Hawaii Coronavirus Impact Committee Handed Grim Prognosis

Mar 12, 2020

The first meeting of a state House advisory committee looking at a possible downturn in the Hawaii economy in the wake of the coronavirus heard what many suspected: the impact is here and it's worse than projected.

“The uncertainty is just enormous as to how long the spread continues,” said Carl Bonham, executive director of the University of Hawaii Economic Research Organization.

Bonham said UHERO believes the most pessimistic of the three possible outcomes it initially produced is now the most likely. That would translate to the loss of around 10,000 jobs locally and recessions for both the state and national economies.

Bonham also said projections by the Council on Revenues for tax collections coming into the state, and which he helped approve less than 24 hours before, were likely too optimistic. He said they would need to be revised downward for the second half of 2020.

The Council on Revenues, of which Bonham is a member, predicted 0% revenue growth for fiscal year 2021, which begins in July 2020.

In a sobering moment, the economist said based on the data he is seeing, Hawaii hotels will be lucky to achieve 50% occupancy for April and May, a rate that is often in the 80% to 90% range.

It won’t take long for a drop in business of that magnitude to start hurting workers as well as companies.

“As we get into the end of March and April, things will deteriorate further,” Bonham said, in assessing the reduction in hours and layoffs workers can expect.

Inflection Point on Unemployment

Scott Murakami, director of the state Department of Labor and Industrial Relations, told the committee he believes Hawaii hit an “inflection point on unemployment” on March 1.

Since that date, first-time claims for unemployment benefit claims have been increasing by 19% on a weekly basis, Murakami said. He added the data did not differentiate between the loss of a full-time job and partial claims due to reduced hours.

Based on potential unemployment projections, Murakami said the department anticipates needing an additional 28 full-time employees to process claims. DLIR is requesting an additional $4 million to create and fill those positions.

“The impact of the global spread of COVID-19 on Hawaii’s economy will be profound," said Peter Ingram, CEO of Hawaiian Airlines. He said that airlines will likely continue reducing schedules in the coming weeks and that it is impossible to predict how much worse the situation will get before a recovery begins.

Ingram said, by the end of February, daily cancellations were exceeding bookings for the coming months. Hawaiian Airlines booked load factor is 7% to 8% lower than one year ago.

Ingram also said it is now clear that the hopeful possibility of U.S. travelers will make up for lost business from Asia “is no longer a plausible reality.”

Bruce Anderson, state health director, praised efforts by Hawaii industry thus far and said slowing the spread of the virus will be critical in “flattening the epidemic curve,” jargon for minimizing the total number of active cases at any one point in time.

Fewer people seeking treatment all at once reduces the daily burden on the healthcare system, which Anderson said is already being taxed by the normal flu season.

“We’re already right at the edge with our flu season in progress. We simply can’t absorb a lot more,” he said.

Melissa Sato with Matson Navigation Co. said the shipping firm has experienced no interruption to Hawaii service and expects no change in demand. No symptoms have been observed in employees.

She also noted that most of Matson’s cargo comes the Mainland, rather than Asia, and thus the company does not expect any decreases in the supply of goods.

Supply Chains In Place

There was good news to report. The islands are not facing a supply-side shortage of food and other consumer goods. Lauren Zirbel with the Hawaii Food Industry Association told the committee that Mainland manufactuers do not expect production issues. 

"We do not currently have a supply chain issue for basic food supplies and we do not anticipate there being a supply chain issue. There is no need to hoard basic food supplies. That is counterproductive to public health,” Zirbel said.

Although packaging for some food items comes from China, Zirbel said suppliers on the mainland believe they have an adequate supply to maintain uninterrupted production and distribution.

Zirbel acknowledged there are nationwide shortages of consumer goods like hand sanitizer, disinfectants, and toilet paper. She said shipments of those items would continue arriving in Hawaii, but that each retailer will only be given a certain allotment to prevent hoarding.

Melissa Sato, with the  Matson ocean cargo shipping company, told the commitee that the freight carrier has not had any issues maintaining normal service and there has been no drop in cargo volume to Hawaii.

She added that the company is monitoring employees for symptoms of the virus.

The committee has the task of identifying the potential financial impacts from the coronavirus in the state and developing short-term and long-term mitigation plans so to avoid the deep government cuts that Hawaii experienced during the Great Recession.