Economic Outlook Shows Signs of Improvement

By Susan Halas

Tourism is up and state general fund revenues have a double digit increase. Courtesy image.

Tourism is leading Hawaii’s economic recovery.

State tax revenues are up, and there some bright spots in construction on the horizon according to data released by the the Economic Research Organization at the University of Hawaii (UHERO).

In the first quarter, the total number of visitors to the state surged 8.5% above previous-year levels. Taking into account length of stay, the number of visitor days rose more than 9%.

Strong visitor performance is occurring across the state. However, neighbor island markets are not yet back to their pre-recession levels. UHERO said that visitor spending is also growing strongly, with a first quarter gain of more than 14%.

Big Gains in Non US-Japan Arrivals

The biggest percentage gains came in markets other than the US and Japan. Canadian visitor arrivals were up 8.3% in the first quarter 2012, and overall arrivals from markets other than the US and Japan were up more than 20%. For the year as a whole, UHERO forecasts arrivals from non-Japan international markets to rise 14.6%.

Japanese Arrivals Surpass Pre-Earthquake Levels

Japanese visitor arrivals have returned to pre-earthquake levels. Courtesy of HVCB.

By early 2012 Japanese arrivals had surpassed their pre-earthquake levels. In the first quarter, there were roughly 334,000 Japanese visitors to the islands – the highest number since the third quarter of 2007 and a nearly 11% increase over 2011. For the year as a whole, UHERO expects Japanese arrivals to rise 6.7% from their 2011 total.

Mainland Arrivals Also Rising

Visitors from the US mainland were up  4.7% in the first quarter. UHERO said that this strength is unlikely to continue, in part because of the planned cancellation of nonstop flights from Minneapolis, and a significant decrease in the number of flights from Chicago, Houston, and Orange County.

The drop in arrivals in the first half of 2012 is likely to be offset by more nonstop flights from New York and Washington, DC in June, as well as the resumption of American Airlines’ Chicago flights during the summer season.

 General Fund Revenues Up in 2012

According to preliminary data for March, total general fund tax collections were up 14.7% for the first nine months of fiscal year 2012. UHERO said Council on Revenues forecasts predict that the general fund tax collections will grow by 14.5% in fiscal year 2012 and 6.5% in fiscal year 2013.

Construction to Grow Next Year

Strong gains in construction jobs are forecast for next year. Susan Halas photo.

The number of jobs in the construction industry dropped 2% in 2011, according to recently revised data. There was a mini uptick in the past three months, but the number of jobs remains below year-earlier levels.

UHERO saw positive signs on Maui and Oahu. Statewide private permits were up more than 15% in the fourth quarter, with activity centered on Oahu. Maui actually saw a small net gain in construction jobs in first quarter data.

Statewide construction job growth is expected to take a positive turn this year, strengthening to more than 9% growth in 2013.

 Oil Prices Affect All Sectors

Higher oil prices will continue to restrain Hawaii growth this year.

Hawaii Real Estate Market Fragile

The market for residential real estate remains frail. On Oahu, median single-family resale prices rose more than 10% in the first quarter of 2012 while sales volume was down 2%. On Maui, an increase in sales volumes of about 3% was accompanied by a similar drop in prices.

Employment Figures Improving

The seasonally adjusted unemployment rate has edged down a bit further, to 6.4% in March, quoting data provided by the Bureau of Labor Statistics in its annual revision of employment estimates.

Despite a significant spike in the number of initial unemployment insurance claims (which partly reflects the recent layoffs at Hawaii Medical Center), total claims were down nearly 5% in the first quarter. UHERO expects unemployment to average 6.1% this year, dropping to 5.4% in 2013.

Revised figures showed the number of non-farm jobs grew by less than 1% in 2011. Year-to-date growth has been highest on Maui and Kauai and slowest on Oahu.

Some Gains in Jobs

Strongest growth in accommodations and food service jobs. Courtesy file photo.

Accommodation and food service jobs were up 4.6% in the first quarter, with strength in both the lodging and restaurant components. This sector has roughly recovered to previous peak levels.

The other sectors linked most directly to tourism have seen smaller gains; retail trade and transportation and warehousing were up just 0.7% and 0.8%, respectively.

Administration and waste management, the growth leader in 2011, has continued to do well this year, with first quarter jobs up 6.1%.

Finance, insurance and real estate turned the corner in the second half of last year, and jobs were up 2.6% in the first quarter of this year.

The health care sector never lost a significant number of jobs during the downturn, although the pace of growth has dropped toward zero over the past year

All other aggregate sectors remain well below their pre-recession levels.

Income

US Bureau of Economic Analysis released income figures for the fourth quarter of 2011. Income measured in current dollars slowed in the second half of last year and rose 4.5% for the year as a whole.

Because of the energy-price-driven spike in consumer prices last year, inflation-adjusted real income was up just 0.7%. UHERO said real income will rise 1.5% this year, firming to 2.7% in 2013.

State Budget Fiscal Year 2013

The state legislature passed an $11.2 billion budget for fiscal 2013. Lawmakers added about $430 million in new bond financing for capital improvement projects, bringing the total value of government sponsored construction projects to $3 billion in fiscal 2013.

However, the expedited permitting process that would have exempted new projects from environmental review did not pass.