Outlook for the Economy

3rd Quarter 2020 Report

Hawaii’s economy has been greatly impacted by the COVID-19 pandemic. During the April-July 2020 period, the average unemployment rate (not seasonally adjusted) was 18.5 percent. Hawaii lost 115,000 non-agriculture payroll jobs during the April-July period as compared with the same period a year ago. All industry sectors lost jobs except construction and federal civilian jobs. The leisure and hospitality sector accounted for 58.7 percent of the total job loss at 67,500. Natural resource, mining, & construction sector gained 0.5 percent or 200 jobs, federal civilian job count was flat during this period. Overall, statewide non-agriculture payroll jobs decreased by 17.7 percent in the second quarter of 2020.

Hawaii initial unemployment claims started to rise mid-March and peaked at 53,112 during the first week of April and then gradually declined. During the second week of August, initial unemployment claims were still above 5,000 per week. During 2012-2019 period, the weekly initial unemployment claims averaged 1,442 per week.

Visitor arrivals to the State during the second quarter of 2020 totaled 30,748, a decrease of 98.8 percent from the same quarter in 2019. However, these visitors stayed longer in Hawaii with average length of stay at 27.3 days. In 2019 the average length of stay was 8.8 days.

Value of private building permits showed a decrease of 14.3 percent during the second quarter of 2020. The largest decrease occurred in the additions and alterations category which was down by 40.7 percent. Value of residential building permits was down by 3.9 percent and the value for commercial and industrial category was up by 101.2 percent during the same period. Though the value of private building permits was down, state government spending on capital investment projects (CIP) was up by 10.7 percent during the same time period. State government spent an average of nearly $1.5 billion a year on CIP projects during the last three years (2017-2019).

As of August 25, 2020, federal funds allocated to Hawaii totaled $8.4 billion. Most of these federal funds has been or will be received as household income and will be spent by Hawaii households. These funds helped mitigate the economic impact from COVID-19.

At the national level, the U.S. economic growth rate was at 0.3 percent during the first quarter and declined by 9.1 percent in the second quarter, as compared to the same quarter in 2019. The Blue Chip Economic Indicators report from Aug. 10, 2020, which is the consensus of 50 economic forecasting organizations, projected that the U.S. economic growth rate for 2020 will decrease by 5.2 percent. The report projected a positive 3.8 percent U.S. economic growth for 2021. The Blue Chip forecasts for foreign countries were all negative except China and India which showed small growth.

Based on the above development, and the delayed pre-test program for transpacific travel coupled with the August 25th two-week Stay-at-Home, Work-from-Home Order for Oahu, DBEDT projects that Hawaii’s economic growth rate, as measured by the real gross domestic product (GDP), will drop by 12.3 percent in 2020, then will increase at 2.1 percent in 2021, 2.0 percent in 2022, and 1.2 percent in 2023.

Hawaii will welcome 2.9 million visitors in 2020, a decrease of 71.9 percent from the 2019 level. Visitor arrivals will increase to 7.2 million in 2021, 8.3 million in 2022, and 9.4 million in 2023. Visitor spending will decrease 67.8 percent in 2020, then will increase 109.1 percent in 2021, 18.8 percent in 2022, and 14.7 percent in 2023.

Non-agriculture payroll jobs will shrink by 12.1 percent in 2020, then will increase by 8.5 percent in 2021, 2.0 percent in 2022, and 1.5 percent in 2023.

Overall for 2020, the average annual unemployment rate will be at 10.9 percent, then decrease to 7.2 percent in 2021, 6.6 percent in 2022, and 6.3 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 12.1 percent in 2020, then will increase by 5.3 percent in 2021 and 3.9 percent in 2022. Nominal personal income growth rate will be at 3.0 percent in 2023.

Hawaii’s consumer inflation rate, as measured by the Honolulu Consumer Price Index for All Urban Consumers, will increase at rates between 1.4 to 1.8 for the next few years.

Hawaii’s 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 10,387 2,922 7,242 8,309 9,362
Visitor days (thousands) ¹ 88,285 90,892 30,035 62,962 72,135 81,155
Visitor expenditures (million dollars) ¹ 17,643 17,844 5,742 12,005 14,267 16,372
Honolulu CPI-U (1982-84=100) 277.1 281.6 285.5 289.8 294.8 300.1
Personal income (million dollars) 78,721 81,442 71,551 75,375 78,298 80,666
Real personal income (millions of 2012$) ² 61,931 62,935 54,678 56,915 58,325 59,229
Non-agricultural wage & salary jobs (thousands) 658.3 655.7 576.3 625.2 637.9 647.3
Civilian unemployment rate ³ 2.4 2.7 10.9 7.2 6.6 6.3
Gross domestic product (million dollars) 93,798 97,282 86,479 89,922 93,326 96,092
Real gross domestic product (millions of 2012$) 82,652 83,509 73,208 74,779 76,266 77,183
Gross domestic product deflator (2012=100) 113.5 116.5 118.1 120.3 122.4 124.5
Annual Percentage Change
Total population -0.3 -0.4 0.0 0.1 0.3 0.3
Visitor arrivals ¹ 5.2 5.0 -71.9 147.9 14.7 12.7
Visitor days ¹ 4.9 3.0 -67.0 109.6 14.6 12.5
Visitor expenditures ¹ 5.1 1.1 -67.8 109.1 18.8 14.7
Honolulu CPI-U 1.9 1.6 1.4 1.5 1.7 1.8
Personal income 4.0 3.5 -12.1 5.3 3.9 3.0
Real personal income ² 2.3 1.6 -13.1 4.1 2.5 1.6
Non-agricultural wage & salary jobs 0.5 -0.4 -12.1 8.5 2.0 1.5
Civilian unemployment rate ³ 0.1 0.3 8.2 -3.8 -0.6 -0.3
Gross domestic product 4.9 3.7 -11.1 4.0 3.8 3.0
Real gross domestic product 2.4 1.0 -12.3 2.1 2.0 1.2
Gross domestic product deflator (2012=100) 2.4 2.6 1.4 1.8 1.8 1.7
1/ Visitors who came to Hawaii by air or by cruise ship. Expenditures includes supplementary expenditures.
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 26, 2020.