Hawaii‘s economy is recovering faster than previously expected, according to the latest forecast from University of Hawaii economists, as accumulated savings, pent-up wanderlust and widespread immunizations in Hawaii and the US continent boost travel to Hawaii — a trend that is expected accelerate in summer.
Combine that with $6 billion in new federal stimulus money flowing into the islands, and the near-term picture is looking pretty good for the Aloha State.
But dig a little deeper into the University of Hawaii’s economic research organization’s latest forecast, titled “Vaccinations and US Strength Drive Upgraded Hawaii Forecast,” and there’s something bogging down expectations: a workforce that’s not strengthening , to meet the slow but steady growth demand for labor.
“For the Hawaiian economy as a whole,” reports UHERO, “labor shortages may be the single biggest obstacle to recovery.”
In other words, companies looking to upgrade may not be able to because they can’t find workers.
This is not to say that the need for labor is anywhere near as great as it used to be. With hotel occupancy now hovering between 40% and 50%, hotel managers say there’s no demand for the large staff they once employed. In the days leading up to the pandemic, Hawaii’s unemployment rate was around 2%, meaning almost anyone who wanted a job could find one.
Now, Hawaii’s unemployment rate is about 9%, which theoretically means nearly one in ten job seekers can’t find work. But local companies report a different picture.
“Although the state still has relatively high unemployment, there is ample anecdotal evidence that Hawaii’s employers are experiencing significant difficulties in hiring new employees,” UHERO reported. “Indeed, labor shortages will become a widespread concern in many industries across the country as the recovery progresses.”
So what is causing this?
UHERO dismisses a common argument: that the federal CARES Act is to blame. Among other things, the law meant an extra $600 a week for the unemployed during the first few months of the pandemic and meant many workers could earn more by staying at home than by working.
But this money dried up in the summer. Additionally, UHERO argues that the stimulus money had the net effect that Congress wanted: it kept more people working than would otherwise have been the case, since the unemployed had money to spend and thus support jobs.
Instead, UHERO points to deeper problems.
Perhaps most troubling, economists are reporting that companies are struggling to find workers simply because there are fewer people in Hawaii. According to UHERO, the pandemic has caused 16,000 people to leave the labor market, and many of those people have left the state entirely.
UHERO cites US census data showing Hawaii’s population fell by nearly 9,000 in 2020.
“Although the state’s population has been declining since 2017, the rate of decline has doubled in 2020,” UHERO reported. “It’s likely that the sudden loss of jobs and the high cost of living in Hawaii have prompted some unemployed people without strong family ties on the islands to relocate.”
The closed schools are also making it difficult for companies to find workers, forcing many parents to stay at home, especially mothers.
“In the hard-hit service sector, the economic crisis has taken a heavy toll on employment, and this is also where the biggest apparent labor shortage is now,” UHERO reported. “That’s not surprising given the majority of women in these jobs.”
“With many schools closed to face-to-face classes and the summer recess approaching, the unavailability and cost of childcare continues to pose a barrier to many women returning to work,” added UHERO.
Workers may not yet feel safe
A national surge in entrepreneurial activity could mean fewer people can work here if the pattern in Hawaii matches the national trend, UHERO reported.
Finally, there is the reality that bosses need to convince their employees that the workplace is safe.
“Some workers may be afraid to return to jobs that require daily interaction with large numbers of people, especially if they or their families have not yet been vaccinated,” UHERO said.
Labor issues aren’t the only things hampering Hawaii’s recovery. UHERO notes that a shortage of rental cars has pushed up prices and discouraged travelers. UHERO also notes that visitors are opting for short-term vacation rentals, which means fewer hotel jobs.
And even when people turn down jobs to stay at home, there just ends up being fewer jobs to turn down.
“Job revitalization is lagging behind tourism,” UHERO noted.
Even as tourists have returned, UHERO continued, “March payrolls were still more than a hundred thousand jobs below their pre-pandemic levels.”
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