The recovery process for the Hawaii economy is just around the corner—by early next year—according to the latest quarterly forecast by the University of Hawaii Economic Research Organization.

Still, it will take several years, due to weak U.S. and Japanese consumer spending and state fiscal problems, to reach a full recovery.

“;It will be a long and slow recovery because it's already been a deep recession,”; said UHERO Executive Director Carl Bonham, who defines “;recovery”; as being back to the same level as before the recession began.

That means the climb out of the recession will take through 2011 and beyond.

Job growth, which was last positive in 2007, will not be so again until 2011, but even then it is expected at under 1 percent.

Job losses are expected to continue, with another 3 percent drop in payroll jobs predicted for this year. The loss of 6,500 nonagricultural jobs in August was the largest sequential-month drop since the recession began in January 2008, according to Bonham.

The unemployment rate, which has hovered between 7 percent and 7.4 percent this summer, is predicted to rise further, averaging 8.1 percent in 2010, UHERO says.

The largest number of job losses are in construction, with big losses in the finance, insurance, real estate and tourism-related industries as well. Construction job losses are expected to end next year due to public-sector infrastructure projects, although UHERO has not included Honolulu's rail transit in its study yet.

On a positive note, UHERO said there was a quicker-than-expected recovery in Japanese visitors following the H1N1 flu scare.

Thus, its forecast for Japanese arrivals in 2009 was revised to a 4.1 percent year-over-year drop, which is less drastic than the 13.8 percent originally predicted in June. Still, no recovery in Japanese arrivals is expected until next year, when UHERO predicts a 3.3 percent increase.

The total number of visitors is not expected to pass the 7 million mark until 2012.

Personal wealth continues to decrease, although UHERO has revised its forecast for real income this year to a decline of just over 1 percent instead of 2.7 percent as anticipated in June.

The revision was due to a smaller projected loss in the private sector, stock market run-up and delay in state worker furloughs.

The silver lining is that Honolulu inflation remained “;nearly nonexistent”; in the first half of this year due to low energy prices and stable rents. UHERO now expects a nearly half-percentage-point drop in average consumer prices for the year, compared with the half-percentage-point rise forecast in June.

But families in Hawaii are expected to struggle as unemployment remains relatively high for several years, with income gains hard to come by amid difficult economic conditions.

“;Recovery means a return to growth, not a return to business as usual,”; the report says.