The trends affecting economic growth in Hawaii

A new report from the Economic Research Organization at the University of Hawaii (UHERO), predicts that Hawaii’s economy will continue to grow in 2020 despite several challenges.

The report’s lead authors, economists Carl Bonham, Byron Gangnes and Peter Fuleky found that while the global economy is mired in ongoing difficulty — such as the trade war and its concomitant contraction of exports and investment — Hawaii, like the country at large, has been buoyed by consumer spending. 

The state’s tourism industry is booming. Visitor arrivals are heading for a record, set to exceed ten million this year for the first time. Nevertheless, another data point for the tourist industry bucks Hawaii’s trend toward growth: visitors are spending less money when they arrive. 

All of the strength is on the domestic side, with arrivals from emerging international markets lower than a year ago. Inflation-adjusted visitor spending has fallen off, down more than four percent in daily per-capita terms. While arrivals will continue to grow at a modest pace, real visitor spending will break even at best next year,” wrote Bonham, Ganges, and Fuleky. 

Analyzing the decreased visitor spending, the report concludes that, due to the trade woes weighing heavily on the major Asian economies, international tourists are arriving in Hawaii with less purchasing power.

The adverse effects are clear when looking at the retail sector. The Hawaii Department of Business, Economic Development, and Tourism reported that retail trade lost 2,800 jobs in the third quarter of 2019. 

 

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Nevertheless, UHERO found that the local hotel industry is performing better than ever and that the record number of tourists still pump money into Hawaii’s economy, even if their pockets aren’t as deep as before. 

Another data point of concern to the economists was Hawaii’s population decline. Due to outward migration, the state’s population has been declining for the past three years. Correspondingly, the report estimated that payroll job growth dropped below zero this year.

While the softness in jobs is most pronounced in sectors linked to tourism, the slowdown is widespread, touching a number of key industries. Only very modest growth is expected in 2020 and beyond.”

The state’s low unemployment rate and steady labor income growth are helping to offset the decline in payrolls, allowing for growth to continue, albeit modestly.  

For health care stakeholders in Hawaii, the report begs the question: Given the trends affecting economic growth in the state, will health care be a drag or driver? 

The nature of health care’s relationship with economic growth is increasingly complex. The sector’s outsized role in the economy is matched by the large cost of health care borne by families and businesses. 

At the 2020 Hawaii State of Reform Health Policy Conference, a panel featuring some of the foremost experts in their fields will discuss the competing trends in Hawaii’s economy, as well as the policy and market responses they may engender. 

Beth Giesting, Director of the Hawaii Budget & Policy Center will be joined Paul Brewbaker Ph.D, Economist at TZ Economics, for what will be a lively and engaging discussion.  The 2020 Hawaii State of Reform Health Policy Conference will be held at the Hilton Hawaiian Village on January 14. Register today.