Fri, Sep 23, 2022 10:21 AM
By Kim Jarrett, The Center Square
Economists at the University of Hawaii Economic Research Organization say they are more pessimistic about the state's economic future.
Inflation, an almost certain recession in 2023 and global conditions are impacting Hawaii, researchers said in a report released Friday.
Covid-19 is no longer seen as a crucial economic factor, even though there are some concerns about the effects of long Covid on the labor force. But changes in the global economy will have a significant impact, according to the report.
"Russia's war with Ukraine has inflicted an energy crisis on Europe, which is now clearly headed for recession," the authors wrote. "China's economy continues to suffer from its Zero Covid policy. Global growth has slowed to about 3% this year and will soften further in 2023."
Declining oil prices and the easing of housing inflation could help the U.S. avoid a recession, the authors wrote. But a 2023 recession would look much different than a 2009 recession, according to the report.
"In the wake of the pandemic, households and businesses have accumulated significant cash reserves,' the authors wrote. "This means that defaults would be less likely in a downturn and recovery more rapid. While some job losses would be inevitable, it is unlikely to generate the deep and persistently slow recovery we experienced beginning in 2009."
Hawaii's unemployment rate was 4.1% in August, up slightly from 4.0% the previous month, according to figures from the Department of Business, Economic Development and Tourism. Job numbers remain below pre-pandemic levels, according to the report.
"The ongoing visitor industry recovery will support job gains in tourism related areas next year, while many other sectors experience weakness," the authors wrote. "Aggregate job growth will slow from more than 5% this year to 1.7% in 2023."
The bright spot in the economic picture is the state's tourism industry, which should see a lift when Japan reopens its borders on Oct. 11.
"Returning visitors from Japan and other international markets may partially insulate Hawaii from a U.S. downturn," the authors wrote. "That is not to say it would be clear sledding. Higher interest rates will weigh on demand here, as will weaker U.S. visitor numbers, and inflation is taking a damaging bite out of household income."
Hawaii's economy differs from the mainland's, but the island state still faces a "rough road," according to economists.
"But even if the U.S. avoids an outright recession, its growth impetus has clearly slowed, and higher interest rates and prices will be a direct burden on many local households," the authors said. "Hawaii is never immune to macroeconomic changes that occur beyond our shores."