Hawaiʻi DBEDT projects moderate 1.6% growth for 2026

The Department of Business, Economic Development and Tourism released its second quarter of 2026 Statistical and Economic Report today. In 2025 Hawai‘i’s economy grew at a robust 2.5%, exceeding the overall US growth rate of 2.1%. Moving forward DBEDT projects Hawai‘i’s economic growth to moderate, with an estimated 1.6% increase for 2026 and 1.8% for 2027.

“Hawai‘i’s economy showed stability and endurance in 2025. The state’s economic growth of 2.5% was driven by a broad base of industries and strong visitor spending and outpaced the national average,” said DBEDT Director James Kunane Tokioka.

“Looking ahead, DBEDT anticipates more moderate growth as inflation rises due to the impacts of the Iran conflict. However, our labor market remains steady and our economy will continue to benefit from ongoing construction activity, infrastructure investment and tourism spending,” said Tokioka.

The most recent data available shows that the growth of Hawai‘i’s economy in 2025 came from a broad base of industries including Information (8.2%); Arts, Entertainment and Recreation (7.2%); Transportation and Warehousing (4.8%); and Wholesale Trade (3.6%). 

Labor Market is Steady

Overall, Hawai‘i’s labor market was approximately the same in the first quarter of 2026, compared to the same quarter of the previous year. Nonagricultural wage and salary employment in Hawai‘i averaged 642,900 jobs in the first quarter of 2026, a slight decrease of 800 jobs (0.1%) from the first quarter of 2025. The latest monthly data shows a slight increase of 2,000 jobs (0.3%) in April 2026 over April 2025.

Hawai‘i’s not seasonally adjusted (NSA) unemployment rate was 2.2% in the first quarter of 2026, 0.2 percentage point lower than the first quarter of 2025. Preliminary data for April shows that the NSA unemployment rate is 2.5%, 0.3 percentage point higher than the 2.2% of April 2025. Tied with Iowa, this was the third-lowest unemployment rate in the nation.

In the first quarter of 2026, the private sector added about 2,300 nonagricultural jobs compared to the first quarter of 2025. The number of jobs increased the most in Health Care & Social Assistance, which added 1,400 jobs or 1.8%. This was followed by job increases in Construction at 1,200 jobs or 3.0%, Accommodation at 500 jobs or 1.3% and Food Services and Drinking Places at 400 jobs or 0.6%.

In contrast to the private sector, the government sector lost 3,100 jobs or 2.4% in the first quarter of 2026 compared to the first quarter of 2025. A majority of the job losses were in the federal government, which decreased by 3,100 jobs or 8.7%; followed by the state government, which decreased by 500 jobs or 0.7%. These losses were offset slightly by local government jobs which gained 600 jobs or 3.1% over the first quarter of 2025.

Moderate Growth with Higher Inflation

In the fourth quarter of 2025, Hawai‘i’s annualized nominal gross domestic product (GDP) increased by $7.3 billion or 6.1% compared to the same quarter of 2024. Accounting for inflation, total annualized real GDP increased $1.6 billion or 1.8% from the same quarter of 2024. In 2025, total annualized real GDP increased $2.3 billion or 2.5%. DBEDT economists project that real GDP growth for 2026 will be 1.6%compared to 2025.

Hawai‘i’s nominal personal income had a substantial increase of $12.9 billion or 12.4% in the fourth quarter of 2025 compared with the same quarter of 2024. The Bureau of Economic Analysis notes that this unusual increase was due to a settlement paid to households in the fourth quarter of 2025 to compensate for losses related to the 2023 Maui Wildfire.

In looking at the components of personal income, wages and salary increased 3.8%; supplements to wages and salaries increased 5.2%; proprietors’ income increased 3%; dividends, interest and rent increased 2.1%, and personal transfer receipts increased 54.9% mainly due to the wildfire settlement payments.

As measured by changes in the Honolulu Consumer Price Index for Urban Consumers (CPI-U), inflation increased by 2.3% in second half of 2025. During this period, the Honolulu CPI-U increased the most in Food and Beverages (3.8%), followed by Recreation (3.3%), Medical Care (3.1%), Apparel (2.2%), Housing (2.1%), Transportation (2%), and Education and Communication (0.7%) compared to the second half of 2024.

In 2026, inflationary pressures rose. After a moderate increase of 2.4% in January 2026, inflation spiked to 3.7% in March 2026 after the start of the Iran conflict, and reached 5.1% in May 2026. Energy prices in May 2026 are up 28.8% compared to one year ago. 

Tax Revenues Remain Firm

With the exception of Net Corporate Income Tax, generally the components of tax revenue remained positive. During the first quarter of 2026, General Excise and Use Tax revenues increased by $39.6 million (3.2%), Transient Accommodations Tax revenues increased by $22.2 million (9.8%), and Net Individual Income Tax increased by $21.0 million (3.6%). However, Net Corporate Income Tax Revenues, which is volatile in nature, was a negative $16.7 million.

Moderate Visitor Arrival Growth with Strong Visitor Spending

Total visitor arrivals by air increased by 85,696 or 3.6% in the first quarter of 2026 compared with the same quarter of 2025. The major market areas that led the growth were the US West (23,940 or 2%), US East (92,298 or 14.3%), and Japan (12,190 or 7.4%). While visitor arrivals (including cruise) increased at a moderate 3.8%, visitor spending increased by 9% in the first quarter of 2026. April data shows a slight softening with total visitor arrivals decreasing 0.5% and visitor spending increasing 4.8%.

Construction Indicators Mixed

Construction market indicators were mixed in the first quarter of 2026 showing an increase in jobs, government contracts awarded — and state CIP expenditures, along with a decrease in private building authorizations.

The number of construction jobs increased by 3% or by 1,200 jobs compared with the same quarter of the previous year. Government contracts awarded more than tripled in the first quarter of 2026 over the same quarter of the previous year, increasing by $720.1 million (202.4%). This reflected paving contracts awarded in February by the Hawai‘i Department of Transportation. State government capital improvement project expenditures were also strong, increasing $39.9 million (11.8%) in the first quarter of 2026 over the first quarter of 2025.

Conversely, private building authorizations in the first quarter of 2026 decreased by $471.9 million (33.5%) compared with the first quarter of 2025. With the exception of Kauaʻi, where permits increased 11.3%, building permits were down across all the other counties. Honolulu County declined 41.6%, Hawaiʻi County declined 3.1% and Maui County was down 50.9%.

Housing market conditions were mixed in the first quarter of 2026 compared with the first quarter of 2025. Average home prices increased by 0.5% in the first quarter of 2026, with a decrease of 3.3% for single-family home prices being offset by a 6.7% increase in condo prices. Buyer activity softened with purchases by local buyers down 1.2%, mainland buyers down 13.7% and foreign buyers down 28%.

For Honolulu, the median price of single-family home resales increased by $30,000 (2.6%) reaching $1,180,000 in the first quarter of 2026 over the first quarter of 2025,  while condo prices remained the same at $510,000. 

Global Growth Varies by Region

Based on data from the U.S. Bureau of Economic Analysis (BEA), US real GDP grew 2.1% in 2025 compared with 2024 and, according to Blue Chip Economic Indicators, this expansion is expected to continue at a rate of 2% in 2026 and 2027.

The Blue Chip Economic Indicators global forecast shows mixed real GDP growth prospects for major international economies. Europe is projected to grow at an annual rate of 0.7% in 2026 and 1.2% in 2027. Japan is also expected to grow at a slower annual rate of 0.6% in 2026 and 0.7% in 2027. On the other hand, South Korea and Taiwan are forecast to grow at a faster pace, partially due AI-related buildouts. South Korea is forecast to grow 2.3% in 2026 and 2% in 2027. Taiwan is expected to grow at 8.9% in 2026 and 3.3% in 2027. China will continue relatively strong growth at 4.6% in 2026 and 4.3% in 2027.

Forecast Summary: Gradual Expansion Expected for 2026–2029 Forecast Period

DBEDT expects Hawai‘i’s economy to continue expanding during the 2026–2029 forecast period. Following real GDP growth of 2.5% in 2025, the economy is projected to grow about 1.6% in 2026 and increase to 1.9% by 2028, reflecting lower inflation, productivity gains and a steady increase in visitor arrivals.

Honolulu’s Consumer Price Index (CPI-U) is forecast to be 3.8% in 2026 and decline to 2.5% by 2029 as inflationary pressures ease. Employment is expected to grow at a moderate pace, with nonagricultural wage and salary jobs increasing at an annual growth rate of 0.4% in 2026 and rising gradually to 0.7% by 2029. The civilian unemployment rate is forecast to decline from 2.4 in 2026 to 2.3% by 2029. Real personal income is projected to grow by 0.9% in 2026, which is substantially below the 2025 increase of 3.9% due to the Maui Wildfire settlement payments in 2025. Real personal income will then increase gradually reaching an annual growth rate of 1.9% by 2029.

Visitor arrivals are forecast to increase 1.9% in 2026, 1.3% in 2027 and 1% in 2028 and 2029. Visitor expenditures are also expected to continue growing, by 4.3% in 2026, 4.5% in 2027, 3% in 2028 and 2.9% in 2029. 

The full report is available at dbedt.hawaii.gov/economic/qser/.