Hawaii’s economy continues to show ominous signs of weakness, even as record visitors come to the state and the unemployment rate remains below 3%. The latest troubling data: the state finished last among the 50 states and the District of Columbia in a federal report on economic growth for the second quarter of 2019.

The Aloha State’s gross domestic product grew by a dismal 0.5% for the quarter ended in June. Only New Jersey, which posted GDP growth of 0.7%, came close to claiming Hawaii’s dubious distinction of recording the nation’s slowest growing economy for the period, the U.S. Department of Commerce’s Bureau of Economic Analysis reported.

GDP is the value of the goods and services produced by an economy. Hawaii’s meager growth came as the GDP of every state grew in the second quarter, in some cases significantly.

For example, states with significant mining industries grew the fastest, with Texas, Wyoming, Alaska and New Mexico all posting growth rates above 4%. Mining increased 23.5% nationally overall, the bureau reported.

The report came as the economy showed other signs of slowing down heading into 2020. Preliminary numbers reported last week in an earnings conference call by the Honolulu-based shipping giant Matson Inc. predict Hawaii’s population will decline in 2019 for a third straight year, a sign that Hawaii’s high cost of living is forcing people to leave the state for other locations with better jobs and lower living expenses.

“It’s not real pretty,” said Carl Bonham, a University of Hawaii economist who heads the University of Hawaii Economic Research Organization. His team has been predicting an economic slow down for Hawaii for months.

And while Bonham said much of Hawaii’s population decline can be attributed to the departure of military personnel and their dependents, that doesn’t make up the whole story, he said.

 

Even as the number of people being born outpaced those dying between 2016 and 2018, the state lost about 8,000 from the population, Bonham said. Meanwhile, the labor force also shrunk, to about 678,000 in 2018 from 682,000 in 2016.

The outmigration combined with a slower birth rate has created a trend that demographers find alarming. Hawaii has fewer working people in proportion to its older population, which raises questions about who will do the work and pay the taxes needed to support the older people in the future if the trend continues. The trend could worsen if younger people most likely to have children leave the state in search of better jobs and cheaper housing.

Meanwhile, people who point to the visitor numbers and the low unemployment rate as signs of a strong economy are missing the point, Bonham said.

Overall visitor spending is down.

As for the low unemployment rate, he said, “The reason it’s so low is because of the outflow of population” and the shrinking labor force.

“Hawaii’s Changing Economy” series is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.

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