A mild recession is expected in the state according to the University of Hawaiʻi Economic Research Organization’s most recent forecast.
It's largely due to weak tourism numbers, federal worker layoffs and volatile tariffs increasing the price of goods.
"We now expect to enter a mild recession later this year. The shift in the outlook is largely about the federal policy changes. Import tariffs are much higher than we expected and policy shifts on tariffs have created quite significant uncertainty,” UHERO Economist Steven Bond-Smith said.
"In addition to that, federal job cuts and spending cuts will also slow the broader U.S. economy," he said. "So these developments affect Hawaiʻi in two main ways: one is that in the near term, international visitors are gonna slow as travelers respond to the geopolitical situation and things like stricter vetting policies at the border. But domestically, tariffs will weigh on business and consumer confidence creating significant uncertainty, and that's limiting economic activity at the moment.”
UHERO expects the recession to last through 2026 with a slow recovery into 2028.
Bond-Smith explained that for the average person who is not changing jobs or trying to buy a home, it should not impact day-to-day life. However, those in transition will feel the impacts.
" It does affect some people, particularly say those new graduates just entering the job market. Those people who are thinking about leaving their job, they might decide to hold off," he said.
"People who are in an uncertain position, whether they could end up losing their job or, or perhaps not getting a pay rise in coming years — they might decide to hold off on a big expenditure, like a new vehicle or say, going on a vacation,” Bond-Smith said.
The report forecasts that tourism numbers will begin to soften and that visitor numbers to Hawaiʻi will fall about 4% over the next two years.
The one bright spot is that construction remains strong because of public infrastructure and Maui rebuilding after the 2023 fires.
However, the tariffs on goods — particularly on China — could push housing developers to postpone projects.
It would be the first time the state has had a recession since the COVID-19 pandemic.
