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In more ways than one, Hawaii’s economy is recovering at a rapid pace: We’re creating new jobs, wages are rising and the state budget is in good shape, a new report from the University of Hawaii Economic Research Organization (UHERO) highlights.
However, UHERO warns that we also face challenges and potential crises. These include rising rates of COVID-19, inflation and war in Ukraine, with the specter of a recession looming.
Given this level of unpredictability, it is imperative that leaders, business owners, and individual households strive for resilience, build reserves, and advance healthy, sustainable economic goals.
Solid outlook for Hawaii gives reason for optimism, with caveats.
Visitors from the US mainland have shown an unwavering interest in visiting our islands, bringing pre-pandemic tourism receipts close to 2019. Revenue will grow higher throughout 2022 as the number of foreign tourists increases, UHERO predicts, which will further boost the state’s economy.
“Without the expected return of international visitors, we would be revising our forecasts downward,” UHERO said in a May 12 report.
It’s also important to recognize that the substantial injection of federal dollars from COVID relief funding and President Joe Biden’s omnibus infrastructure bill may not happen down that path again.
Given these realities, it’s reassuring to see that the Legislature topped up the Rainy Day Fund, also known as the Emergency and Budgetary Reserve Fund, with $500 million and allocated $321 million to the state unemployment fund. Other prudent steps were also taken, such as restoring the state’s $5 million disaster fund.
It would be advisable for individuals and companies to take parallel steps. This includes budgeting for the essentials before you spend on extras, and funding or rebuilding an emergency cushion when possible.
The better we as a state manage to avoid high infection rates from COVID-19, the more stable our life will be. It is important to continue to encourage booster vaccinations and take safety precautions.
If things go as we would like — Hawaii’s tourism patterns continue as expected, COVID hospitalizations are falling to negligible levels, and no major shocks undermine the economy — there’s good news for job seekers.
Visitor spending this year is expected to reach $17.4 billion, which will support an additional 25,700 jobs in 2022 and 21,400 next year on UHERO projects. Higher employment leads to higher levels of health insurance and wellness, both of which are welcome.
But here, too, we see warning flashes. UHERO reports that Hawaii’s pool of available labor shrank during the pandemic as residents left the state. We continue to face housing shortages and extremely high living costs, both of which can drive working-age residents to leave the islands.
UHERO expects inflation-adjusted personal income to fall by 5.1% this year, mainly due to the lack of government aid. Low-income residents will feel this decline disproportionately.
The forecast says income will rebound by 0.9% next year, followed by 1.6% in 2024, but the wage increase will not be evenly distributed.
Inflation is another stumbling block, although UHERO forecasts it will fall to previous levels by 2024.
While UHERO forecasts that Hawaii’s economy will weather these sources of turmoil, risks remain. Let us do our part by preparing individually and collectively for challenges.
We can support each other by following safe COVID-19 practices. We should also support local businesses: Promoting local businesses and purchasing Hawaiian-made products helps support local income and maintain wealth on the islands.