Aloha State News

Department of Business, Economic Development and Tourism (DBEDT) issued the following announcement on Dec. 4.

The Department of Business, Economic Development and Tourism (DBEDT)  released its fourth quarter 2020 Statistical and Economic Report.  Based on recent developments in Hawai‘i’s economy, DBEDT now projects  that Hawai‘i’s economic growth will fall by 11.2 percent in 2020, less  than the 12.3 percent previously forecast.

Recent Economic Improvements

Improvement in the Hawai‘i economy includes the following:

1. Visitor arrivals recovered by 23 percent in November 2020 in  comparison to the level, in the same month, in 2019. The preliminary  visitor count for November was 6,100 a day, which is an improvement from  630 a day for the first half of October and from 4,000 a day for the  second half of October.
2. Hawaii bankruptcy filings fell by 9.4 percent during the first eleven months of 2020 compared with the same period in 2019.
3. Personal income rose 15.9 percent during the second quarter of 2020 compared with the same quarter a year ago.
4. Initial unemployment claims have been stable at below 5,000 level  since October 17.  For the most recent week (week ending November 28),  initial unemployment claims were 6.7 percent of the peak level, which  occurred in the week ending April 4, 2020 with 53,112 unemployment  filings.
5. In December 2020, 935 more flights are scheduled from the U.S.  mainland and 84 more flights are scheduled from international  destinations than in November 2020.  Of the international flights in  December, 42 will be coming from Canada, which is the first time that  Hawai‘i has had Canadian inbound flights since April 2020.
6. Hawai‘i’s unemployment rate continued to decline from 23.4 percent in May 2020 to 14.2 percent in October 2020.
7. In terms of average daily new COVID-19 cases per 100,000 population,  Hawai‘i’s cases ranked the lowest among the states in the nation for  the week ending December 3, 2020, with  5.7 cases per 100,000 population  in Hawai‘i versus 53.3 cases per 100,000 population for the U.S. as a  whole.
8. According to U.S. Congressman Ed Case, the COVID-19 vaccine will be available for distribution in the middle of December 2020.
9. A bipartisan group of lawmakers unveiled a $908 billion coronavirus  relief proposal on December 1, 2020, with more federal funds potentially  coming in 2021.
10. The U.S. stock market, in terms of the Dow Jones Industrial Index, had the best month in November 2020 since 1987.
11. The outlook for the U.S. economy has continued to improve in recent  months. According to the Blue Chip Economic Indicators report issued in  November the U.S. economy is expected to contract by 3.7 percent in  2020. That is an improvement from the May forecast of 5.8 percent  contraction in 2020. The Blue Chip forecast is for 4 percent U.S.  economic growth in 2021. The Blue Chip Economic Indicators is a  consensus of 50 economic forecasting organizations.

The improvements cited above are mainly attributed to the federal  government assistance programs and the starting of the pre-travel  testing program for trans-Pacific passengers.  As of the end of  November, federal funds allocated to Hawai‘i totaled $10.3 billion, of  which 80.3 percent has been spent.

Economic Challenges Remain

According to an estimate by the U.S. Bureau of Economic Analysis,  Hawai‘i’s real gross domestic product (GDP) fell by 13.9 percent in the  second quarter of 2020 compared with the same quarter of the previous  year.  As the pandemic took hold, tourism-related industries were hit  the hardest in the second quarter with real GDP declines in Arts,  Entertainment and Recreation (-61.8%), Accommodation and Food Service  (-61.1%), Transportation and Warehouse (-30.6%), Educational Services  (-18.4%), and Wholesale Trade (-17.9%). Buoyed by resident spending, the  retail industry fared better than other tourism-related industries,  declining 9.0 percent in the second quarter over the same quarter of the  previous year.

GDP for knowledge-based industries showed a measure of resilience,  declining less than overall state GDP in the second quarter compared  with the same quarter of the previous year. These industries included  Finance and Insurance (-1.3%), Information (-2.8%), Management of  Companies and Enterprises (-4.3%), and Professional, Scientific, and  Technical Services (-8.7%).

The construction industry also showed resilience, with a modest GDP  decline of 3.5% in the second quarter over the same quarter of the  previous year. Commercial and industrial construction appears to be  paving the way for a recovery, with the value of September year-to-date  building permits up 89.6 percent over the same period of 2019.

In spite of the pandemic, there were two non-agriculture industries  that grew during the second quarter: Federal Civilian Government (1.7%),  Utilities (2.6%).

There were 110,000 fewer non-agriculture payroll jobs in the third  quarter of 2020 compared with the same quarter of 2019. The decline in  jobs was the highest for Accommodation (-33,300 or 77.8%), Food and  Drinking Places (-30,000 or 42.7%), Transportation, Warehousing &  Utilities (-9,800 or 28.7%), Professional & Business Services  (-7,500 or 10.1%), and Arts, Entertainment, and Recreation (-5,900 or  43.1%).

The challenging climate for businesses was reflected in the second  Hawai‘i Commercial Rent Survey conducted by Island Business Management  Hawai‘i with data provided by DBEDT and released in October. Company  revenues were down almost across the board, with 86.4 percent of  respondents indicating that 2020 revenues would be below 2019 revenue.  Furthermore, 11.9 percent of those surveyed indicated that their  revenues would be 50 percent or more below 2019 levels. As revenues  declined, the ability of Hawai‘i ‘s businesses to meet their basic  expenses became increasingly difficult. When asked about their level of  hardship to pay expenses, “extreme hardship” was indicated by 43.7  percent of the businesses for rent expenses, 40 percent for employee  expenses, and 36.7 percent for operating expenses.

At the national level, the U.S. economic growth rate was negative 9.0  percent for the second quarter and negative 2.9 percent for the third  quarter of 2020 compared to the same quarters in 2019. The Blue Chip  Economic Indicators November report forecast that a majority of  countries in the world will have economic contractions in 2020 with  China as an exception with a 2.0 percent increase. Declines in 2020 are  forecast for the European region, 7.6 percent; Japan, 5.4 percent;  Canada, 5.8 percent; Australia, 3.9 percent; and South Korea, 0.9  percent.

Forecasting Results

DBEDT now projects that Hawai‘i’s economic growth rate, as measured  by real GDP, will drop by 11.2 percent in 2020, then will increase at  2.1 percent in 2021, 2.0 percent in 2022 and 1.2 percent in 2023.

Hawai‘i is forecast to welcome 2.7 million visitors in 2020, a  decrease of 73.7 percent from 2019. Visitor arrivals are forecast to  increase to 6.2 million in 2021, 7.7 million in 2022, and 8.8 million in  2023. Visitor arrivals are not expected to reach 2019 levels until  2025.

Visitor arrivals to the state from April to October 2020 totaled  171,136, a decrease of 97.2 percent from the same period in 2019.   However, these visitors stayed longer in Hawaii with an average length  of stay at 22.9 days.  In 2019 visitor average length of stay was 8.6  days.

Non-agriculture payroll jobs are forecast to shrink by 11.9 percent  in 2020, then increase by 6.1 percent in 2021, 2.5 percent in 2022 and  1.9 percent in 2023.  Like the GDP growth, non-agriculture payroll jobs  are not expected to recover to pre-crisis level until 2025.

The state unemployment rate is projected to average 11.2 percent in  2020, then decrease to 7.9 percent in 2021, 7.1 percent in 2022 and 6.6  percent in 2023. These rates are much higher than the average Hawai‘i  unemployment rate of 2.5 percent between 2017 and 2019.

Nominal personal income is expected to increase by 7.6 percent in  2020, mainly due to the federal assistance programs. The majority of the  increase in personal income came from government transfers related to  unemployment insurance payments and other transfers mostly related to  the CARES ACT funds, which offset declines in wages and salaries.   Nominal personal income is expected to decrease by 7.8 percent in 2021  due to the reduction in federal assistance programs.

Inflation is expected to remain moderate.  As measured by the  Honolulu Consumer Price Index for urban consumers, inflation is forecast  to increase at rates between 1.6 to 2.3 percent for the next few years.  These growth rates are higher than those projected in the previous  quarter.  During the second half of 2020, Honolulu consumer inflation  was 1.6 percent, with increases in items including Food & Beverage  (2.7%), Housing (2.6%), and Apparel (4.9%) being offset by declines in  Transportation (-4.5%) as fuel prices fell.

Statement of Director Mike McCartney

“We are happy to see the improvements in the economies of the U.S.  and Hawai‘i. It is great to see the airlines adding flights to our  state, especially those from Canada and Japan.  With the expected  distribution and use of the COVID-19 vaccine in December, I believe our  tourism recovery will be accelerating in 2021,” said DBEDT Director Mike  McCartney. “During the last three quarters of 2020 we faced  unprecedented challenges while slowly restarting our economy and will  continue to face more difficult times during the first half of 2021.  Nonetheless, I am optimistic that we will see accelerated economic  growth during the second half of 2021 due to increased visitor arrivals  thanks to our Safe Travels program and the distribution of a COVID-19  vaccine.”

The full report is available at: dbedt.hawaii.gov/economic/qser/.

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About the Department of Business, Economic Development & Tourism (DBEDT) 

DBEDT is Hawai‘i’s resource center for economic and statistical data,  business development opportunities, energy and conservation  information, and foreign trade advantages. DBEDT’s mission is to achieve  a Hawai‘i economy that embraces innovation and is globally competitive,  dynamic and productive, providing opportunities for all Hawai‘i’s  citizens. Through its attached agencies, the department fosters planned  community development, creates affordable workforce housing units in  high-quality living environments, and promotes innovation sector job  growth.