Forecasts for Hawaii’s Economy in 2019
Pacific Business News asked several local business owners and leaders for their forecasts for Hawaii’s economy in 2019, and people in industries ranging from restaurants to technology and energy shared with us what they’re excited about (and concerned about) in the coming year. We begin this series with insights from two experts — people who study economics for a living — and here’s what they had to say:
Carl Bonham, professor of economics and executive director, University of Hawaii Economic Research Organization
What should Hawaii business owners and leaders be concerned about in 2019?
In many ways, our annual Hawaii forecast report focused on limits: visitor industry capacity that limits further tourism growth, record-low unemployment that limits further job growth, and slower population growth that limits further labor market expansion. Together, these limits mean that the pace of near-term growth will be lower than it was earlier in the cycle and that growth over the long term will be much less rapid than in past decades.
That slower growth makes it much more challenging to deal with disruptions, whether they are due to natural disasters such the flooding, eruptions, and tropical cyclones we experienced this year, or manmade disasters such as a full-blown trade war.
What can Hawaii business owners and leaders look forward to in 2019?
It is important not to confuse the acknowledgement of limits as a sign of ill health. The fact is that by many metrics Hawaii’s economy is the healthiest it has been in years. Yes, visitors are pressing against capacity, but that is because the industry keeps setting records for the number of visitors served, and that is growing employment and revenues. It should go without saying that record-low unemployment is a good thing in and of itself, especially if one recalls the widespread hardship of high unemployment in the wake of the Global Financial Crisis. Lower population growth will have its own benefits in a state that faces congestion and environmental stresses, even if a slower-growing and aging population will present challenges for public finances and our systems of social support.
Eugene Tian, state economist, Hawaii State Department of Business, Economic Development & Tourism
What should businesses/business owners in Hawaii be most concerned about in 2019?
Hawaii’s economy will continue to grow in 2019, but at a slower pace. According to our most recent economic forecast, which was released on Nov. 21, 2018, Hawaii’s economic growth is expected to be at 1.2 percent in 2019, lower than the average growth of 1.8 percent experienced in the past 30 years. After several years of strong growth, tourism growth will be slowing down in 2019. During the first nine months of 2018, total air seats increased by 8.9 percent from the same period in 2017, but the scheduled air seats to Hawaii will increase only 0.5 percent during the first nine months of 2019, indicating a slower growth in visitor arrivals for 2019. Visitor spending is expected to grow at 4.2 percent in 2019, lower than the 8.9 percent expected for 2018. Hawaii’s unemployment rate will remain low in 2019 at 2.5 percent. Businesses may still have a difficult time finding workers for their business expansion.
What can Hawaii businesses/business owners look forward to in 2019?
Several industries are expected to perform well in 2019, including health care and social assistance, professional and business services, and construction. The job count in the health care industry has been growing in the last 30 years, even during the recession years. Being the state with the seventh-oldest population in the nation, with 18 percent of Hawaii’s residents at least 65 years of age, there will be an increasing demand for health services. This industry will continue to grow in the years to come.
The construction industry will continue to grow in 2019. During the first nine months of 2018, the value of private building permits increased by 3.6 percent and the value of government contracts awarded increased by 39.3 percent. The combined value of private and government permits increased by 14.6 percent. The value of the building permits is a leading indicator that the construction industry will be busier in 2019. During the last 20 years (1998-2018), professional and business services increased payroll jobs by 27,900, which was the largest job gain by industry in the state. This industry is expected to grow more in 2019.
The article appeared first in Pacific Business News and can be viewed here.