Outlook for the Economy

2nd Quarter 2020 Report

The outlook of Hawaii’s economy is based on the following assumptions:

  • The total non-agriculture job loss in the state in April was 121,000. 78,000 jobs were lost in tourism-intensive industries (hospitality, trade, and transportation), and the rest were in the non-tourism intensive industries.
  • SBA PPP loans to Hawaii businesses totaled $2.6 billion as of May 20, 2020 and EIDL loan totaled $83.5 million, for a total small business loan-total of $2.7 billion.
  • Assume 75 percent of the SBA loans are being used for payroll which is $2 billion.
  • Based on data from the U.S. Bureau of Economic Analysis, the total number of private non-farm employees was 544,139 and total private non-farm workers compensation was $33 billion in 2018 with an average compensation per employee at $60,632.
  • Average compensation per month per worker is calculated to be $60,632 a year or $5,052 per month.
  • Total jobs supported by small business loans should be equivalent to 395,883 workers (2,000,000,000/$5,052).
  • PPP loans need to be spent within 8 weeks (2 months), then jobs supported should be 197,942 jobs (395,883/2) each for May and June.
  • Assume the visitor industry will start opening in September 2020 and will recover 30 percent of arrivals (from same month in 2019) in September and 45 percent in December 2020.
  • No cruise visitors until second half of 2021.
  • It will take 6 years for visitor arrivals to recover to the 2019 level. This is based on the 2009 great recession pace.
  • It will take 2 years for local (non-tourism intensive sector) businesses to recover to the 2019 level, in terms of job count. This is based on the 2009 great recession pace.

Based on the above assumptions, DBEDT projects that Hawaii’s economic growth rate, as measured by the real gross domestic product (GDP), will drop by 12.1 percent in 2020, then will increase at 0.7 percent in 2021, 0.6 percent in 2022, and 1.1 percent in 2023.

Hawaii will welcome 3.4 million visitors in 2020, a decrease of 67.5 percent from 2019 level. Visitor arrivals will increase to 6.2 million in 2021, 8.3 million in 2022, and 9.4 million in 2023. Visitor arrivals will not reach the 2019 level until 2025 based on the assumptions. Visitor spending will decrease more during the next few years due to the decrease in daily spending.

Non-agriculture payroll jobs will shrink by 8.9 percent in 2020, then will increase by 4.1 percent in 2021, 2.9 percent in 2022, and 1.3 percent in 2023. As for the GDP, non-agriculture payroll jobs will not be recovered to pre-crisis level until 2025.

The unemployment rate reached 23.5 percent in April, but it will improve in May and June due to the PPP and EIDL funds. Overall for 2020, the average annual unemployment rate will be at 8.6 percent, then decrease to 7.3 percent in 2021, 6.5 percent in 2022, and 6.2 percent in 2023. These rates are much higher than the average Hawaii unemployment rate of 2.5 percent 2017 to 2019.

Nominal personal income is expected to decrease by 10.2 percent in 2020, then will increase by 2.6 percent in 2021, 2.4 percent in 2022, and 2.8 percent in 2023.

Hawaii consumer inflation rate, as measured by the Honolulu Consumer Price Index for All Urban Consumers, will increase at rates between 0.5 to 1.7 for the next few years. These growth rates are lower than previously projected at about 2 percent.

Hawaii population is expected to be unchanged in 2020 and increase only by 0.1 percent in 2021, and 0.3 percent each year thereafter. Though international migration (usually net in-migration) may be halted in 2020, domestic migration (usually net out-migration) is likely to be on hold as well in 2020.

ACTUAL AND FORECAST OF KEY ECONOMIC INDICATORS FOR HAWAII: 2018 TO 2023
Economic Indicators 2018 2019 2020 2021 2022 2023
Actual Forecast
Total population (thousands) 1,421 1,416 1,416 1,417 1,421 1,425
Visitor arrivals (thousands) ¹ 9,889 10,425 3,392 6,241 8,340 9,397
Visitor days (thousands) ¹ 88,285 90,892 29,536 54,257 72,401 81,453
Visitor expenditures (million dollars) ¹ 17,643 17,754 5,534 10,360 14,248 16,348
Honolulu CPI-U (1982-84=100) 277.1 281.6 283.0 287.0 291.6 296.5
Personal income (million dollars) 78,721 81,342 73,039 74,910 76,718 78,898
Real personal income (millions of 2012$) ² 61,931 63,169 56,473 57,264 57,894 58,762
Non-agricultural wage & salary jobs (thousands) 658.3 655.7 597.3 621.8 639.9 648.2
Civilian unemployment rate ³ 2.4 2.7 8.6 7.3 6.5 6.2
Gross domestic product (million dollars) 93,798 97,282 86,786 89,012 91,162 93,756
Real gross domestic product (millions of 2012$) 82,652 83,509 73,374 73,873 74,349 75,157
Gross domestic product deflator (2012=100) 113.5 116.5 118.3 120.5 122.6 124.7
Annual Percentage Change
Total population -0.3 -0.3 0.0 0.1 0.3 0.3
Visitor arrivals ¹ 5.2 5.4 -67.5 84.0 33.6 12.7
Visitor days ¹ 4.9 3.0 -67.5 83.7 33.4 12.5
Visitor expenditures ¹ 5.1 0.6 -68.8 87.2 37.5 14.7
Honolulu CPI-U 1.9 1.6 0.5 1.4 1.6 1.7
Personal income 4.0 3.3 -10.2 2.6 2.4 2.8
Real personal income ² 2.6 2.0 -10.6 1.4 1.1 1.5
Non-agricultural wage & salary jobs 0.5 -0.4 -8.9 4.1 2.9 1.3
Civilian unemployment rate ³ 0.0 0.3 5.9 -1.3 -0.8 -0.3
Gross domestic product 4.9 3.7 -10.8 2.6 2.4 2.8
Real gross domestic product 2.4 1.0 -12.1 0.7 0.6 1.1
Gross domestic product deflator (2012=100) 2.4 2.6 1.5 1.9 1.8 1.7
1/ Visitors who came to Hawaii by air or by cruise ship. Expenditures includes supplementary expenditures. 2019 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, May 21, 2020.