Hawaii’s Economy Continues to Expand at Slower Pace

Posted on Aug 22, 2018 in News

For Immediate Release: August 22, 2018

HONOLULU—The Department of Business, Economic Development and Tourism (DBEDT) released its third quarter 2018 Statistical and Economic Report today.

In this report, DBEDT revised its projection on Hawaii economic growth downward to 1.5 percent for 2018 from 1.9 percent projected in the previous quarter. Though labor market conditions continue to be the best in the nation and tourism growth is still strong, the most recent economic data from federal sources indicate that Hawaii’s economic growth during the first quarter of 2018 was at 1 percent and the Honolulu consumer inflation was at 1.6 percent for the first half of 2018. Both numbers came out much lower than projected.

During the first seven months of 2018, Hawaii continued to have the best labor market in the nation with an average unemployment rate at 2.1 percent, which was the lowest in the nation and the lowest rate in Hawaii’s history. For statewide employment, the number of people who are either employed for pay or self-employed, was at a record high level during the first seven months of 2018 at 673,200. The average number of people who were still looking for jobs and available to work was at the historical low level of 14,550 during the first seven months of 2018.

Non-agriculture payroll jobs increased by 10,300 during the same period. Visitor arrivals registered the best half year during the first half of 2018 with 4.9 million visitors coming to Hawaii by airplanes. The corresponding nominal visitor expenditures increased 10.8 percent during the first half of 2018. Total number of air seats on scheduled flights to Hawaii, a leading indicator of the tourism industry, increased 10.2 percent during the first half of 2018 and is expected to increase by 6.2 percent during the rest of 2018.

“Hawaii’s economic conditions remain healthy,” said DBEDT Director Luis P. Salaveria. “Even though we are now entering a slower growth period of around 1.5 percent annual growth, the lower growth rate will be accompanied by a lower rate of inflation. Our economic growth rate during the past three years (2015-2017) was 2.4 percent.”

The tourism industry accounted for more than half of the 10,300 jobs gains during the first seven months of 2018. Food services added 4,200 jobs, and accommodation added 1,000 jobs. Healthcare and social assistance added 2,700 jobs, professional and business services added 2,000 jobs. A few industries experienced job losses, which included state government (-1,300 jobs), retail trade (-500 jobs), information (-200 jobs) and manufacturing (-100 jobs).

“We are encouraged to see that the value of private building permits increased 3.9 percent during the first half year of 2018. If this trend continues for the second half year, the construction industry will perform well in 2019, since it takes a few months to start construction after permits are issued,” said Chief State Economist Dr. Eugene Tian. “The value of government contracts awarded increased 151 percent during the first half of 2018.”

The most recent economic forecasts by more than 50 top economic research organizations (the Blue Chip Economic Indicators) released a report (Aug. 10) that the U.S. and world economies will experience steady growth in 2018 and 2019, and the U.S. economy will experience accelerated growth at 2.9 percent in 2018 and 2.6 percent in 2019. Hawaii’s economic growth rate will be lower than that of the nation. During the past 30 years, Hawaii’s economic growth rate was at 1.8 percent a year on average, while the economic growth rate for the U.S. was 2.5 percent for the same period.

DBEDT revised the visitor industry forecast slightly upward with visitor arrivals now growing at 6.1 percent for 2018, 1.6 percent for 2019 and 1.3 percent for 2020. Growth of visitor expenditures will be at 9.2 percent for 2018, 2.4 percent for 2019, and 3.4 percent for 2020.

DBEDT kept its projection on the non-farm payroll job count unchanged from the previous quarter forecast at 1.2 percent for 2018, 0.9 percent for 2019 and 2020, 0.8 percent for 2021. The unemployment rate projections were also unchanged from the previous quarter forecast at 2.2 percent for 2018 and will gradually increase to 3.4 percent by 2021.

DBEDT expects consumer inflation, as measured by the Honolulu Consumer Price Index, to be lower than previously projected, now at 2 percent for 2018, and will gradually increase to 2.7 percent by 2021. Hawaii’s consumer inflation rate is expected to be lower than the nation in 2018 and beyond. Between 2003 and 2017, Hawaii’s consumer inflation was higher than the U.S. average.

DBEDT revised the nominal personal income growth rates downward from the previous quarter forecast to 3.5 percent for 2018, 3.8 percent for 2019, 4 percent for 2020 and 2021. Growth of real personal income was revised upward from the previous quarter forecast and is now 1.8 percent for 2018, and at that growth rate for the next few years. The upward revision on real personal income was mainly due to the lower expectation on consumer inflation in Hawaii.

The DBEDT Quarterly Statistical and Economic Report contains 136 tables of the most recent quarterly data on Hawaii’s economy as well as narrative explanations of the trends in these data.

The full report is available at here.

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Media Contact:
Christine Hirasa
Department of Business, Economic Development and Tourism
Phone: (808) 587-9006
Mobile: (808) 286-9017
Website: dbedt.hawaii.gov

ACTUAL AND FORECAST OF KEY ECONOMIC INDICATORS FOR HAWAII: 2016 TO 2021

Economic Indicators 2016 2017 2018 2019 2020 2021
Actual Forecast
Total population (thousands) 1,429 1,428 1,435 1,443 1,452 1,462
Visitor arrivals (thousands) ¹ 8,934 9,383 9,959 10,123 10,257 10,381
Visitor days (thousands) ¹ 80,225 83,991 88,862 90,384 91,614 92,754
Visitor expenditures (million dollars) ¹ 15,911 16,897 18,449 19,036 19,618 20,178
Honolulu CPI-U (1982-84=100) 265.3 272.0 277.5 283.8 290.9 298.8
Personal income (million dollars) 71,946 74,055 76,661 79,574 82,757 86,067
Real personal income (millions of 2009$) ² 55,024 55,795 56,799 57,821 58,862 59,804
Non-agricultural wage & salary jobs (thousands) 646.1 652.7 660.5 666.5 672.5 677.9
Civilian unemployment rate 2.9 2.4 2.2 2.5 3.0 3.4
Gross domestic product (million dollars) 84,904 88,136 91,485 94,687 98,190 101,823
Real gross domestic product (millions of 2009$) 74,241 75,473 76,605 77,831 78,920 80,025
Gross domestic product deflator (2009=100) 114.4 116.8 119.4 121.7 124.4 127.2
Annual Percentage Change
Total population 0.2 -0.1 0.5 0.6 0.6 0.7
Visitor arrivals ¹ 2.9 5.0 6.1 1.6 1.3 1.2
Visitor days ¹ 2.0 4.7 5.8 1.7 1.4 1.2
Visitor expenditures ¹ 5.3 6.2 9.2 3.2 3.1 2.9
Honolulu CPI-U 2.0 2.5 2.0 2.3 2.5 2.7
Personal income 3.3 2.9 3.5 3.8 4.0 4.0
Real personal income ² 2.6 1.4 1.8 1.8 1.8 1.6
Non-agricultural wage & salary jobs 1.3 1.0 1.2 0.9 0.9 0.8
Civilian unemployment rate ³ -0.7 -0.5 -0.2 0.3 0.5 0.4
Gross domestic product 3.7 3.8 3.8 3.5 3.7 3.7
Real gross domestic product 2.0 1.7 1.5 1.6 1.4 1.4
Gross domestic product deflator (2009=100) 1.7 2.1 2.3 1.9 2.3 2.3

1/ Visitors who came to Hawaii by air or by cruise ship. Expenditures includes supplementary expenditures. 2017 supplementary expenditure was estimated by DBEDT.
2/ Using personal income deflator developed by the U.S. Bureau of Economic Analysis and estimated by DBEDT.
3/ Absolute change from previous year.
Source: Hawaii State Department of Business, Economic Development & Tourism, August 21, 2018.