KAANAPALI - The economy is sickly for now, but it could pick up in the second half of this year and continue on the upswing in 2010, economist Paul Brewbaker said Friday.
That rebound could come sooner if Congress quickly passes an economic stimulus plan meant to speed up the nation's recovery, he said. A deal on an economic stimulus measure was announced Friday after Brewbaker's talk.
"I'm pretty sure 2009 is the bottom," he said. Brewbaker, senior vice president and chief economist for Bank of Hawaii, spoke at the Maui Chamber of Commerce's annual Paul Brewbaker Ph.D. Economic Forecast Luncheon, sponsored by Bank of Hawaii.
The Maui News / AMANDA COWAN photo
Paul Brewbaker, senior vice president and chief economist for Bank of Hawaii, speaks to the Maui Chamber of Commerce on Friday afternoon at the Sheraton Maui Resort & Spa. Brewbaker said that the slumping economy will continue for now, but he expects an upswing later this year or in 2010.
Brewbaker acknowledged an "extraordinary period of uncertainty and turbulence" that has unfolded since investment bank Lehman Bros. filed for bankruptcy in September.
Brewbaker told the audience that around 500,000 jobs in the U.S. were lost from January to August of last year. But from September to December the economy lost an average of 500,000 jobs each month.
For Hawaii, one new trend coming out of the shakeup is that changes in property valuations, which used to lag behind the Mainland market by a few months, now fluctuate in "real time," rising and falling nearly in sync with the Mainland.
Brewbaker also suggested that construction spending can be graphed in a "V" rather than a "U" - meaning a sharp increase, rather than a gradual one, after the downturn.
There are some bright spots to the slowdown, he noted.
With the cost of oil down, airfares have decreased, making it easier for some to travel, and electricity costs are also down, which frees up some money for some households.
Brewbaker said airfares are now low enough that he recently was able to go to Denver to visit his children, who are also taking advantage of the low fares to fly home for spring break. He said tickets cost around $400, but noted that not everyone has $400 to spend.
Low occupancy also means rooms in Hawaii are more competitively priced, Brewbaker noted.
He told The Maui News that with declining airfares, the visitor industry should work on luring visitors back.
Questioned about the federal government's more-than-$700-billion bailout of investment banks, Brewbaker said the spending was an important "backstop" protecting the country's financial system. Allowing major companies like AIG to fail could lead to the collapse of the whole economy, he warned.
"All that did is prevent the whole thing from collapsing at the same time," Brewbaker said. "(It's) unfair to say, 'We spent all this money. What did it do?'"
But he acknowledged public anger over how some companies have continued extravagant executive compensation practices.
"I understand people are (furious) that these yahoos from wherever got bonuses last year," he said. "I feel your pain."
The rapid unraveling of the economy last fall was caused by a "capitulation" of consumers and lenders who all at once lost confidence.
Brewbaker reviewed some major points of the government's stimulus plan, which involves tax cuts and spending, especially for infrastructure, in order to create jobs and pump cash into the economy.
He didn't feel direct "stimulus checks" to taxpayers, like the program tried by President George W. Bush last year, would be as effective. Instead of spending, most people used their stimulus checks to pay off debts or save, he said.
* Melissa Tanji can be reached at email@example.com.