In a presentation titled “Maui Outlook: Weak Recovery Underway,” the economist assured the audience, “We are beginning to see some signs of growth.” But, he asked, “What does it mean to say that the recession is ‘over?’” It may not be over, but “Hawai‘i’s economic recovery has begun,” he said, noting some key factors: Employment has stabilized; residents have started to save more and reduce consumption; and visitor spending is beginning to firm along with economic conditions in the state’s major tourism markets.
In February, Dr. Bonham said, the state saw a significant “bounce in tourism,” as visitor arrivals increased by 5 percent (arrivals plummeted by 25 percent during the recession). As the global economy continues to improve and airlines add more flights to Hawai‘i, he said he expects arrivals to increase to 7 percent by the summer. Tourism is Hawai‘i’s “major export,” he said, and Maui, along with the other islands, is “filling rooms more than a year ago… which means spending is doubling.”
This is much better news than last year; and as the visitor industry rebounds, “We will be seeing the hotels slow down their discounts.” If you are planning a family vacation, book it now, he said with a smile. While consumers and visitors are starting to spend more, it is still “extremely volatile.” As a result, recovery will be a slow process, limited by moderate consumer spending and fiscal conditions on the county and state levels. One significant side effect of this, according to a recent UHERO report, is that “unemployment will recede only gradually from current high levels.”
Professor of Economics and University of Hawai‘i Economic Research Organization (UHERO) Economist Dr. Carl Bonham shared his forecast for the state of Maui’s economy at the 2010 American Savings Bank Economic Update Luncheon held at the Kahili Golf Club on Friday, April 9.
One silver lining though, said Dr. Bonham, is that certain policy-driven initiatives, such as Cash For Clunkers and First Time Homebuyers’ incentives, have contributed to consumption rates across the state. “A lot of things are going on that affect consumption,” he said, “the effects of the stimulus package are evident, but won’t last forever. If you are looking to refinance anytime soon, do it now—the window of opportunity is starting to close.”
Despite these signals of recovery, Dr. Bonham warned that the process “is going to be choppy.” During the recession, “We destroyed a lot of wealth,” he said. In addition, sectors of the economy—primarily the housing market—are “years and years away from full recovery.” The reality is, recovery is “underwater” and the only way to get our heads above water is to “save and reduce consumption,” he said.
Additionally, the construction industry has suffered perhaps the greatest blow dealt by the recession. “Construction has been hurt worse than any other industry,” Dr. Bonham said solemnly. “What really drives the economy is construction.” Pointing to a jagged line on a graph illuminated on the screen behind him, he said, “If it’s any indication, building permits are at 1990s levels… the lowest point in 30 years.” Even worse, across the state, an estimated 10,000 construction workers were out of work last year, and on the Valley Isle, construction jobs fell by 25 percent—causing a significant ripple effect throughout the local economy.
If federal stimulus monies are allocated to the right places, he said it is possible for the construction industry to rebound. “Cross your fingers,” he said. Reiterating that the process will be “choppy,” Dr. Bonham admitted, “I’m optimistic that we will see month-to-month growth, especially in the tourism sector.” This incremental road to recovery won’t happen overnight, but, “We are definitely moving in the right direction,” he said. “When you fall off a cliff and start to climb up… well, it will take a while.”
And as Hawai‘i looks to the future, the predictions will inevitably shift in different directions. Dr. Bonham advised the audience to “stay tuned, as UHERO will release an updated forecast for Maui County at the end of June. “The numbers will change,” he said.