Hawaii may see double-digit economic downturn in 2020

Despite record-number job losses due to the COVID-19 outbreak in Hawaii, some jobs involving infrastructure improvement appear to be unabated, like this dredging project along Honolulu’s Ala Wai Canal. (Screenshot footage by Ron Hamilton, EBC Hawaii Bureau, Eagle News Service)

 

By Alfred Acenas
EBC Hawaii Bureau

HONOLULU (Eagle News) – The State of Hawaii’s Department of Business, Economic Development, and Tourism (DBEDT) released its second quarter 2020 Statistical and Economic Report on May 22, 2020 and estimated that Hawaii’s economic growth is projected to fall by 12.1% in 2020 due to the novel coronavirus 2019 (COVID-19) pandemic.

The report states that, since Hawaii’s first cases were reported in early March, the pandemic has weakened consumer demand, particularly in tourism and other sectors that require large social gatherings or personal close contact.

Initial unemployment claims started to surge during the week of March 16, and totaled 232,893 as of the end of May 16, up to an unprecedented 2,081% from the same period in 2019.

Data from Hawaii’s Department of Labor and Industrial Relations (DLIR) show that the state’s unemployment rate in April 2020 jumped to 23.5% (not seasonally adjusted) with Hawaii ranking the third highest in the nation after Nevada and Michigan.

One hundred twenty-one thousand non-agriculture payroll jobs were lost in April as compared with April in 2019. The job loss was the highest for Accommodations at 64,000, followed by Food Services and Drinking Places at 41,000, and Retail Trade at 9,700. Overall, the Hospitality sector lost 70,000 payroll jobs.

After declining 53.7% in March, the number of visitor arrivals was only 3,565 in the full month of April while the average daily visitor arrivals in 2019 was 28,562. During the first 21 days of May, visitor arrivals to the state totaled 5,397, the daily visitor count (257 per day) now is more than double the April daily count (120 per day).

According to the Business Pulse Survey conducted by the U.S. Census Bureau between April 26 and May 2, which was a month into Hawaii’s stay at home order, 56.6% of the Hawaii businesses surveyed said that COVID-19 has had a large negative effect on their businesses and 81.1% of respondents said their operating revenues decreased in the week before the survey. 58% of responding businesses decreased employee hours, and 37.3% of respondents cut their workforce in the last week. Of the Hawaii businesses which responded, 39.3% thought that it will take more than six months for business to return to normal.

Most businesses surveyed had applied for some type of federal financial assistance, but half of businesses had not received assistance when they were surveyed.

The first week of the survey corresponded with the opening of the second wave of federal funding for the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL). Businesses that did not get their applications submitted in time for the first round of funding were eligible to have their applications reviewed during the second round, which is still ongoing.

According to a survey conducted by the University of Hawaii Economic Research Organization (UHERO) and the Chamber of Commerce Hawaii (CCHI) released on May 5, statewide job losses between January and April 2020 were 41.7% for full time jobs and 41.3% for part time, respectively.

Kauai, Maui, and Big Island were hit harder than Oahu in terms of jobs loss. When asked about the current business status in April, 36.1% of the respondents said they were completely shut down, 59.1% of the responded businesses were open with adjustments, only 4.8% of the responded businesses remained open regularly.

DBEDT assumes that, since the global COVID-19 pandemic and accompanying tourism shutdown are unprecedented, Hawaii’s economic forecast cannot be generated using past trends. However, basic relationships between economic variables remain unchanged, such as the relationship between job count and unemployment, personal income, and gross domestic product (GDP).

Due to the government assistance programs, DBEDT also believes there will be a significant increase in personal transfer receipts from the federal government, which consists of income payments to households in which no current services are performed. The federal assistance will also be reflected in household spending, according to the State.

Based on the above assumptions, DBEDT projects that Hawaii’s economic growth rate, as measured by the real GDP, will drop by 12.1% in 2020, then will increase at 0.7% in 2021, 0.6% in 2022, and 1.1% in 2023.

“Hawaii was one of the hardest hit states economically but is one of the safest states in the nation during this COVID-19 pandemic,” said DBEDT Director Mike McCartney. “While our economy will not recover overnight, Hawaii is well positioned because of our strong human will, innovative spirit and physical infrastructure. We are well positioned to go beyond recovery and evolve into a more balanced and diversified economy.”

(Eagle News Service)