CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM
University of Hawaii economists predict tourism this year will reach record levels, just one reason why Hawaii's economic future is looking bright. Here, Rae Huo photographs newlyweds in Waikiki.
UH report optimistic
about state’s economyA predicted rise in tourism and
an upcoming military buildup
are expected to create a boost
Hawaii's economic future looks bright, according to the University of Hawaii Economic Research Organization.
Even a downturn in local spending brought on by the deployment of troops to Iraq should turn around, the report said.
Beginning mid-year, soldiers and their dependents connected with the planned Stryker Brigade will be sent to Oahu, and the troop buildup will accelerate before the end of the decade if an aircraft carrier being courted by the state's congressional delegation becomes based in Hawaii, the report said.
UH economists Carl Bonham and Byron Gangnes also are optimistic about tourism, both in continued strong mainland arrivals and a return of Japanese visitors.
Japan's economy looks better than it has in a decade, Bonham said. With growth in the country's economy in the last four quarters and improved business confidence, Hawaii could see significant growth in Japanese visitor arrivals, he said.
Bonham and Gangnes predict total tourism arrivals will grow by more than 8 percent in 2004, approaching the record level set in 2000. U.S. arrivals will rise by 3.6 percent, they project. And Japanese arrivals will soar by 24.5 percent, but won't approach pre-Sept. 11, 2001, levels until the end of 2005, they said.
The economists are similarly enthusiastic about Hawaii's job market. They predict the number of construction workers will increase 5 percent this year, while above-average job growth will occur in service areas including health care, business services, real estate and finance.
Payroll jobs are predicted to expand by 2.1 percent this year, but will cool slightly in 2005, according to the report. The expanding labor market will keep the unemployment rate hovering just above 4 percent for the next two years, the economists said.
Real income is likely to be stronger next year as military construction projects ramp up. But growth will be tempered by factors including the unknown result of wage negotiations and higher inflation, which is predicted to pick up to nearly 3 percent this year and next.
As Hawaii's economic growth continues, housing price increases will push up the Honolulu consumer price index, Bonham and Gangnes said.
Bank of Hawaii Chief Economist Paul Brewbaker said he concurs with the report's findings, but with some caveats.
"The thing we should keep an eye on is the housing cost component and the effect of higher energy costs," he said.
Brewbaker also expressed concern that personal income tax revenues are not higher. The UH report noted that while general excise and use taxes were up 8.4 percent in the calendar year, revenues from personal income tax were weaker because of higher refunds in 2003.
"If the economy is so good, then why is it not generating tax revenues?" Brewbaker asked. "Revenue should actually be growing a lot more than the economy."
Brewbaker, a former member of the state Council on Revenues, said as economists have had to revise their forecasts as the economy fared better than expected, legislators need to revise their thinking on the state's economy.
"I think the Legislature went too far with tax credits and tax cuts -- all of which were motivated by a false perception that the economy needed help," Brewbaker said. "It's actually outperformed what we originally predicted.
"So if you've given away more than you planned on giving away, then you need to reconsider it."
