David Y. Ige | DBEDT PRESS RELEASE: IMPROVEMENT IN HAWAIIS ECONOMY

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DBEDT PRESS RELEASE: IMPROVEMENT IN HAWAIIS ECONOMY

Posted on December 4, 2020 in News, Newsroom

HONOLULU – The Department of Business, Economic Development and Tourism (DBEDT) today published its statistics and economic report for the fourth quarter of 2020. Based on recent developments in Hawaii‘s economy, DBEDT now predicts Hawaii’s economic growth will decline 11.2 percent in 2020, less than the previously forecast 12.3 percent.

Recent economic improvements

Improving Hawaii’s economy includes the following:

  1. Visitor numbers in November 2020 rebounded 23 percent compared to the same month’s level in 2019. The preliminary visitor number for November was 6,100 per day, an improvement from 630 per day in the first half of October and 4,000 per day for the second half of October.
  2. Hawaii bankruptcy filings were down 9.4 percent in the first eleven months of 2020 compared to the same period in 2019.
  3. Personal income rose 15.9 percent in the second quarter of 2020 compared to the same quarter of the previous year.
  4. Initial jobless claims have been stable below 5,000 since October 17. For the last week (the week ending November 28), initial jobless claims hit 6.7 percent of the high that occurred in the week ending April 4, 2020 with 53,112 unemployed filings.
  5. In December 2020, 935 more flights from the US mainland and 84 more flights from international destinations are planned than in November 2020. Of the international flights in December, 42 will be from Canada, which is the first time Hawaii has been Canadian since April 2020 Inbound flights.
  6. The unemployment rate in Hawaii continued to decline from 23.4 percent in May 2020 to 14.2 percent in October 2020.
  7. In terms of the average daily new COVID-19 cases per 100,000 population, for the week ended December 3, 2020, Hawaii’s cases ranked 5.7 cases per 100,000 in Hawaii, compared with 53.3 cases per 100,000 for the US as a whole.
  8. According to US Congressman Ed Case, the COVID-19 vaccine will be available for distribution in mid-December 2020.
  9. A bipartisan group of lawmakers voted on Jan.
  10. The US stock market recorded its best month since 1987 in November 2020, as measured by the Dow Jones Industrial Index.
  11. The outlook for the US economy has continued to improve in recent months. According to the Blue Chip Economic Indicators report published in November, the US economy is expected to shrink 3.7 percent in 2020. This is an improvement on the May forecast of 5.8 percent in 2020. The blue chip forecast predicts US economic growth of 4 percent in 2021. The blue chip economic indicators are a consensus of 50 economic forecasts.

The above improvements are mainly due to the federal government’s funding programs and the launch of the pre-voyage test program for transpacific passengers. At the end of November, federal funds allocated to Hawaii were $ 10.3 billion, of which 80.3 percent was spent.

Economic challenges remain

According to an estimate by the US Bureau of Economic Analysis, the real gross domestic product (GDP) of Hawaii decreased by 13.9 percent in the second quarter of 2020 compared to the same quarter of the previous year. When the pandemic broke out, the tourism-related industries were hit the hardest in the second quarter, with real GDP in arts, entertainment and leisure (-61.8%), accommodation and restaurants (-61.1%), transportation and storage (-30.6%), educational services (-18.4%) and wholesale (-17.9%). The retail sector performed better than other tourism-related sectors, borne by residents’ spending, and fell by 9.0 percent in the second quarter compared to the same quarter of the previous year.

Knowledge industries GDP showed some degree of resilience and declined less than general government GDP in the second quarter compared to the same quarter last year. These sectors included finance and insurance (-1.3%), information (-2.8%), business and corporate management (-4.3%), and professional, scientific and technical services (-8.7%) .

The construction industry also showed itself to be resilient, recording a slight decline in GDP of 3.5% in the second quarter compared to the same quarter of the previous year. Commercial and industrial construction seems to be paving the way for a recovery, the value of building permits for the year to date in September has increased by 89.6 percent compared to the same period in 2019.

Despite the pandemic, there were two non-agricultural industries that grew in the second quarter: federal civil government (1.7%), utilities (2.6%).

In the third quarter of 2020 there were 110,000 fewer jobs outside of agriculture compared to the same quarter of the previous year. The decline in jobs was most pronounced in accommodation (-33,300 or 77.8%) and catering (-30,000 or 42.7%). ), Transportation, warehousing and utilities (-9,800 or 28.7%), professional and business services (-7,500 or 10.1%), and arts, entertainment and leisure (-5,900 or 43.1%).

The difficult business climate was reflected in the second Hawai’i Commercial Rent Survey conducted by Island Business Management Hawai’i using data from DBEDT and published in October. The company’s sales declined almost consistently, with 86.4 percent of respondents saying 2020 sales would be lower than 2019 sales. Additionally, 11.9 percent of respondents said their income would be 50 percent or more below 2019 levels. As revenues decreased, it became increasingly difficult for Hawaiian companies to cover their basic expenses. When asked about the amount of the expense allowance, 43.7 percent of the companies stated “extreme hardship” for rental costs, 40 percent for personnel costs and 36.7 percent for operating costs.

At the national level, the US economic growth rate was minus 9.0 percent in the second quarter of 2020 and minus 2.9 percent in the third quarter of 2020 compared to the same quarters of 2019. The November Blue Chip Economic Indicators report predicts that the Majority of the countries in the world will have economic contraction in 2020, with China being the exception with an increase of 2.0 percent. For the Europe region, declines of 7.6 percent are forecast for 2020; Japan, 5.4 percent; Canada, 5.8 percent; Australia, 3.9 percent; and South Korea 0.9 percent.

Forecast results

DBEDT now predicts that Hawaii’s economic growth rate, as measured by real GDP, will decline 11.2 percent in 2020, then to 2.1 percent in 2021, 2.0 percent in 2022, and 1.2 percent in the year Will increase in 2023.

Hawaii is expected to welcome 2.7 million visitors in 2020, a decrease of 73.7 percent from 2019. The number of visitor arrivals is projected to 6.2 million in 2021, 7.7 million in 2022 and 8.8 million respectively in 2023 will increase by 2025 to reach the level of 2019.

A total of 171,136 visitors came to the state from April through October 2020, a 97.2 percent decrease from the same period in 2019. However, those visitors stayed longer in Hawaii, with an average length of 22.9 days. In 2019, the average length of stay of visitors was 8.6 days.

Jobs outside of agriculture are projected to shrink 11.9 percent in 2020 and then increase 6.1 percent in 2021, 2.5 percent in 2022, and 1.9 percent in 2023 – crisis levels up to 2025.

The state unemployment rate is projected to average 11.2 percent in 2020 and 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 Hawaii’s average unemployment rate of 2.5 percent between 2017 and 2019.

The nominal personal income is expected to rise by 7.6 percent in 2020, mainly due to the federal aid programs. Most of the increase in personal income came from government transfers related to unemployment insurance payments and other transfers, mainly related to the CARES ACT funds that offset wage declines. Due to the cut in federal funding programs, a decline in nominal personal income of 7.8 percent is expected in 2021.

Inflation should remain moderate. Measured by the Honolulu consumer price index for urban consumers, inflation is forecast to rise between 1.6 and 2.3 percent over the next few years. These growth rates are higher than forecast in the previous quarter. In the second half of 2020, consumer inflation in Honolulu was 1.6 percent, with increases in food and drink (2.7%), housing (2.6%) and clothing (4.9%) driven by declines in transportation (-4 , 5%) were offset. when fuel prices fell.

Statement from director Mike McCartney

“We’re excited about the improvements in the US and Hawaiian economies. It’s great to see airlines adding flights to our state, especially from Canada and Japan. With the expected distribution and use of the COVID-19 vaccine in December, I believe our tourism recovery will accelerate in 2021, “said DBEDT Director Mike McCartney. “We faced unprecedented challenges in the slow recovery of our economy in the final three quarters of 2020 and we will continue to face tougher times in the first half of 2021. Nevertheless, I am optimistic that we will see accelerated economic growth in the second half of 2021. “Due to the 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 Economy, Economic Development & Tourism (DBEDT)

DBEDT is Hawaii’s resource center for economic and statistical data, business development opportunities, energy and energy conservation information, and foreign trade benefits. DBEDT’s mission is to achieve a Hawaiian economy that embraces innovation and is competitive, dynamic, and productive globally, providing opportunity for all Hawaiian citizens. Through the affiliated agencies, the department promotes planned community development, creates affordable housing units for workers in high-quality residential environments and promotes employment growth in the innovation sector.

Media contact:

Dr. Eugene Tian

Research and Economic Analysis Department

Department of Economics, Economic Development & Tourism
(808) 586-2470
[email protected]
dbedt.hawaii.gov/economic/

Charlene Chan
Department of Economics, Economic Development and Tourism

(808) 824-0134
[email protected]
dbedt.hawaii.gov

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