UHERO’s latest revenue forecast points to 6 month delay in economic recovery
The Economic Research Organization at the University of Hawaii’s (UHERO) latest state forecast update points to a 6 month delay in Hawaii’s economic recovery due to the summer surge in COVID-19.
UHERO Executive Director Carl Bonham discussed the findings of the report during a House Select Committee on COVID-19 Economic and Financial Preparedness meeting on Monday.
“We released our September forecast last week and basically that forecast has a delayed recovery – everything is pushed back roughly 6 months because of the surge in cases on Oahu, because of the additional shutdown, and because of the postponement of reopening to tourism,” said Bonham.
“So, rather than having a relatively robust bounce back in 2021, it actually doesn’t really start back up until the second half of 2021 when, in our baseline forecast, the tourism recovery is quite a bit stronger under a maintained assumption that by the second half of 2021 a vaccine will become more widely available.”
Bonham says the latest data for 2021 isn’t as strong as what was predicted in UHERO’s May forecast.
Similar to past forecasts, the latest report outlines expectations under baseline, optimistic, and pessimistic scenarios. Under the baseline scenario, there will be an average 12.4% unemployment rate for 2020. That rate is expected to decline to 9.7% in 2021, 5% in 2022, and 3.8% in 2023. However, regardless of scenario, Bonham says recovery will be a long, drawn out process.
The forecast predicts very limited job growth of about 2% in 2021, says Bonham, and a second year of decline in real personal income.
When asked about the long-term consequences of a slow economic recovery, particularly if Hawaii’s recovery is slower than the rest of the United States, Bonham said that it will likely exacerbate the population decline Hawaii has seen in recent years.
“And so, it’s a drag on the overall economy. We’re talking continued population loss for the next several years. Basically, that means that at the end of this forecast sample, in 2025, we’re still about 20,000-25,000 jobs short of where we were in 2019. And our unemployment rate is getting back near the 3.5% to 4% range, but we’ve lost population, we’ve lost labor force and so we’re a smaller economy,” Bonham replied.
The full forecast is available here.