Kauai's economy, which is less diversified and more dependent on tourism than Oahu's, will see its largest contraction in jobs since Hurricane Iniki wreaked havoc on the Garden Isle in 1992, First Hawaiian Bank economic adviser Leroy Laney said during an annual overview of the island's economy.

The island's unemployment rate, which broke into double digits early this year, is an astounding 7 percentage points higher than it was in 2008, Laney said last night in a presentation before the Kauai Chamber of Commerce at the Grand Hyatt Kauai Resort & Spa. Kauai also is experiencing strong slumps in tourism, construction and real estate, causing it to feel the impact of economic downturn more than Oahu, he said.

“;Recovery will be gradual and will depend critically on the return of healthy tourism, especially for an economy like Kauai's,”; Laney said. “;And that in turn will depend on the return of better times to the mainland economy, especially the West Coast.”;

Jack Suyderhoud, professor of business economics at the University of Hawaii at Manoa, who joined Laney as a speaker at the 35th annual Kauai Business Outlook Forum, said he sees “;us bouncing along the bottom of the economic cycle for the last half of 2009 with modest recovery in place by mid-2010.”;

The road back to sustained economic recovery will not be fast or easy, Suyderhoud said. The current economy is like a slow train going through a long tunnel with only distant glimmers of light at the end, he said.

During the first half of the recession, Laney said that Kauai experienced the biggest drop in visitor arrivals of any island. Work at Kauai Lagoons and the Ritz Carlton Residences ceased as a result of the financial turmoil, and much of the construction in the Poipu area either halted or slowed markedly, he said. Only seven out of 25 lots at Poipu Beach Estates, near Sheraton Kauai Resort, have been sold, and construction has not started, he said. Likewise, prices are down at Koloa Landing, a 323-unit luxury condominium project.

“;But all is not doom and gloom,”; Laney said.

Time-share visitor numbers have helped cushion Kauai's tourism downturn, and a $1 million Kauai tourism marketing campaign has begun, Laney said.

“;Kauai's numbers would look a good bit worse were it not for the time-share component, which—as always—has held up better,”; he said.

“;Though time-share rentals are down, owners are still coming.”;

Laney identified other positives, including the reopening of Koa Kea Hotel, formerly the Poipu Beach Hotel, as an upscale boutique property; the beginning of $50 million in renovations at the Kauai Marriott; and the planned reopening of the Princeville Hotel in October as Hawaii's first St. Regis Hotel.

Federal stimulus money also could help fund government construction, and the Pacific Missile Range Facility has continued to supply high-salary jobs, he said.

“;When the economy struggles, activities not related to the economic cycle such as the Pacific Missile Range Facility are appreciated more than ever,”; Laney said.

“;Counting contractors as well as uniformed military and government civilians, jobs there total about 875, and most are higher paying than elsewhere in Kauai's service-based economy.”;

In addition, Laney said Kauai's economy will get a boost from the new St. Regis Hotel and Safeway's plans to put an anchor store in the Hokulei Village Complex, which is slated to open in October and could create 1,000 jobs.