Kauai hit by
economic storm
Economist Leroy Laney warns
that the island faces a housing crisis
LIHUE » Kauai's economy is on the verge of a boom not seen since before 1992's Hurricane Iniki, First Hawaiian Bank economics consultant Leroy Laney said in Princeville last night.
The result has been a dramatic drop in unemployment, Laney said at the bank's annual Economic Outlook Forum.
From 1997 through the first half of 2004, the unemployment rate on Kauai plunged 7.2 points while average unemployment in Hawaii declined only 2.8 percent, he said.
Last year and so far this year, Kauai's rate of job creation has been nearly twice the state average.
But, Laney cautioned, the island faces a major housing crisis and wages are not keeping up with increases in the cost of living.
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As he has in past years, Laney stressed the need to diversify Kauai's economy and reduce its reliance on tourism.
Kauai Mayor Bryan Baptiste said he agreed and the island is moving in that direction.
"We're focusing on diversification in the areas of high-technology, renewable energy, agriculture and health tourism, and at the same time training our children for the jobs that will be created," Baptiste said. "The greatest value in a good economy is the opportunity to take care of the people of Kauai."
Laney said tourism in particular is doing well on Kauai, running well ahead of last year, with gains greater than those on Maui.
Construction on Kauai is showing a dramatic increase, Laney said. Permits for new single-family residences are approaching the level of the 1993 post-Iniki reconstruction.
"Development on Kauai is quite literally exploding, a boom that should continue for several years," he noted.
On the down side is the increase in the cost of living, particularly housing. In the first half of 2004 alone, the median home price increased 24 percent on Kauai.
"This becomes a serious social problem in an economy where there aren't that many high-paying jobs," Laney said. "If wage increases had to match the cost-of-living increases, every employer on the island would go bankrupt."
"Even young professionals often can't buy, leading to out-migration," he said. "There are obvious strains on attracting qualified people and keeping them here."
