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Hawaii’s economy on a long road to recovery, economist says

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(The Center Square) – An aging population, an exodus of residents, and slow recovery in tourism and jobs all contribute to the anticipated contraction of Hawaii’s economy in 2024, an economist told a state Senate panel.

Dr. Eugene Tian, economic research administrator at the Department of Business, Economic Development and Tourism, shared the viewport at the Senate Ways and Means Committee.

According to Tian’s department, there were 10.4 million visitors to Hawaii, spending an estimated $17.7 billion before the pandemic. That figure will reach 9.8 million visitors in 2024, up 0.2% from 2023 to 10.1 million in 2025, according to the forecast.

Tourism is Hawaii’s primary income source, impacting service industries from transportation to retail trade.

“The visitors in 2019, we had 10.4 million, by 2025 our forecast is 10.1, so we will not recover until after 2026 according to our estimates,” Tian said.

Hawaiians would like to see tourism spending grow but not an increase in tourism.

“The sentiment in the population here is they don’t want to see tourism growing above the ten million mark that we used to have,” Sen. Donna Kim said. ”It seems like we’re saying tourism is not growing therefore the economy is not going to grow and we want tourism to grow.”

Tian said most of the visitor spending increases seen in 2023 were due to inflation and an increase in the transient accommodations tax at 3% across services, which was included in the visitors’ spending figures.

“The cost of lodging and food away from home in Honolulu has skyrocketed,” the report said. “Room rates have surged by 31%, and dining out in Honolulu is now 28% more expensive than in 2019. These increases in local tourism costs affect all visitors, and they have pushed up U.S. visitor spending.”

Jobs also grew slowly in the past few years, according to Tian.

“You can see the jobs in 2019 were about 660,000 jobs, but by 2025 we will not recover,” he said. “So the jobs and the visitors, they are consistent that recovery will be 2026 or beyond.”

Non-agricultural jobs, which employed just over 658,000 workers in 2019, fell during the pandemic years but have slowly been increasing. They are forecast to reach approximately 641,000 in 2024 and 652,000 in 2025.

“In terms of jobs, we are still losing about 30,000 jobs compared with 2019,” Tian said.

The Hawaii County or “Big Island” job market has almost recovered to 99.6%.

The Maui fires impacted gross domestic production, but as of the third quarter of 2023, Hawaii recovered 97.7% of the same period of 2019.

“We are still recovering while the U.S. has been fully recovered since 2021,” Tian said “So we are lacking the full recovery from the economy, in terms of GDP (it) will be about 2026.”

Tian said it takes about six years for the economy to recover, and the same is true for Hawaii.

“One of the industries we are doing well is actually construction,” Tian said. “This is one of the bright spots.”

The bulk of the increase in construction is a result of federal spending projects like ”the $4 billion for work at Pearl Harbor” for naval shipyard renovations. Local codes still delay permits for building residential houses for up to eight years, he said.