Last fall, the University of Hawaii Economic Research Organization predicted a recovery beginning sometime this year. Turns out it started happening around then.

“;Hawaii's economic recovery has begun,”; declares the state annual forecast from UH economists, released today. “;Employment is stabilizing and many sectors will begin to add modest numbers of jobs as the year progresses.”;

The report also says visitor arrivals will increase by 2.9 percent this year and that spending should stabilize.

Job losses in 2009 were severe, but some sectors, like in finance, insurance, real estate and food services, saw upticks in jobs.

“;We're still talking about relatively slow growth, a modest recovery that's nothing to get real excited about,”; said UHERO Executive Director Carl Bonham. “;It's the first quarter where we've seen any growth in quite a long time.”;

Construction jobs should see a boost this year with public-sector contracts, as Hawaii begins feeling the effects of federal and state stimulus funding, according to the report.

Government contracts awarded will rise from $779 million last year to about $1.6 billion this year before dropping back off.

None of the projects includes the city's rail transit plan, since schedules for that work have not yet been finalized.

The report sees the unemployment rate staying at 6.9 percent but possibly falling 0.5 percent in 2011.

Additional government job losses are likely, but that does not necessarily mean layoffs.

“;Some of them will be retirements,”; Bonham said. “;There's still continued cutting of budgets by the state. That will result in attrition. Furthermore the counties are just now looking at their fiscal issues.”;

The visitor industry might see more tourists from Asia but a flat market from the U.S. mainland, particularly the West Coast, Hawaii's largest tourism market.

“;There are very, very poor economies in our traditional markets,”; Bonham said.

“;We could be surprised and get a bounce, but we're a little more concerned about the U.S. economy maintaining its strength throughout the year.”;

As of January, California's unemployment rate was 12.5 percent. Bonham said jobless rates are a proxy of consumer confidence.

“;What we need is profit in the future,”; Bonham said. “;Its going to be a long time before we get that, including on the housing side. Those things play on the psyche on someone who might be thinking of a vacation.”;

Visitor spending took hits because of discounting in the tourism industry. Lower prices might continue, but returning demand is beginning to support higher prices and spending, the report states.

Hawaii's job losses may have been severe, but personal income did not take big hits, largely because of increased unemployment benefits from the federal government.

Total real personal income actually rose by 0.2 percent in the first three quarters of last year, but it was a symptom of the recession.

There was a 239 percent surge in unemployment compensation.

According to the report, Hawaii's gross domestic product was down 0.4 percent in 2009.