UH predicts
‘rosy’ economy
The University of Hawaii Economic Research Organization is painting a rosy economic forecast for the state in 2005.
A report released yesterday by the university said job and income growth will finish this year with gains of more than 2 percent, with plenty of momentum going into next year.
Growth in Hawaii's economy has been broad-based and should remain healthy during the next two years, according to the report by economists Carl Bonham and Byron Gangnes.
"It's a rosy economic picture for sort of the average citizen," Bonham said. "If you don't have a job right now, you're in a good situation, because you can find one. That's a much better place to be than we were five or six years ago, when there weren't any jobs to be found.
"Businesses don't add jobs unless things have improved," he said. "They wait until they're so busy that they have to have that extra employee."
The report is also good news for business.
"It basically means that times are good," Bonham said. "It's kind of hard to think of a business sector that isn't doing better than it was a year and a half ago or two years ago."
Residential housing may be near its peak, but the report said military construction during the next several years should make up for it.
Bonham and Gangnes said income growth in the construction sector was surprisingly weak in the first half of this year, largely due to a nearly two-month-long strike by concrete workers. But the economists expect the sector to rebound strongly.
The report found Hawaii's tourism industry to be healthy, even though the recovery of the Japanese market has been slower than expected. However, an increase in visitors from the mainland has taken up the slack, it said.
On the down side, the deployment of more than 10,000 military troops based on Oahu has had a negative economic influence this year that will extend into next year, Bonham and Gangnes said.
New troops being based on Oahu will provide a stimulus for the economy in 2006 and beyond, they said.
Real personal income, which is adjusted for inflation, will expand by 2.5 percent in 2004, up slightly from the report's third-quarter forecast and a bit ahead of last year's 2.3 percent growth, the report said.
"We now expect a slower acceleration of income growth than a few months ago, with 2.5 percent growth next year, rising to 2.8 percent in 2006," Bonham and Gangnes said in the report's executive summary.
The growth will be fueled by military construction, the return of military personnel and their dependents, the continuing recovery of the Japanese tourist market and pay raises in the public sector, they said.
However, rising energy prices and higher home prices and rents have caused inflation to pick up markedly, the report said.
"Because of persistent record-breaking oil prices, we now expect 3.5 percent inflation for this year as a whole, peaking at 3.8 percent in 2005 and declining only gradually thereafter," Bonham and Gangnes said.
"With high energy prices and a robust local economy, Hawaii can expect to outpace mainland inflation for at least the next several years," the economists said.
Bonham and Gangnes said there are risks to continued economic growth in Hawaii, including oil price-related inflation, as well as a possible escalation of violence in Iraq or elsewhere.
