The economy may be downbeat, but what goes down must come up again, eventually.

Leroy Laney, economics adviser to First Hawaiian Bank, forecasted a continuing contraction of the economy in 2009 yesterday at the 29th annual Business Outlook Forum at Dole Cannery Ballroom.

“;Of course, overly downbeat forecasts can themselves contribute to a slower economy, so we don't want to overdo it,”; said Laney. “;The thing to remember at this stage of the economic cycle is just simply that the cycle will always be with us. We hope the downturns will be mild, and that expansions will last much longer. Usually in Hawaii, that has turned out to be the case. We can be thankful for that, and we can be confident that better times will indeed return.”;

The expansion coming to an end in 2008 lasted 11 years, according to Laney, two years longer than the last one that ended in the early 1990s.

Unfortunately, the pauses in economic activity here in Hawaii last longer than one year. Expecting good times to return instantaneously would be unrealistic, he said.

Hawaii's banking industry has largely been spared from problems plaguing national markets because many local bank credit policies avoided subprime mortgage loans which started it all.

But practically every sector of Hawaii's economy is down, with tourism the hardest hit in 2008.

 

  Economists Say Hawaii In Recession

 

  Many Hawaii residents are trying to deal with the economic downfall. First Hawaiian Bank economic advisor Leroy Laney believes it will be a slow recovery. 

 

[  Watch  ]

 

 

 

 

Among First Hawaiian Bank's forecasts are a higher unemployment rate of 5.5 percent next year, up from 4.2 percent this year. Hawaii's unemployment rate usually lags the overall economy, but broke into the 4 percent range this year, compared to only 2.5 percent just a year ago.

Job growth, likewise, is forecasted to decline 1.2 percent next year compared to just 0.3 percent this year.

Real personal income—or inflation-adjusted income growth—is expected to decline an even greater 1.5 percent next year compared to 1 percent this year.

Inflation is also forecasted to increase 3.5 percent in 2009, not as high as the 5 percent jump this year due, in part, to the recent drop in fuel prices.

But Laney warned that oil prices tend to be highly volatile, and won't likely result in much long-term relief.

It will take the visitor industry time to regain its footing, said Laney, and for the traveling public to adjust to higher airfares that may continue despite recent lower oil prices.

Still, visitor arrivals are expected to drop 5 percent next year, not as bad as 9 percent this year. Arrivals from Japan generally have been declining for over 10 years. Higher airfares and mainland economic uncertainty also will contribute to the drop in arrivals.

That will likely translate into further weakness in jobs in the accommodation and food service, transportation and utilities and retail sectors.

“;After almost a decade of increasing jobs in Hawaii, when this year's final numbers are in we are likely to see a slight decline in this number also, especially if weak consumer confidence delivers a lackluster holiday season,”; said Laney.

By 2010, however, Laney said it's possible the state can expect a full-fledged recovery in tourism and return to positive job creation.

By 2011, he said, it's possible for the Hawaii economy to be “;firing on all cylinders once again.”;