Hawaiʻiʻs Economy Continues to Expand at Slower Pace
The Department of Business, Economic Development and Tourism released its Statistical and Economic Report for the third quarter of 2018, which includes the months of July to September.
Before the third quarter, DBEDT predicted that Hawai’i’s economy would grow 1.9 percent for 2018. Though in their report, their prediction lowered to 1.5 percent.
DBEDT says that although labor market conditions are the best in the nation and tourism growth is still strong, the most recent economic data from federal sources indicate that Hawai’i’s economic growth during the first quarter of 2018 (January to March) was at 1 percent. These sources also showed that Honolulu consumer inflation was at 1.6 percent for the first half of 2018. Both numbers came out much lower than DBEDT expected.
“Even though we are now entering a slower growth period of around 1.5 percent annual growth…Our economic growth rate during the past three years (2015-2017) was 2.4 percent,” DBEDT Director Luis P. Salaveria said. “Hawaii’s economic conditions remain healthy.”
During the first seven months of 2018, Hawai’i continued to have the best labor market in the nation with an average unemployment rate of 2.1 percent. According to DBEDT, this rate was the lowest in the nation and the lowest in Hawai’i’s history. DBET also said that the number of people who are either employed for pay or self-employed statewide was at a record high level during these first seven months. The average number of people who were still looking for jobs and available to work was also at a historically low level during the time.
During the same period, non-agriculture payroll jobs increased by 10,300. Visitor arrivals were at a record high with 4.9 million visitors coming to Hawai’i during the first half of 2018. Visitor expenditures also increased by 10.8 percent during the time.The total number of air seats on scheduled flights to Hawai’i, a leading indicator of the tourism industry, increased by 10.2 percent and is expected to increase by 6.2 percent during the rest of 2018.
DBEDT said that the tourism industry accounted for more than half of the 10,300 jobs gained during the first seven months of 2018. The Food services added 4,200 jobs, and accommodation added 1,000 jobs. Healthcare and social assistance added 2,700 jobs, professional and business services added 2,000 jobs. A few industries experienced job losses, including the state government (-1,300 jobs), retail trade (-500 jobs), information (-200 jobs) and manufacturing (-100 jobs).
“We are encouraged to see that the value of private building permits increased 3.9 percent during the first half year of 2018. If this trend continues for the second half year, the construction industry will perform well in 2019, since it takes a few months to start construction after permits are issued,” Chief State Economist Dr. Eugene Tian said. “The value of government contracts awarded increased 151 percent during the first half of 2018.”
The most recent economic forecasts by more than 50 top economic research organizations state that the US and world economies will experience steady growth in 2018 and 2019. These reports predict that the US economy will experience accelerated growth at 2.9 percent in 2018 and 2.6 percent in 2019. The forecasts also indicate that Hawai’i’s economic growth rate will be lower than that of the nation. During the past 30 years, Hawaii’s economic growth rate was at 1.8 percent a year on average, while the economic growth rate for the U.S. was 2.5 percent for the same period.
DBEDT revised the visitor industry forecast upward with visitor arrivals now growing at 6.1 percent for 2018, 1.6 percent for 2019, and 1.3 percent for 2020. Growth of visitor expenditures will be at 9.2 percent for 2018, 2.4 percent for 2019, and 3.4 percent for 2020.
DBEDT did not change its projection on the non-farm payroll job count from the previous quarter forecast (April to June) at 1.2 percent for 2018, 0.9 percent for 2019 and 2020, 0.8 percent for 2021. The unemployment rate projections also remained the same from the previous quarter forecast at 2.2 percent for 2018 and will gradually increase to 3.4 percent by 2021.
DBEDT expects consumer inflation, as measured by the Honolulu Consumer Price Index, to be lower than previously projected, now at 2 percent for 2018, and will gradually increase to 2.7 percent by 2021. Hawaii’s consumer inflation rate is expected to be lower than the nation in 2018 and beyond. Between 2003 and 2017, Hawai’i’s consumer inflation was higher than the US average.
DBEDT lowered the nominal personal income growth rates from the previous quarter forecast to 3.5 percent for 2018, 3.8 percent for 2019, 4 percent for 2020 and 2021. Growth of real personal income was revised upward from the previous quarter forecast and is now 1.8 percent for 2018, and will remain at that growth rate for the next few years. The upward revision on real personal income was mainly due to the lower expectation on consumer inflation in Hawaii.
The DBEDT Quarterly Statistical and Economic Report contains 136 tables of the most recent quarterly data on Hawaii’s economy as well as narrative explanations of the trends in these data.
The full report is available online.