BLOOMBERG NEWS FILE PHOTO
Robert Parry, president of the Federal Reserve Bank of
San Francisco, says Hawaii likely will avoid a 1990s-like bust.

Hawaii weathering
downturn, Fed
exec says

He credits isle high-tech
firms for softening the
economic blow from
the U.S. and Asia

---

By Rick Daysog
Star-Bulletin

While the aftershocks of the dot-bomb economy and the Asian financial crisis are being felt here, Hawaii's economy is "on a stronger footing" today than it was during previous economic downturns.

That's the assessment of Robert Parry, president of the Federal Reserve Bank of San Francisco.

In a speech before local business leaders at the Kahala Mandarin Hotel yesterday, Parry said the recent emergence of a high-tech sector in the isles is helping to cushion the impact of the mainland and Asian economic downturns.

"The slower growth in the U.S. economy as well as ongoing weakness in Japan pose some risk to Hawaii's economy," said Parry. "(But) the Hawaiian economy is now in a very different position from the early 1990s when the last downturn began."

Parry, who declined to provide a forecast for Hawaii's growth rate for this year, said the high-tech slump and continued weakness in Japan's economy will likely mean lower westbound and eastbound visitor traffic to Hawaii.

Already, employment figures for the January through April period are behind the growth rates during the 1999-2000 period, while consumer spending in the isles has slowed, he said.

However, Hawaii's fledgling high-tech industry will likely shield the local economy from a 1990s-like bust.

Parry noted that employment in the tech sector increased by 26 percent between 1994 and 2000, as thousands of new jobs were created in telecommunications, biotech and information processing.

As for the mainland economy, Parry believes the full impact of the recent interest rate reductions and the Bush administration's tax cuts won't be seen until late this year or next.

Since January, the Fed has cut short-term interest rates five times in response to the weak mainland economy. The Federal funds rate -- the rate banks charge each other for overnight loans -- has fallen from 6.5 percent in January to about 4 percent today, he said.

"This easing affects the economy with fairly long lags so it may be some time before the stimulus works its ways through the economy full," he said.