Economist sees better times in the U.S., abroad
WAIKAPU – Maui businesses should see modest growth this year, University of Hawaii economics professor Carl Bonham told nearly 100 business leaders Friday during a Maui Chamber of Commerce luncheon at the Kamehameha Golf Course Clubhouse.
Government austerity in the form of reduced government spending, increases in taxes or a combination of both have been a drag on economies in the United States at all levels of government and in Europe and in Japan, he said in a preview of Maui County’s economic forecast by the University of Hawaii Economic Research Organization. He serves as UHERO’s executive director.
“The austerity is starting to go away,” he said. “It’s happening a little bit more slowly than we originally anticipated. But it is going away, and that will let the private sector’s strength . . . start to sort of shine and come through more in the bottom-line numbers.”
Maui’s economy is experiencing a “pause” or a “slowdown,” he said, maintaining that Maui needs “balanced expansion,” with not only some tourism growth but also some other sector of the economy to expand.
“We think that’s going to happen because we’re seeing balance-sheet and cash-flow improvements for households, to some extent for government, and that sets the stage for widespread spending,” Bonham said. “We need to have broad-based private-sector spending. We need to have government starting to contribute to growth instead of acting as a drag on growth.”
Government austerity is “going away, at least for now,” he said. “It’s an election year . . . It provides room for the private sector to grow.”
After job losses in recessions in 1990 with the first Gulf War, in 2001 after the Sept. 11, 2001, terror attacks and the Great Recession in late 2007, U.S. employment has stabilized and is “basically getting back to normal,” Bonham said. “That’s really important because that contributes directly to consumer confidence. It contributes to directly increased consumer spending.”
Consumer consumption contributed 3 percentage points to the nation’s gross national product in the first quarter of this year, he pointed out.
The improving outlook for consumers arises from a number of factors, he said.
“Labor market prospects are better. Consumption can grow again. Government austerity is going away,” he said. For U.S. growth, “we think we’re going to see a better 2014 than it was in 2013.”
“Basically, we’re looking at moderate growth, not only for the United States, but for many Asian-Pacific countries,” he said.
For Maui’s tourism, visitor arrival numbers were down, but visitors stayed longer, Bonham said.
“That’s what you want,” he said. “You want them to be here to spend some money.”
Bonham said UHERO’s forecast for visitor arrivals is for “very, very slow growth” of around 2 percent this year.
“It’s going to be a challenge to get that after a very weak first quarter of visitor arrivals,” he said.
But the reason university economists think that will happen is because there’s about a 6 percent increase in scheduled airline seats to Maui in the second quarter of this year, compared with the same quarter last year. Most of the increase in seats is toward the end of the quarter, in June, the start of the summer travel season, he said.
“Many of those seats are already sold,” he said. “Most people don’t plan their trip one month out. It’s more like six months out. That’s a good sign that we’ll see a pretty good summer season.”
Bonham said there’s been an overall slowdown in visitor arrivals in Maui and statewide because of costs, particularly higher airfare and hotel expenses for tourists.
“You take the total cost of a vacation to Hawaii since 2010, and it’s up 30 percent,” he said. “That’s the total cost of a room plus airfare. I’m not counting all the other stuff. And that’s part of the reason why the stuff that you’re selling has gotten harder to sell.”
The biggest increase in room rates has been on Oahu, where there’s been a 40 percent increase, Bonham said. Maui’s room rates have gone up 22 percent, and the state average is about 30 percent.
He predicted about a 3 percent annual growth in visitor arrivals and spending for Maui.
“That’s good,” he said. “You’ve got to have that stability in the visitor industry to get that balanced expansion.”
Bonham showed a chart for Maui County private-sector job growth in 2013, which detailed more jobs in the categories of nonfarm, visitor accommodation, food services, retail trade, health care, professional business services and construction, among others. There were job losses for the categories of other services, the federal government, air transport and no change in manufacturing and information employment.
There’s been better job expansion across the entire economy, but not strong enough, he said. The total Maui employment growth was 1,733 jobs last year, but that would need to be repeated this year and next to surpass the previous peak for jobs in 2007, Bonham said.
“Balanced expansion needs to see a resumption of residential and nonresidential investment,” he said.
Maui’s construction industry, however, continues to struggle, he said, pointing out that residential building permits fell at the beginning of the Great Recession and have remained low since then.
It’s important for the island’s construction industry to recover, he said.
“It’s the building that creates the jobs and stimulates the economy,” he said.
* Brian Perry can be reached at email@example.com.