y PAUL C. CURTISTGI Business Editor KALAPAKI BEACH – The Mainland, Hawai’i and Kaua’i economies are on such a roll, Bank of Hawai’i Economist Paul Brewbaker said, that businesses shouldn’t even be thinking about stashing away savings for the inevitable
y PAUL C. CURTISTGI Business Editor
KALAPAKI BEACH – The Mainland, Hawai’i and Kaua’i economies are on such a roll,
Bank of Hawai’i Economist Paul Brewbaker said, that businesses shouldn’t even
be thinking about stashing away savings for the inevitable cyclical
downturn.
That downturn isn’t even in the extended forecast, Brewbaker said
during a Kaua’i Chamber of Commerce breakfast meeting with nearly 40 business
leaders at the Kaua’i Lagoons restaurant.
Saving for a rainy day, he
continued, “is not really a looming issue,” Brewbaker said.
“The answer is
productivity,” he said, using Bankoh’s recent down-sizing from 4,000 to 3,000
employees as an example.
Productivity improvements, especially with the
technological advancements being made in most industries and businesses, will
allow businesses to stay competitive even if revenues level off or decrease, he
said.
Sometimes, firms react instinctively to downturns by cutting back not
only on staff or hiring, but on investment in new buildings, equipment and
other business infrastructure, he added.
The problem with that, he said, is
that new buildings and equipment usually “imbed” new technologies in them that
can help businesses better cope with flat or down sales figures.
Now that
the economy is bustling, investment in infrastructure is happening, but
investment in new people is usually the last step a business will take.
The
costs in hiring a new person are up-front, with wages, benefits, and the
learning curve of time associated with when that new person will finally become
a producing asset for a company, he said.
Finding qualified, talented
workers, as reported on these pages previously, is difficult in the current
tight labor market. And it’s only getting tighter, which is a good problem to
have, he reasons, because that means the economy is strong.
Brewbaker, who
along with other economists is predicting a strong remainder of this year as
well as a booming 2001, painted the picture of a tightening labor market for a
few reasons.
“The labor supply’s not growing,” as people aren’t moving into
the state from the Mainland because of the hot economy there, the numbers of
people in their 20s in the state is much lower than it was 20 years ago, and
there are less working women today, he said.
The labor market is as tight
here as it is on the Mainland, he commented. But, as a result of Hawai’i’s
bustling economy, he expects these trends to reverse, as more people move to
the state.
There is a net out-migration of U.S. citizens, mainly because of
the down-swing of the military in the state, and a net in-migration of foreign
nationals, which amounts to a wash there, he said.
While the tight labor
market when combined with the state’s affordable housing shortage might spell
trouble, Brewbaker remains optimistic that, with the technological advances of
the past several years, businesses can increase productivity without
necessarily increasing payroll numbers.
We should always have that problem
of the economy growing too fast, he said. While Brewbaker is predicting
something in the neighborhood of 3 percent overall growth in the state economy
this year, the state Department of Business, Economic Development and Tourism
sees even stronger growth for the rest of this year, closer to 3.5 percent, he
continued.
The state is already predicting record visitor arrival numbers
this year, with hotel occupancy, hotel revenues, construction, retail sales,
and essentially every other sector showing increases, he said.
Construction
on Kaua’i, usually a sure indicator of a continuing strong economy, is surging
again. For the years 1996 to 1998, annual average construction permit value was
around $100 million on this island.
Last year, it was $140 million, the
highest figure since Hurricane ‘Iniki. For the first quarter of this year,
there was $32 million worth of construction permits issued, putting the island
on pace to possibly do even better than 1999, he said.
As far as the
overall state economy is concerned, two of the best five quarters ever recorded
were the fourth quarter of last year and the first quarter of 2000, he
said.
In the past several years, economists like Brewbaker have had to
adjust upward their growth forecasts, and have still seen their predictions be
too low for the sizzling island economy.
And there’s more where that came
from, as the country, state and island may all have to adjust upward
predictions for sustainable, non-inflationary growth rates, he said.
As an
example, Brewbaker is close to winning a plate-lunch bet with state Sen.
Whitney T. Anderson (R-25th District) about when the state’s unemployment rate
will match the national rate.
Brewbaker bet it would take around a year
from January of this year for the two rates to meet, and Anderson doubted it.
Currently, statewide unemployment is around 4.2 percent or 4.3 percent (down
from around 6.5 percent as recently as a year ago), while the national rate is
around 4.1 percent, he commented.
Even what is appearing on the horizon as
at least the final breaths of Amfac Sugar Kaua’i’s Eastside operations can’t
dampen his enthusiasm for the island economy.
“The last ones to go are
always the leeward ones,” he said of plantations on the sunny west sides of the
islands. “Kaua’i’s been through it.”
The issue is what comes next on the
lands. The faster you start figuring out what to do with the lands, the better,
he said.
Other uses for the land can be found, probably not in agriculture,
he continued. “The problem’s getting there. But, we sorta knew it was
coming.”
The 1990s have been about a transition out of sugar in the state,
he noted. Still, 1999 marked the highest income ever recorded from agriculture
in the state.
But back to the booming economy for awhile.
“The state’s
raking in the dough, from the hotels, anyway,” he said of an estimated $140
million in transient accommodations tax (TAT, or hotel room tax)
revenues.
“It’s an insanely huge number,” he said of TAT revenues. And the
counties are upset, because tax revenues generated on each island are ending up
in the general fund and not necessarily going equally back to the counties
where they were generated, he said.
While the counties clamor for funding
for various improvements, public workers have gotten fat raises over the last
several years, including 7 percent increases for several consecutive years for
firefighters.
“It’s politics. It has nothing to do with what makes
sense.”
Bankoh does a regular poll of business optimism in the state, and
the mark in February of this year was the highest level of sunny weather since
1990, he continued.
While the increases in personal wealth in the Mainland
western states initially translated into land acquisitions in the islands, now
insurance companies, pension funds and other entities empowered by that
newfound wealth are looking to erect hotels, office buildings and other
structures in the state, he said.
Brewbaker finds state figures showing
visitor spending down hard to believe, when hotel occupancy, hotel revenues,
average room rates, retail spending, and other figures all pointing
skyward.
One University of Hawai’i at Manoa tourism industry management
school official said the retail sales growth can be attributed to resident
buying habits in the green economy, but Brewbaker doesn’t buy that.
“How
can the total have gone down” when all the indicators keep going up? he
asked.
Responding to a question about the visitor industry, and the
one-island-only visitors all the islands are enjoying at record levels, he said
it’s good for islands to distinguish themselves from one another.
But, in
order to secure more of the lucrative repeat-visitor business, companies as
well as islands must re-invent themselves, so they’ll have new activities, new
things to draw those important repeat visitors to the island and business again
and again, he said.
