Slow climb ahead for Hawaii economy, even with vaccine

  • Judi Mellon and Jason Ueki visit Hawaii Forest & Trail Hilo in early November 2018. (Hawaii Tribune-Herald/file photo)

Although the anticipated rollouts of COVID-19 vaccines should improve the prospects for economic growth in Hawaii in the second half of 2021, the University of Hawaii’s Economic Research Organization says that making it to the point when the virus no longer poses a threat will be “painful and costly.”

UHERO on Friday issued its latest economic forecast as the state continues to struggle with the impact of the pandemic.

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“The Hawaii economy began to recover from the COVID-19 downturn by the end of the second quarter, but subsequent waves of the pandemic have disrupted economic progress,” a summary of the forecast states.

A spike in COVID-19 cases last summer reversed some of the state’s recovery gains that started in late spring.

“The lifting of local restrictions on Oahu in late September put Hawaii back on the path to recovery, but as of late November, the recovery has made up less than half of pandemic losses,” the report states.

Due to the uncertainty surrounding the pandemic, the forecast presents baseline, optimistic and pessimistic scenarios.

The baseline forecast predicts that a “meaningful economic recovery” will be delayed until the middle of 2021, after which UHERO anticipates a weakened recovery, though “at a somewhat faster pace than in our previous forecasts.”

In its baseline forecast, UHERO anticipates visitor arrivals slowing in the short-term because of the surge in COVID-19 cases on the mainland and tightening of Hawaii’s quarantine rules.

“As the first quarter progresses, pre-travel tests are expected to become more accessible to travelers and the upward trend in arrivals will resume,” the forecast summary states. “More significant tourism gains will be seen in the second half of 2021 after vaccines become widely available.”

However, in the optimistic scenario, UHERO says earlier and widespread vaccine availability and rapid virus tests would allow more visitors to return sooner.

“Even in this case, we would not approach 2017 levels of activity during our five-year forecast horizon,” the report states.

“In a more pessimistic scenario, the surge in COVID-19 cases nationally would lead to test shortages that combine with Hawaii’s tightened quarantine rules to cause a several-month setback for tourism and overall economic recovery.”

UHERO anticipates air arrivals on the Big Island to increase over the next three years.

UHERO expects more than 766,100 visitors to the Big Island next year and 1.6 million by 2023. In 2019, there were nearly 1.8 million arrivals.

Statewide, UHERO expects visitor arrivals by air to reach 4.4 million in 2021 and nearly 9.1 million by 2023.

Additionally, the Big Island had a 12.2% unemployment in 2020, according to the report.

UHERO anticipates that number to decline in the coming years but it is not expected to reach pre-pandemic levels.

In 2021, unemployment on Hawaii County is forecast at 11.3% and looks to dip to 7.2% in 2022 and 6.1% in 2023.

The Big Island’s unemployment rate was about 3.5% in 2019.

“Obviously, it’s been a very rough ride,” UHERO Director Carl Bonham said Friday during a livestream. “The recovery has sort of been on-again, off-again.”

According to Bonham, Hawaii lost about 130,000 jobs in April before slightly rebounding because of the federal Paycheck Protection Program loans and initial reopening of the economy in May.

But a second surge of cases in the summer resulted in more job losses.

“The recovery since then has started again, but you get this sort of on-again, off-again as you play whack-a-mole with the virus,” he said. “The good news is, right now, the virus seems to be mostly under control on Oahu.”

Bonham said through October, the biggest job losses have been in tourism, hospitality and transportation.

The only areas with small gains have been in federal civilian government jobs and the construction sector.

Bonham, a member of the House Select Committee on COVID-19, said public health is the committee’s top priority.

“I think everybody agrees with that, but we’re not going to be in a situation where we have zero COVID cases,” he said. “That’s just not the reality we live in, and if we did, it would be because we had completely shut off interaction. … The economy would basically be shut down.

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“And that kind of a balance is not going to work because there are significant health costs, there’s significant social costs to not having work. Long-term unemployment is incredibly damaging. Not being able to have our kids in school, all of that, is damaging, so we have to find this balance.”

Email Stephanie Salmons at ssalmons@hawaiitribune-herald.com.

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