Unemployment rises

The state is still feeling
the effects of the Iraq war
and the SARS outbreak

Hawaii's seasonally adjusted unemployment rate rose to an 11-month high of 4.1 percent in June as the state's economy continued to feel the aftereffects of the Iraq war and the SARS epidemic.


But Bank of Hawaii economist Paul Brewbaker said yesterday the state should begin seeing a reversal in that lagging indicator as tourism recovers.

"It's what my colleague (Diane Swonk) at Bank One calls Iraqnophobia," Brewbaker said. "In anticipation of the conflict, firms were cutting back on hiring, deferring capital spending decisions and sort of just keeping their powder dry because the model they had in mind was the first Gulf War and then 9/11.

"As we did after 9/11, I think what we're seeing three months after the (Iraq) event is a little unemployment surge and then we should observe a tapering off over the next few months."

The 4.1 percent jobless rate was two-tenths of a percentage point above May's 3.9 percent rate and was the highest level since hitting 4.1 percent in June and July of 2002.

Despite the uptick, though, Hawaii's rate continues to fare much better than the national mark, which rose in June to 6.4 percent from 6.1 percent the previous month.

"In light of the continued relatively higher unemployment rate at the national level, Hawaii's economy has been resilient," said Nelson Befitel, director of the Department of Labor and Industrial Relations.

Hawaii's seasonally adjusted civilian labor force in June was 605,300, considerably above its low point of 592,500 in March when the Iraq conflict was starting. The labor force has been above 597,000 for the past three months.

However, the number of people unemployed in June was 24,600, the fourth straight monthly rise from a 2003 low of 17,800 in February.

"What that's telling you is that roughly an extra 7,000 people entered the labor force over the course of the last three to four months," Brewbaker said. "People who had jobs continued to have jobs so that was roughly stable, while the number of people seeking to enter the labor force went up. That phenomenon caused the unemployment rate to go up.

"Lurking in the background is a very strong expectation for Hawaii of economic and employment growth. People are betting on the economy doing well and they're entering the job force in increasing numbers."

Meanwhile, Hawaii's not-seasonally-adjusted unemployment rate jumped to 4.4 percent in June from 3.8 percent the previous month and 4.5 percent from June 2002.

The not-seasonally-adjusted number is more volatile than the adjusted number because it doesn't take into account seasonal fluctuations, such as the conclusion of the academic year, which results in a surge of new entrants into the labor force and also the temporary loss of jobs in public and private education.

The state, which only provides not-seasonally-adjusted numbers for each island, showed year-over-year jobless rate declines on four of the six islands.

The unemployment rate fell on Oahu fell to 3.8 percent from 4.0 percent in June 2002. It declined on Kauai to 5.1 percent from 5.3 percent. It dropped on Maui to 4.1 percent from 4.4 percent. And it decreased on Lanai to 2.3 percent from 4.5 percent.

However, the unemployment rate rose on the Big Island to 7.3 percent from 6.9 percent and on Molokai to 12.4 percent from 9.8 percent.


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