The record growth Hawaii's tourism sector is experiencing this year has yet to translate into benefits for the broader economy, which remains mostly stagnant, the latest forecast by University of Hawaii economists says.
The state's economy is still being hampered by slowdowns in the construction industry and public works projects, as well as lingering caution among consumers and businesses, the University of Hawaii Economic Research Organization said in its annual forecast released today.
"The tourism industry is on a tear, posting impressive rates of growth (while), with a few exceptions, the rest of the local economy is going nowhere," the UHERO report said.
Maui is responsible for a couple of the bright spots, including a surge in construction jobs so far this year and a declining unemployment rate.
In the first half of the year, Hawaii saw 3.9 million visitors who generated $7.1 billion in expenditures, with both figures representing double-digit increases over the same time period last year, according to the Hawaii Tourism Authority.
In June alone, total visitor spending statewide surged 20 percent to $1.2 billion, setting a new record for the month, the Hawaii Tourism Authority said.
Maui's visitor expenditures year to date have shot up 22.5 percent through June. Visitor arrivals to Maui are up 6 percent to 1.1 million for the first half of the year, compared to the same time frame last year.
UHERO is forecasting that visitor spending growth will level out to a moderate 8 percent gain in 2013. "At that point, annual spending will be 60 percent higher than it was in 2009," the report said.
But the tourism gains have not spilled over to help lift Hawaii's jobs count, real estate health, construction activity or consumer confidence.
"The overall economic situation in Hawaii has improved over the past year, but it remains distressingly uneven, with a disproportionate share of recent gains limited to the visitor industry," UHERO said. "Except for pockets of activity, many nontourism sectors of the local economy continue to suffer. The tourism boom has yet to spill over."
Overall job growth, for example, is dismal. Job growth so far this year is at 1 percent; it's just 0.2 percent if the accommodation and food service sector is factored out. UHERO expects job growth to end the year up just 1.3 percent. It forecasts a 2.4 percent increase for 2013.
The slow growth has meant the state's unemployment picture remains mostly unchanged. Statewide, the rate dropped only slightly from 6.5 percent in January to 6.4 percent in June. UHERO expects that the jobless rate will decline to 5.6 percent next year.
Meanwhile, Maui's unemployment rate was at 7.4 percent for June, down from 8.4 percent last June, according to the state Labor Department. That means a smaller chunk of Maui's labor force of about 78,500 is jobless.
And Maui's construction jobs count swelled 25 percent amid the state's overall construction employment declining 1.6 percent year to date. The state's construction jobs base is still nearly 12,000 jobs below the 2008 pre-recession peak.
"Maui, on the contrary, saw a marked improvement, with the number of construction jobs surging 25 percent since the beginning of the year, apparently on the strength of new commercial construction," the UHERO report said.
Statewide, public sector construction projects are expected to gain momentum, led by Honolulu's rail transit project and other large projects such as road, harbor and airports improvements and military housing renovations.
"After a very weak start to the year, government contracts awarded surged in May, and for the January-to-May period, their value was more than double that of the same period in 2011," UHERO said.
Another indicator, real estate, is seeing mixed results. The residential real estate market has firmed on Oahu, but prices continue to slide on the Neighbor Islands, UHERO said.
Maui's real estate market has been mostly flat over the past year. Single-family residential unit sales on Maui totaled 440 units for the first half of the year, down 1 percent from the same period last year. The median sales price was up 1 percent to $450,000 from the same period last year, according to the Realtors Association of Maui.
Looking more broadly at overall economic activity, UHERO said first quarter statewide personal income (not adjusted for inflation) increased by 3.6 percent. "This is likely equivalent to roughly unchanged real income once inflation is taken into account. Last year, annual real personal income increased by 0.7 percent," the report said.
In the short term, university economists expect a strong summer tourism season, with scheduled air seats up more than 12 percent.
But, "looking beyond that immediate horizon, the growth in visitor days has now brought statewide occupancy rates up to levels that approach those experienced during past booms," UHERO said. "We are getting to the point where existing capacity is beginning to fill up, and announced additions to room stock are fairly modest."
UHERO also cautions that the tourism industry is very vulnerable.
"There is no doubt that a dramatic worsening of global conditions would cause a steep falloff in all tourism markets," the report said. "In any case, there is only so much tourism capacity, so gains on the scale of recent growth will not be sustained indefinitely."
Still, the forecast is "cautiously optimistic" that construction will turn the corner, while a combination of Oahu's improving home resale market, ever-lower mortgage interest rates, and tight housing inventory could favor a pickup in residential building next year.
"We are cautiously optimistic that these factors will maintain gradually improving economic conditions in the islands," UHERO said.
* Nanea Kalani can be reached at firstname.lastname@example.org.