While the U.S. economy is improving, it will be 2011 before Hawaii experiences sustained recovery, according to economists at the 40th annual First Hawaiian Bank Business Outlook Forum.

Leroy Laney, a professor of economics and finance at Hawaii Pacific University and economic adviser to First Hawaiian Bank, was joined by keynote speaker James F. Smith, who is regarded as an optimistic economist among his peers.

Despite improvements to the U.S. economy and tenuous recovery in Japan, Laney characterized next year as a period of stabilization rather than recovery in Hawaii.

Smith, chief economist of Parsec Financial Management in North Carolina, made headlines earlier this year when he called an end to the recession on May 15, 2009, a date far ahead of a possible affirmation from the National Bureau of Economic Research, which determines official recession dates.

There is not any way to deny the last 17 or so months of economic contraction; however, Smith advised that better times are coming.

“;My bet is on pretty good growth for the next four or five years until something comes along that scares us all again,”; he said.

In his latest nationwide economic forecast for the Wall Street Journal, Smith said that he expected unemployment to drop from 9.1 percent in December to 7.6 percent by December 2010.

Smith forecast that the U.S.'s Gross Domestic Product, the market value of all goods and services made in the U.S., would rise from -0.1 percent in the fourth quarter of 2009 to 3.3 percent in the fourth quarter of 2010.

Smith's WSJ forecast also was bullish on U.S. residential real estate. Home prices should rise by 2.8 percent this year and another 4.6 percent next year, he said.

While Laney said it's possible that Hawaii's economy will be firing on all cylinders by 2011, next year more people will lose jobs, and the rate of inflation and unemployment will move up. Still, there will be small gains in visitor arrivals and real personal income as stabilization occurs, he said.

Laney characterized 2010 as a “;year of transition to better and more sustained growth.”; He said that “;recovery could be longer than the earlier declines”; and will be dependent on tourism as well as recovery of the mainland's economy, particularly on the West Coast.

Even as the national recession ends, Laney said that he expects “;long-distance relatively expensive”; leisure travel to remain weak. Barring unforeseen shocks, Hawaii will see arrivals growth for its key visitor industry, he said. Still, spending declines could continue outstripping the drop in arrivals, Laney said.

Japan's faltering economy also will necessitate the need for Hawaii to diversify into other tourism source markets like China, said Smith, who praised Gov. Linda Lingle's most recent China mission.

“;I think she's brilliant. You have to get the Chinese people coming to Hawaii,”; he said. “;They are the way of the future.”;

Japan is a “;basket-case country,”; and there is “;no clear way out of its current economic woes,”; he said.

On other important fronts, Laney said Hawaii's real estate sales have been showing signs of a bottom in 2009 and that declines have not been as great as the previous year.

“;But the decline in median prices probably has a while to go,”; he said, adding that this year's decline could hit the high single digits, followed by a smaller drop next year before prices stabilize in 2011.

Hawaii's real personal income, a broad measure of the economy, is likely to rise 0.5 percent next year, Laney said.

Since the labor market is a lagging indicator, Hawaii's job growth will decline by about 0.5 percent next year, and unemployment could rise to 7.5 percent, he said.