UHERO forecasts state’s economic future

LIHU‘E — Hawai‘i’s economic forecast continues to look grimmer as the pandemic persists, and one forecast compares two different projections.

In an optimist scenario from the University of Hawai‘i Economic Research Organization, a third spike will emerge in the fall and winter, an effective vaccine will not be available until late next year, and federal aid package will come about.

In the pessimistic scenario, the state will face a substantial budget deficit, the state government would resort to partial furloughs, and unemployment will remain above 8% until 2022.

“Rather than having a relatively robust bounce back in 2021, it’s actually really doesn’t start until the second half of 2021,” UHERO Executive Director Carl Bonham said Monday at a virtual House Select Committee on COVID-19: Economic and Financial Preparedness. “Tourism recovery is stronger (then) because, during the second half of 2021, a vaccine would be more widely available.”

The state is looking at a 12.4% unemployment rate for 2020, up from 2.7% in 2019. Service-industry employment dropped nearly 60% earlier this year.

On Kaua‘i, the economic picture looks worse.

The unemployment rate in 2019 was 2.7%. In 2020, UHERO forecasts a 19.1% unemployment rate, and by 2023, a 6.6% rate.

“What happens in our forecasting models, if our unemployment rates stay elevated, we end up with more outward migration,” Bonham said.

As of March 1, the state’s Department of Labor and Industrial Relations has paid $3,298,070,537 and 3,448,775 weeks claimed as of last week.

The number of jobs available will still fall short by about 20,000-25,000 positions, he said, with about 40,000 residents moving out of the state in one forecast.

“In this kind of environment the people who are doing relatively well, and who will continue to do relatively well, are the higher-income households,” Bonham explained. “What we’re expecting is that the people who can’t find work will be leaving.

“And that population will likely be those in the tourism and service industry. “Other areas of the country will recover faster in that area,” Bonham said.

The state opens its doors to its pre-travel testing program on October 15, but visitor arrivals are forecasted to drop 73.7% since last year. On Kaua‘i, that looks like 1,372,700 visitors in 2019 to 363,300 visitors in 2020.

“The tourism recovery will be hampered by the public’s reluctance to travel and by macroeconomic weakness in all major visitor markets,” the “Hawai‘i in Early Stages of Recovery, Then a Setback” forecast update states.

UHERO points to the state’s “failure to take advantage of a nearly-two-month period without COVID-19 cases to prepare for an eventual resurgence is regrettable, to say the least.”

The reopening of the state and the commitment to keep it open can result in a tax recovery before 2025, Bonham explained.

And some of that comes down to the communication with residents, President and Chief Executive Officer of Hawai‘i Pacific Health Ray Vara, said Monday.

“We have to prepare people for the fact that our baseline is no longer at zero,” Vera said. “If was going to have activity around our communities, we’re going to see more activity.”


Sabrina Bodon, public safety and government reporter, can be reached at 245-0441 or sbodon@thegardenisland.com.

  1. Da Shadow September 29, 2020 8:09 am Reply

    -But let’s keep the tourists away, as the vocal, elitist locals would like. Never mind the hardship to those of us who rely on visitors. So long as “I was here first!” locals aren’t inconvenienced by Kapa’a traffic or haoles on the beaches, all is good.

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