Hawaii’s economy is still sputtering — and it isn’t expected to fully recover any time soon.

That’s according to the latest quarterly report from economists at the University of Hawaii who say “Hawaii’s recovery process is tenuous and far from complete.”

“Our forecast is for gains as we move into 2012, but not at a pace that will lead to rapid improvement in economic conditions,” the University of Hawaii Economic Research Organization wrote in a report released Friday.

But the group wasn’t totally pessimistic: It pointed to strengthening tourism as one bright spot. And economists are still counting on Honolulu’s rail project to lift construction jobs next year.

UHERO said parts of the local economy are healthier than the U.S. mainland as a whole, but that the state is similarly facing a weak jobs market, limited income growth and lack of construction. The economists called the slowed recover “disappointing, but not particularly surprising.”


One of those healthier sectors is the tourism industry. Economists are projecting a boost from the APEC events this month as well as a rebound in visitors from Japan after substantial drop-offs following the natural disasters in March. In September, visitor arrivals from Japan were up nearly 1 percent over last September.

Offsetting a drop in visitors from the U.S. mainland are increases in visitors from Australia, Canada and Korea.

“We anticipate relatively strong visitor numbers in the final quarter of the year,” the report said. “For the year as a whole, we expect arrivals to rise 2.1 percent compared with 2010.”


The state’s construction industry, on the other hand, “remains in the deep doldrums.”

“Permits for new construction are languishing at low levels,” the report said. “Adjusted for inflation, real building permits for both residential and nonresidential construction are at levels not seen since the early 1980s.”

Public sector construction projects are no better: “The $63 million dollars of public contracts in the second quarter was the lowest level of government
contracting since the first quarter of 1984!” The report notes several planned government projects — sewer construction and Gov. Neil Abercrombie‘s New Day Work Projects — should help add jobs in coming months.

UHERO said it doesn’t expect the city’s rail project to contribute to the construction industry anytime soon, saying federal dollars aren’t anticipated until next fall. It also cited uncertainty over the legal challenge to the project.

“Still, by late next year we expect rail to be making a substantial contribution to the state construction industry,” UHERO said. “Much of this will be on Oahu with a more tepid construction upturn expected for the Neighbor Islands.”

Job Market

UHERO described the state’s jobs recovery as “disappointing,” with statewide unemployment at 6.4 percent, or 40,250 people out of work.

The state did see year-over-year gains in the following sectors: private education, administrative services, and professional and business services. Meanwhile, the following sectors saw decreases: wholesale trade, finance, and transportation and warehousing.

Personal Income

UHERO projects real personal income growth of 0.9 percent for 2012, down from 1.3 percent for the current calendar year. It’s expected to increase to 2.1 percent in 2013.

Those estimates are more pessimistic than Thursday’s forecast by the state Council on Revenues. The group is projecting 4.5 percent real income growth for calendar year 2011, and 4 percent growth for 2012. Council on Revenues member Carl Bonham, who also is UHERO’s executive director, said the council’s forecast should be taken “with a big grain of rock salt.”

The group cited cuts in federal payroll taxes, which are expected to sunset at the end of the year, as providing a one-time boost in personal income. It also estimates inflation will drop in 2012 from 3.2 percent to 1.7 percent, which should boost purchasing power.

Real Estate

Housing prices and home sales are down year-to-date on Oahu. On the neighbor islands, sales volumes are up, but prices are down compared to last year.

“On Maui and to a lesser extent the Big Island, there is still a clear downward trend with no sign of price stabilization,” the report said. “There continues to be a substantial foreclosure overhang, equal to at least two months of resale inventory.

Read the full report here.

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