Hawai‘i’s Economic Fundamentals Remain Positive
The “Economic Outlook” section of the Department of Business, Economic Development and Tourism’s first “Quarterly Statistical and Economic Report” of 2016 states that Hawai‘i’s economic growth rates remain unchanged from its previous forecast.
The report states that Hawai‘i Gross Domestic Product growth will be 2.3% throughout 2016 and is predicted to rise to 2.4% in 2017.
These growth rates are similar to the US economic growth as forecasted by the 50 top economic forecast organizations and published in Blue Chip Economic Indicators.
“We are pleased that Hawai‘i ended 2015 with the historical high levels for labor force, employment and job count, and are excited to see the trend continue in 2016,” said DBEDT Director Luis P. Salaveria. “The state’s unemployment rate was the sixth lowest in the nation, and the economic fundamentals remain positive.”
In 2015, 9,500 non-agriculture payroll jobs were added in the economy, representing a 1.5% increase. Healthcare and social assistance added the most jobs at 1,900, construction added 1,800, retail trade added 1,700, food services and drinking venues added 1,600 jobs, professional and business services added 1,300 jobs.
Federal and state government each lost 500 jobs in 2015 as compared with 2014.
Hawai‘i’s unemployment rate in 2015 averaged 3.7% and was the lowest level since 2007. Unemployment rates for all the counties in the state fell under 5% in 2015 and the gaps between Neighbor Island counties and Honolulu are closing.
Honolulu’s unemployment rate was the lowest among the counties at 3.5%, followed by Maui County at 3.8 percent in 2015.
Though Hawai‘i and Kaua‘i counties had annual average unemployment rates above 4%, the two counties experienced a significant improvement in unemployment during the year. The unemployment rate in Hawai‘i County was 5.2 percent in January 2015 and dropped to 3.7 percent in December 2015. Kaua‘i County’s unemployment rate was at 4.9% at at the beginning of 2015 and dropped to 3.5% at the end of the year.
With 676,300 people in the labor force and 651,350 people employed in 2015, the numbers show historical high levels for the state.
Initial unemployment claims in 2015 decreased by 18.4%, from 1,620 claims per week in 2014 to 1,322 claims per week in 2015. The declining trend continues during the first month of 2016. In January 2016, initial unemployment claims declined 31.4% from the same month last year.
In 2015, the state saw increases for the construction industry. Contracting tax base, an indicator for construction completed, reached $6 billion during the first three quarters of 2015, representing 16.3% upswing compared to the same period last year.
The construction industry had the highest job growth among all the industries in the state in 2015 at 5.7%. The construction job increase accelerated toward the end of last year, with a double-digit increase in November and December, when many construction projects fought for completion before the end of the year.
Government contracts awarded (federal, state, and county government construction projects, excluding the Honolulu rail project) increased 41.8%t in 2015. The state government has budgeted $1.6 billion in capital improvement projects for Fiscal Year 2016.
Future construction activity (as indicated by the values of building permits issued) looks bright for 2016. The total value of private building permits issued in 2015 increased 19.6% from a year ago.
Leading the increase was the value of residential building permits, which increased by 67.5%, followed by the value of commercial and industrial permits at 41%.
With the completion of the Ala Moana shopping center renovation, the value of additions and alteration permits decreased 12.1 percent in 2015.
DBEDT expects payroll job count will grow by 1.3% in 2016 and at 1.1 to 1.2% in the future.
DBEDT predicts that the unemployment rate will drop to 3.5% in 2016, lower than the 3.7% projected last quarter. The unemployment rate is expected to drop to 3.1% in 2019.
Visitor arrivals created a new record in 2015 with 8.6 million visitors. Visitor spending increased 2.3 percent to $15.3 billion in 2015.
DBEDT expect that visitor arrivals will reach 8.8 million in 2016—an 1.9% increase from 2015. However, with the strong US dollar and the weakening of foreign currency, visitor spending is now projected to increase by 2.4%, down from the 3.5% projected in the previous quarter.
Scheduled air seats will increase by 3.2% in the first quarter of 2016, indicating continued strong demand for travel this year. Visitor arrivals growth in the next few years will be stabled in a range between 1.8 to 1.9%.
Nominal (no inflation adjustment) personal income is projected to grow at 4.8% in 2016—the same as the projection in November last year. According to the US Bureau of Economic Analysis, the state’s personal income grew by 4.7% during the first nine months of 2015.
With a lower inflation rate caused by the lower oil price, Hawai‘i consumers benefited from stronger purchasing power from income. DBEDT estimated that real personal income increased by 3.6% in 2015 and will increase by 3% this year. (These real personal income growth rates are the same as those projected in the previous quarter.)
DBEDT lowered its projection for the consumer inflation rate from 2.3% to 2% for 2016 due to the continued expectation of low oil prices.
DBEDT’s quarterly statistical and economic report contains more than 100 tables of the state’s most recent quarterly economic data as well as narrative explanations of the trends in these data.
The full report is available online.