Economic Promise and Peril Awaits Hawaii in 2021
2020 was a tumultuous year for the local economy in Hawaii and the outlook for 2021 remains mixed and uncertain.
Hawaii’s economy suffered more than any other state in 2020 when it came to per-capita job losses and shrinking overall output.
The last place finish comes despite the modest economic recovery that has been underway since the relaunch of trans-pacific tourism in October.
“Many, many more job losses than any other state in the country,” was the summary from economist Carl Bonham, Executive Director of the University of Hawaii Economic Research Organization.
In a mostly remote briefing to state lawmakers Bonham said that while job losses were most acute in travel, leisure, and retail, almost every industry was affected.
“In Hawaii the job losses were really everywhere. The only large sector that didn’t see job losses in 2020 was federal government,” Bonham noted.
The increase in federal employment was largely to result of the U.S. Census Bureau hiring temporary workers to carry put the 2020 counting of everyone living in the United States.
Overall, Hawaii finished the year with a net loss of roughly 100,000 jobs. The state’s pre-pandemic labor force was approximately 650,000 people.
Despite the massive economic shock 2020 represented, there are some encouraging economic signs.
According to Eugene Tian, Chief Economist for the State of Hawaii, the number, weekly first-time unemployment claims has stabilized since the relaunch of tourism in October.
The return of tourists has also helped buoy state tax revenue; roughly one-quarter of which is generated from visitor spending.
Tian told lawmakers that returns from the state’s General Excise Tax, which dropped sharply when the COIVD-19 pandemic forced lockdowns and halted travel, have stopped falling and are even starting to improve.
“It’s not declining. It has been, especially in the past 4 months, increasing slowly. It is an up-trend,” Tian said.
That was welcome news for state lawmakers, who face a multi-billion dollar budget shortfall over the coming years. Without substantial improvement to local economic performance, they will be forced to make difficult decisions on spending cuts and public employee furloughs.
Even with the mountain of data available to forecasters, it is still difficult to predict what 2021 holds in store for Hawaii economically.
Officials were told not to expect full recovery in the labor market until widespread vaccination is achieved and visitor arrival numbers increase substantially.
Financial assistance from the federal government also represents a major unknown in the coming year.
The billions of dollars in pandemic relief money sent to individual households in 2020 resulted in an 8% increase personal income statewide, despite the loss of tens of thousands of jobs.
The latest aid package passed by Congress extends some of those benefits into March of 2021, something President-Elect Joe Biden has called a “down payment.”
With cases of COVID-19 raging in major source markets for Hawaii tourism like California and the Western U.S., the local tourism industry will likely continue to limp forward well into 2021.
If the latest round of fiscal support runs out before additional aid is passed, 2021 could see Hawaii facing a double-digit percentage decline in personal income, months before a more robust recovery in the job market is expected.