Job growth in Hawaii outpaces much of U.S.
The state had the seventh-fastest rate of job creation in the states, according to an FDIC report
Hawaii had the seventh-fastest job growth among the states in the second quarter, up slightly from its ranking of eighth a year earlier, according to the Federal Deposit Insurance Corp.
The state's job count grew 2.9 percent during the quarter and its unemployment rate dropped to 2.6 percent in August -- the lowest in almost 15 years. Key industries that have driven job growth, such as tourism and construction, maintained high worker levels or continued to grow.
"The Lingle-Aiona administration has overseen a vibrant economy that has created more than 38,000 new jobs," said state Labor Director Nelson Befitel. "We have witnessed extraordinary job growth for the last 33 months, with more of Hawaii's residents working than ever before."
Some 500 jobs were created in the construction industry and 1,000 jobs in the tourism industry during the second quarter, said James Hardway, Befitel's assistant.
Hawaii's strong housing market also has contributed to economic growth, according to FDIC State Profiles, a quarterly publication that analyzes economic and banking trends in the 50 states and the District of Columbia.
While Honolulu office buildings showed some deterioration in vacancy rates and rents, home price appreciation ranked among the fastest 10 percent of metropolitan areas nationwide, the report said.
Strong demand for Hawaii real estate has led to high year-over-year increases in median single-family home prices. However, housing affordability measures fell to near 10-year lows.
"Overall, the jobs picture is good and the banking sector in Hawaii is healthy," said Catherine Phillips-Olsen, head of the FDIC's Division of Insurance and Research in San Francisco. "However, we continue to monitor rising interest rates and the recent spike in energy prices to see how they will affect consumers and the state's important housing and construction industries."
Demand for housing in Hawaii should ease as interest rates rise, but the market is likely to remain strong, said Harvey Shapiro, a research economist for the Honolulu Board of Realtors.
"The housing market has been a major portion of the economic engine for Hawaii for the last few years and I think that it will continue to play a major role," Shapiro said.
Phillips-Olsen noted that the recent hurricanes may have indirect implications for Hawaii as reconstruction in the Southeast begins to suck up labor and construction supplies. However, a large amount of planned federal construction jobs should keep Hawaii's construction industry healthy, said state economist Pearl Imada Iboshi.
Phillips-Olsen also expressed concern that energy price increases could hurt the state's dominant tourism industry by reducing consumer demand for travel to Hawaii. However, the state has yet to see an impact, said Imada Iboshi.
"Most of the studies that we have done in terms of visitors show conditions such as rising energy costs don't adversely affect demand," Imada Iboshi said. "What we've seen is that if people want to take a trip, they will."
Rising fuel costs could lead to increased air fares next year, but for now there are no signs of a slowdown in Hawaii tourism, said Frank Haas, director of marketing for the Hawaii Tourism Authority.
"We know that the tourism industry is very fragile and even though we are having a record year, there are disruptions that could affect us in the future," Haas said. "We routinely plan for all kinds of disruptions ranging from strikes, airline stoppages, bankruptcies, natural and health disasters."
Since 9/11, emergency contingency plans for the Hawaii visitor industry have gotten more robust, he said.
"It's important to be prepared," Haas said. "Right up until the storm hit, tourism officials in New Orleans were probably looking at some very healthy tourism targets."
The FDIC also reported that Hawaii's bank-loan delinquencies remain extremely low. However, the FDIC said local banks may be at a turning point for credit quality, evidenced by an uptick in charge-offs, primarily in consumer portfolios, Phillips-Olsen said.
Higher credit and energy costs could hurt borrower cash flows, commercial real estate capitalization rates and occupancy rates for new buildings, Phillips-Olsen said.
Rising interest rates also could have a disproportionate effect on higher-risk consumer borrowers, who have increasingly turned to interest-only and adjustable-rate mortgages to afford the skyrocketing cost of a home.