The early morning event featured two of Hawai‘i’s leading economists, First Hawaiian Bank Economic Adviser and Hawai‘i Pacific University Professor of Economics and Finance Dr. Leroy Laney and Dr. Jack Suyderhoud, professor of Business Economics at University of Hawai‘i’s Shidler College of Business.
In a presentation entitled, “2009-10 U.S., Global Outlook: Long Tunnel, Slow Train, Glimmers of Hope,” Suyderhoud detailed the effects of the economic downturn on the national and global economies. “Last year, I promised I’d have better news for you in 2009,” he said with a smile.”Fortunately, that’s the case.”
Elaborating upon his concept of “The Long Tunnel,” Suyderhoud described the current recession as “an unhappy coincidence of cyclical issues, structural issues and long-term trends,” and a result of overconsumption, rising deficits combined with a lack of savings and consumer confidence, among other factors. While once-faltering, consumer confidence “has ticked up recently… it has a long way to go,” he said. In addition, he said, “Since employment and the unemployment lag the economy, we can continue to expect worsening numbers for the rest of the year.”
Jack Suyderhoud, professor of Business Economics at the University of Hawai‘i Shidler
College of Business, presented the “U.S. and Global Economy Forecast” to a standing-room only crowd at the 35th Annual Maui County Business Outlook Forum.
The “Slow Train” moving towards economic recovery will require us to deal with financial imbalances and increase our savings, said Suyderhoud. However, he said, increasing savings will reduce consumer spending and slow down our recovery. But according to Suyderhoud, there are several “Glimmers of Hope” emerging on the horizon. “Signs of improvement are there,” he said. For example, some financial markets are beginning to settle, and inflation is “squashed... at least for now,” he said, noting that gasoline hovered around $4 a gallon in the first half of 2008.
“The road back to a strong and sustainable economy won’t be easy,” he admitted. “I see us as ‘bouncing along the bottom’ of the economic cycle for the last half of 2009… with a modest recovery in place by mid-2010.”
Bringing the conversation closer to home, Laney took the stage to present his “2010 Maui Economic Forecast,” an overview of Maui County’s economic landscape. After completing an extensive tour of Maui’s economic sectors last summer, he compiled a comprehensive report summarizing major trends impacting the local economy. According to Laney, some negative trends include declines in visitor arrivals and spending, a shrinking job market and rising unemployment, decreased retail spending, a sluggish real estate market and the dwindling viability of sugar.
Laney emphasized that for the last two years, the Neighbor Islands have felt the sting of the current economic downturn more than O‘ahu. “Less diversification and the greater role of tourism on the Neighbor Islands are major reasons,” he said. “Tourism is still Maui’s big export driver, and here especially, the Valley Isle and other Neighbor Islands have taken the brunt of the recession… arrival numbers are worse than for O‘ahu. Add to that the fact that tourism is much more important here than on O‘ahu and you get a discouraging picture.”
According to Laney, one significant obstacle for Maui tourism lies in its marketing plan. “The image it has tried hard to cultivate, an upscale destination for affluent travelers, is not a reputation you want in this new world of frugality,” he said. “Visitors attracted to Maui by lower airfares and hotel room rates are not likely to be big spenders when they get here. And after all, spending is the bottom line, no matter how many come or where they stay. In that regard, surveys indicate that Maui activity sales have declined more than on other islands.”
But Laney also noted that some positive trends, such as new commercial and residential construction projects, workforce development efforts and soaring enrollment at Maui Community College. “Recession can do strange things in education,” he said. “More unemployed or underemployed individuals can translate into higher enrollments if they decide to use the extra time to go back to school.”
As for economic recovery, Laney said it will be a gradual process. “The pace will depend on the return of healthy tourism, which in turn, will depend on the return of better times on the Mainland, especially the West Coast,” he said. “Even though that recovery is largely beyond local control, anything that can be done here to stimulate the visitor industry is more welcome than ever.”
Laney reminded the audience members, “We are talking about a cycle… it will get better. It will happen. We just need to be patient.” Although Laney and Suyderhoud indicated that the road to economic recovery may be an arduous one, they both agreed that there is, after all, a light shining at the end of this dark economic tunnel.