UH Economists Say Recession Possible

Carl Bonhan, UHERO executive director and associate professor of economics. Courtesy photo.

By Sonia Isotov

The University of Hawaii Economic Research Organization (UHERO) today released an update to their state forecast saying that “Hawaii’s recovery pace has slowed to a standstill this year” and that the debt crisis in Europe is Hawaii’s biggest economic threat.

The report explains that despite downside risks from the US and abroad, UHERO expects modest gains for the state economy in 2015. In particular, UHERO noted that although healthier than the US as a whole, Hawaii shares the same pain points with the US:  labor market issues, absent construction, and limited income growth.

UHERO predicts small gains moving into 2012, but there will be no rapid improvement in Hawaii’s economic condition next year. Recent positive developments have included the reversal of the post-quake Japanese visitor falloff, the opening of Disney’s Aulani resort, and strong visitor numbers from countries other than the US and Japan. For instance, Canadian visitor arrivals are up 21% in the year through September and Australian visitor numbers are up 28%. These trends should persist, especially considering the relatively weak dollar and increases in airlift. The APEC conference next week should also help boost visitor numbers in the last quarter of this year.

Given the generally dismal economic outlook for the US mainland, UHERO says it continues to worry about the decline in US visitors. US arrivals began the year roughly 10% higher than at the start of 2010, then trended lower thereafter, and in August they were 10% lower than the year-earlier level. UHERO economists believe this could be evidence of some firming in US travel.

“The biggest present risk is in Europe, where a euro zone that is probably already in recession could be crushed by the sovereign debt crisis if political will is not found to drive a comprehensive solution. The US economy and Hawaii can avoid falling into outright recession if Europe manages to get things right. We are counting on that.”

To read the entire report, visit UHERO online at http://www.uhero.hawaii.edu/.