Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues.
Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues.
Recession proves uneven Internet security not easy BACK TO TOP
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Recession proves uneven
In Hawaii, the depth of our
By Leroy Laney
current economic downturn depends
on who's doing the talkingHawaii's economy, along with that of the nation, technically has been in recession since last September's terrorist attacks. What does that mean?
The national rule of thumb is that the economy is in recession if it undergoes two consecutive quarters of contraction in real (or inflation-adjusted) Gross Domestic Product.
At the state level we have no such number. Neither do we have any similar conventionally agreed upon number. Often that causes some confusion, and debate, among regional economists.
Sometimes we judge a state economy to be in recession if the job base is contracting. Sometimes we look at a number like real personal income growth, which is one of the broadest measures of the economy we have at the state level. The problem with using that number is that it is produced by the U.S. Commerce Department's Bureau of Economic Analysis in Washington, and it comes to us with such long lag that the economy may have emerged from recession before we get it.
Even at the national level, the two consecutive quarter rule is not always used. The final referee of peaks and troughs in the business cycle at the national level is the recession dating committee of the National Bureau of Economic Research (NBER).
And they use no simple rule at all. They look at a broad array of numbers that are available on the economy and make the call, usually after the fact, to the very month that the national economy peaks and then later pulls out of recession. This time, they post-dated the beginning of national recession to last April, even though we had gotten a narrowly positive reading on real GDP in the second quarter of last year.
The NBER's rather eclectic methodology often refers to the "three Ds" of the recession -- duration, depth, and dispersion. What if we applied those three Ds to Hawaii's own situation this time?
Duration would probably extend from the date of the Sept. 11 attacks, when we initially saw massive layoffs in tourism-related areas, to the present. (It certainly would not extend back before that because Hawaii was doing substantially better than the nation prior to September 2001.
In fact, 2001 would have been the first year in a decade when Hawaii's growth actually exceeded that of the nation.) Most local economists expect Hawaii will emerge from contraction sometime this spring, especially if we see a significant return of the Japanese travel market by then.
Depth would be characterized by a significant drop off just after the attacks in September, as many tourists suddenly became hesitant to fly, but as time has passed that depth has diminished a good bit. Still, recovery to pre-9/11 levels can only be a gradual process. It may be well into 2003 before we surpass those levels. But remember, surpassing those levels also does not date a recession. The recession is over when the economy starts growing again, even if it takes years to attain the previous peak.
Dispersion is where it gets more interesting. This has been an extremely spotty recession for Hawaii. Coming after a long decade of lackluster growth, we had finally emerged into the economic sunlight in the last few years. The year 2001 would not have been quite as good as 2000 anyway, because the latter was a banner year in several respects. But we were still doing fairly well in most respects. Tourism had slowed, but sectors like construction were keeping our head well above water.
Even after 9/11, any sector that is sensitive to interest rates has been doing very well. Real estate, construction, auto sales and other consumer durables are examples. The Fed's interest rate policy actions saw to that.
The dispersion aspect also has an interesting geographical dimension. This has more than anything been an "Oahu recession." Our Ground Zero was Waikiki, as the Japanese business suddenly dried up. Even elsewhere on Oahu, the further one gets from the tourist sector the better things seem to be.
The Neighbor Islands are another story entirely. If you talk to many people in the three Neighbor Isle counties, it would be hard to tell the state has gone through any recession at all.
For one thing, mainland travel has recovered much faster than the Japanese side, and their tourism is weighted much more heavily to that side of the Pacific. Yet other sectors of their economies that are not related in any way to tourism are still thriving. For example, fledgling high tech efforts on the Neighbor Isles do not seem to have been impacted as much by California's downturn in that area. And agriculture obviously is not a sector that would be hit much by the so-called "terror recession."
So recession depends on whom you talk to as well as how you measure it. If you have just lost your job, you are in recession even if the rest of the economy is booming. But overall, it is useful to bear in mind this state's recession is very uneven in nature.
By Leroy Laney is a professor of economics and finance at Hawaii Pacific University. He can be reached at lo9_laney@hotmail.com.
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SAFEGUARDING INFORMATION
There are no easy solutions
By Rick Marine
to fix your businessŐs
Internet security problemsLast September, nearly a week after the disasters on the East Coast, Tom Cesar, our data center manager, noted the computer servers we were monitoring for several clients started slowing down to a crawl. Our monitoring tools indicated an inordinate amount of traffic. We double-checked the numbers when all of a sudden the chart monitor pointing to unusual activity went through the roof.
We soon realized the problem was the virus called Nimda. However, it wasn't just software tools that allowed us to resolve this for our customers but the hands-on work of our data center manager. Even with the best gear in the world, in the end human intervention is necessary to interpret the data and react accordingly.
As our government struggles to create a framework for homeland security, IT experts are scrutinizing our country's vulnerability to cyber terrorism. The news is, there is no quick fix for computer attacks.
Hardware and software continues to get better. We're always creating new patches for security flaws and building better firewalls to keep the bad guys out. The high tech version of the better mousetrap is always on the drawing board. However, the consensus among security experts is that only by constant training and/or hiring dedicated personnel to run your company's current IT assets will you effectively keep out hackers.
The problem is, with millions of computers in this country, and the software tools to gain entry to them available free on the Internet, hacking or unauthorized entry is only going to increase. This issue has the attention of top people in government as well as the private sector.
John Gilligan, the U.S. Air Force's acting chief information officer said recently, "This type of attack on our information-technology infrastructure will be more frequent and more virulent." Gilligan spoke at an event that announced the 20 top Internet security vulnerabilities identified by the SANS Institute, a trade organization whose name stands for System Administration, Networking and Security. (www.sans.org/top20.htm).
One of the points Gilligan was making was that we can address malicious code such as Nimda or Code Red, but all it takes is one weak link to create a problem. That weak link is a computer in a network that lacks the proper password controls, updated software patches or anti virus software. That one computer can become an entry point for the attack on the mainland or in Hawaii.
The essential issue, according to Bruce Carleton, a Navy security expert who works in Honolulu, is that human intelligence is absolutely critical in an overall solution.
"When you get down to it," said Carleton, "your technology is only as good as the people who implement and manage it. Firewalls, antivirus programs and other systems screen data traffic entering networks, but the reports they generate have to be interpreted by people who can spot new threats such as malicious code or hackers."
What can the Hawaii business owner, large or small, do to at least minimize cyber threats? There are several things I recommend:
>> Make sure your firewalls are up and running according to specification. Firewalls are the first line against hack attack and if this component is faulty, you're toast.Be realistic in your assessment of security risks. There are few certainties in life. The best you can do is to be prepared.>> Hire the best possible security talent or make use of outsourced companies that handle these types of services.
>> Be certain your antivirus scanning software is updated on a daily basis. Outdated antivirus software is worthless.
>> If you're running Web servers, make sure your operating system has the latest software updates. If not, it's likely you're opening up yourself to hackers.
Rick Marine, is the founder and chief executive officer of Century Computers, a Honolulu-based technology company. He can be reached at rick@centuryc.com.
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