Economy better
than predicted,
Fed analyst says

Unemployment will rise some more
before a recovery, he says

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By Lyn Danninger
ldanninger@starbulletin.com

Despite the loss of another 89,000 jobs across the country in January -- including more than 6,300 in Hawaii -- the U.S. economic outlook is looking better than many economists predicted, with 4 percent growth forecast for 2003, according to a Federal Reserve economist.

The national economy is turning around slowly with such indicators as better than expected holiday sales and rapid reduction of inventories. But the country will continue to lose jobs, Gary Zimmerman, an economist with the Federal Reserve Bank of San Francisco, told a Honolulu audience yesterday.

"There is much stronger growth, but not enough to head off growing unemployment," he said.

Zimmerman spoke at a briefing presented by the Chamber of Commerce of Hawaii. He was joined by Andrea Wolcott, group vice president and district community outreach officer for the San Francisco Federal Reserve, who spoke on the Fed's role of overseeing the nation's monetary policy and Leroy Laney, professor of economics and finance at Hawaii Pacific University and consultant to First Hawaiian Bank.

Other risks identified by Zimmerman include further slowdown in the global economy, continued consumer caution and any future international de-stabilization, such as another terrorist attack.

He also noted that Japan's gross domestic product is also expected to further decline this year.

Remarking on western regional conditions, Zimmerman said there has been a major slowdown throughout the Federal Reserve's 12th District, made up of 9 states including Hawaii and Pacific territories.

Within the region, Hawaii's job losses had been most dramatic, considering the state had enjoyed a record 4 percent job growth as recently as 2000, he said.

But Zimmerman noted the rebound in domestic airline passenger arrivals has helped the state, even as international arrivals still have a way to go.

HPU's Laney said he sees Hawaii's remaining economic difficulties confined more to Oahu than the neighbor islands.

"Our ground zero was Waikiki, so the further you get away, the better," Laney said. "If you look at Maui, Kauai and over in Kona, it's not nearly as big a drop off. This is really more of an Oahu recession."

Laney predicted the state's economy may emerge from recession at least by mid-year. But that depends on the return of the Japanese market, he said.

A return to pre-Sept. 11 tourism arrivals levels may not take place until well into 2003, he said.