KAHULUI - Although construction accounts for only 6 percent of jobs on Maui, the swings in this sector "play a large role in both job growth and job loss on Maui," according to a study released last week by the University of Hawaii Economic Research Organization.
And since construction jobs are being lost at an annual rate of 17 percent, the outlook is not good.
"Construction has ceased to be a growth engine for Maui's economy at a time when other sources of job growth have stalled," wrote professor Carl Bonham.
Furthermore, he noted that building permits have taken a huge dive. The dollar value of permits fluctuates erratically. But the fall from $352.6 million at the peak during the fourth quarter of 2006 to $45.9 million in the third quarter of this year is "a useful signal."
Bill Kamai of the Maui branch of the Hawaii Carpenters Union said a third of his members are out of work, and large numbers have been out of work for a long time.
Unemployed workers in Hawaii can get benefits for 26 weeks and can apply for an additional 13 weeks. Kamai said the union knows when carpenters apply for extensions because the Department of Labor and Industrial Relations asks the union to confirm that the applicant is still in the union.
That means some carpenters have now been without work for close to nine months. And it's worse with the operating engineers, said Kamai, who at last report had more than 50 percent idle.
Bonham's report, researched by graduate students Sean D'Evelyn and Heber Moulton, takes the numbers through August. They have deteriorated since, he said during at interview at the ILWU Hall.
Bonham has been painting a gloomy picture of the islands' economy for some time, and for a while he was apologetic about it. Now that the rest of the world has caught up with his pessimism, he just launches into the news without preamble.
The loss of construction jobs is linked to the decline in housing values, whose collapse is affecting lenders. Both values and the number of transactions are down on Maui, Bonham said.
Although local banks avoided writing subprime loans, out-of-state lenders were working the islands, and the proportion of subprime loans in the state, 11 percent, is only slightly below the national rate.
"Because construction has been a primary driver in Maui's job market for the past five years," the report says, "this has troubling implications for the overall Maui economy."
"I don't know of any $300 million projects that are going to be approved soon," he said.
Since only a few projects are being advanced, the jobs created in the past few years are running out. The heavy equipment operators felt it first, as little site work is being called for. With no sites being readied, no work for other trades is being created.
As of August, the masons reported a lower, although still high unemployment rate, 37 percent.
The operating engineers reported 25 percent on the bench in September 2007, at a time when the masons were reporting 34 percent.
Since then, the engineers' rate has zoomed, while the masons' rate has crept up only slightly. However, Bonham said, the masons will beginning catching up - or "catching down" - soon.
Put another way, joblessness among unionized construction workers doubled from the summer of 2007 to the summer of 2008, from 300 to 600 out of about 1,900 union members.
Although Maui has its own drivers, the national picture is similar. On Thursday, the Portland Cement Association, based in Skokie, Ill., adjusted its consumption figures down again.
PCA now expects a decline of 12.8 percent this year, another 11.9 percent in 2009. It now expects declines into 2010, although by then at a rate of 2.1 percent.
The group cited a weak economy and tight credit conditions, coupled with severe job losses and the resulting decline in state government revenues.
Speaking generally, and before the PCA revisions, Bonham also cited the decline in local government revenues. As housing prices continue to fall, real property tax collections will fall along with them, and if that gets to the point where local governments start laying off teachers and police, then those mortgage holders will begin to lose their homes, driving prices down even further.
A looming problem is that many municipal bonding districts signed contracts which allowed lenders to sell their paper in the credit-default swap market. With defaults rising, this means some municipalities have their interest rates reset higher, just as holders of adjustable rate mortgages see theirs reset.
The state of Hawaii and Maui County are not in danger. Agnes Hayashi, deputy finance director for Maui County, said state law prevented any public bonds, state or county, from being involved in derivatives contracts.
Construction accounted for 32 percent of new Maui jobs in 2005, 23 percent in 2006 and 31 percent in 2007, even though signs of softness were beginning to appear last year.
Construction jobs were still increasing in the first quarter of 2008, but in the April-June period Maui lost 640 jobs.
Many were related to the failure of Aloha Airlines, but 200 jobs disappeared in construction, too.
The decline has accelerated since then.
Towne Development wrapped up or canceled all its Maui developments, while at Makena Resort, developer Everett Dowling said he would finish what he had started but had put future projects on the shelf pending improvements in construction lending markets.
At Betsill Brothers, big project work was coming to an end, according to construction manager Darryl Banks, but the company was competing for renovation work at resorts, government contracts and a few "carefully chosen" contract homes.
"We've been blessed" to have avoided deep layoffs so far, Banks said.
Although the national recession and, quite likely, global recession as well make Bonham think that Maui's economic conditions will continue to deteriorate through 2009, he also said some countercyclical effects will be noted.
"Hotels and resorts that have been considering future renovations may move forward quickly since business is down and the supply of available labor is growing," he said.
One where that is already happening is the Grand Wailea Resort Hotel & Spa, which will rebuild most of its water features over the next few weeks. As a way to make up for the loss of water attractions for customers, the hotel will be offered in-house credits of up to $1,000 for such things as spa services, depending on the number of nights booked.
Nevertheless, "weakness in the (construction) sector threatens to further dampen economic prospects over the next several years," Bonham said.
Harry Eagar can be reached at heagar@mauinews.com.
