Hawaii’s economy is recovering faster than previously expected, according to the latest forecast by University of Hawaii economists, as built-up savings, pent-up wanderlust and widespread vaccinations in Hawaii and on the U.S. continent are spurring travel to Hawaii – a trend expected to accelerate during the summer.

Combine that with $6 billion in new federal stimulus money headed to the islands, and the near-term situation looks pretty good for the Aloha State.

But dig a little deeper into the University of Hawaii Economic Research Organization’s latest forecast, which is titled “Vaccinations and US Strength Drive Upgraded Hawaii Forecast,” and there’s something that confounds expectations: a workforce that’s not stepping up to meet the slowly but steadily growing demand for workers.

“For the Hawaii economy overall,” UHERO reports, “labor shortages may pose the most daunting impediment to recovery.”

Line of customers goes out the door and around the side of Leonard’s Bakery, a popular tourist spot for delectable Malasada treats.
A return of tourists to Hawaii has been a boon for some local businesses. But even as the demand for workers increases, some businesses say they can’t lure workers back. Cory Lum/Civil Beat/2021

In other words, businesses that want to gear up again might not be able to because they can’t find workers.

This isn’t to say that need for workers is close to what it once was. With hotel occupancy now in the 40% to 50% range, hotel executives say there isn’t demand for the big staffs they once employed. In the pre-pandemic days, Hawaii’s unemployment rate was around 2%, meaning just about anyone who wanted a job could find one.

Now Hawaii’s unemployment rate is stuck at about 9%, which theoretically means almost one in 10 people seeking work can’t find it. But businesses on the ground report a different picture.

“Although the state is still experiencing relatively high levels of unemployment, there is ample anecdotal evidence that Hawaii’s employers are having substantial difficulty hiring new staff,” UHERO reported. “In fact, labor shortages are becoming a common problem in many industries nationwide as the recovery advances.”

So what’s causing this?

UHERO dismisses one common argument: that the federal CARES Act is to blame. Among other things, the act meant an additional $600 per week for unemployed workers during the early months of the pandemic and meant many workers could earn more staying at home than working.

But that money dried up over the summer. Plus UHERO argues the stimulus money had the net effect Congress wanted: it kept more people working than otherwise would have, as the unemployed people had money to spend and thus support jobs.

Instead, UHERO points to deeper problems.

Perhaps most troubling, the economists report that businesses are struggling to find workers because there are simply fewer people in Hawaii. According to UHERO the pandemic has led to the departure of 16,000 from the labor force, and many of these people have left the state altogether.

Amelia Ross, New Classroom, distance learning, education, school
Due to school closures and children learning from home, many parents have been reluctant or unable to go back to work, leaving employers having trouble finding workers, UHERO reports. Courtesy: Misha Ross

UHERO cites U.S. Census data showing Hawaii’s population fell by nearly 9,000 in 2020.

“Although the state’s population has been falling since 2017, the pace of decline doubled in 2020,” UHERO reported. “It is likely that the precipitous job losses and high cost of living in Hawaii have incentivized some unemployed workers without strong family ties in the islands to relocate.”

Also making it hard for businesses to find workers are closed schools, which is forcing many parents to stay at home, especially moms.

“In the hard-hit service sector, the economic contraction exacted a heavy toll on employment, and this is also where there are now the biggest apparent labor shortages,” UHERO reported. “This is not surprising given the preponderance of women in these occupations.”

“With many schools closed for in-person classes and the summer break on the horizon, the unavailability and expense of child care continues to create a barrier to the return to work for many women,” UHERO added.

Workers Might Not Feel Safe Yet

A national uptick in entrepreneurial activity could mean fewer people available to work here if the pattern in Hawaii parallels the national trend, UHERO reported.

Finally, there’s the reality of bosses having to convince employees that the workplace is safe.

“Some workers may be afraid to return to jobs that require interaction with a large number of people on a day-to-day basis, especially if they or their families have not yet been vaccinated,” UHERO said.

Workforce issues aren’t the only things hindering Hawaii’s recovery. UHERO notes a shortage of rental cars has driven prices up and discouraged travelers. Also, UHERO notes, visitors are opting to stay in short-term vacation rentals, which means fewer hotel jobs.

And in the end, even if people are turning down jobs to stay at home, there are simply fewer jobs to turn down.

“The recovery of jobs has trailed behind tourism,” UHERO noted.

Even as tourists have returned, UHERO continued, “March payrolls were still more than a hundred thousand jobs below their pre-pandemic level.”

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