HAWAII ECONOMIC GROWTH PROJECTIONS UNCHANGED DESPITE SLOWER GROWTH PROJECTIONS AT THE NATIONAL LEVEL
News Release from DBEDT, May 31, 2022
HONOLULU—The Department of Business, Economic Development and Tourism (DBEDT) released its second quarter 2022 Statistical and Economic Report today. DBEDT kept the 2022 Hawaii economic growth unchanged at 3.2 percent, as projected in later February this year. According to the economic projections by the top 50 economic forecasting organizations published in Blue Chip Economic Indicators, U.S. economic growth in 2022 was revised downward from 3.7 percent in their February projection to 2.6 percent in their May projection. DBEDT expects that Hawaii’s economic growth in 2022 and 2023 will be higher than the nation.
Between the first quarter and second quarter of 2022, DBEDT sees Hawaii’s economic condition and growth trend unchanged. As tourism recovery continues, employment has increased and the construction industry is still busy, however, inflation remains high and labor shortages have put some limit on the growth.
Visitor Industry Recovery Accelerating
During the first four months of 2022, Hawaii welcomed a total of 2.8 million visitors, representing a 83.3 percent recovery from the same period in 2019. U.S. visitors have surpassed the same month 2019 levels every month since May 2021. During the first four months of 2022, U.S. visitors were 13.8 percent higher than the same period in 2019 while international visitors were 71.9 percent lower than those came during the same period in 2019.
International visitor recovery came mainly from Canada. Canadian visitor arrivals during the first four months of 2022 were 55.6 percent of those arrivals in the same period in 2019. Japanese visitors were only 3.2 percent of those who came in 2019 during the same period.
In comparison, with the same month in 2019, visitor arrivals by air and cruise ships had a recovery rate at 70.2 percent in January, 80.8 percent in February, 84.9 percent in March, and 96.3 percent in April 2022. Visitors by air recovered during the first four months of 2022 at 84.1 percent and cruise visitor recovery was at 39.8 percent between the first four months of 2019 and 2022. The table below shows the percentage recovery of visitors by air, by island, during the first four months of 2022. The recovery in April was robust especially on the neighbor islands.
Percentage recovery of air visitors by island by month: 2022
(compared to same month of 2019)
Statewide hotel occupancy rate was at 72.0 percent during the first four months of 2022, 8.0 percentage points lower than the same period in 2019 (at 80%) while hotel room rates increased from $286.1 per room per night to $364.3 (+27.3%) during the two comparison periods. Because of the increase in room rate, the state accommodation tax revenue increased 21.8 percent between the two periods. In January 2022, state transient accommodation tax (TAT) revenue was at the historical level of $82 million, and in April 2022 the TAT was at $75.9 million, the second highest TAT collection on record.
As currently scheduled, total air seats during May-July 2022 period will recover 95.8 percent from the same period in 2019. Seats from the U.S. mainland will be 12.5 percent higher and seats from international airports will be 54.8 percent short as compared with the same period in 2019. Flights from Japan will not increase significantly until July of this year.
State Tax Collections Setting New Records
During the first four months of 2022, state general fund tax revenue collection reached $3.6 billion, representing 45 percent growth from the same period in 2019. As components of the general fund, state general excise tax revenue increased 14.1 percent, individual income tax revenue increased 84.9 percent, and transient accommodation tax revenue increased 21.8 percent. General excise tax revenue and individual income tax revenue in April 2022 were at historical monthly record levels. The increase in tax revenues was partially due to the higher inflation rate and partially due to economic growth. Inflation in Honolulu between the first quarter of 2019 and first quarter of 2022 was 10.3 percent.
Labor Market Conditions Continue to Improve
Hawaii’s labor market conditions continued to improve throughout the first four months of 2022 with unemployment rate at 4.2 percent seasonally adjusted and 3.7 percent not seasonally adjusted. As a comparison, the seasonally adjusted unemployment rate was 7.1 percent and not seasonally adjusted rate was 6.5 percent during the first four months of 2021. Hawaii’s seasonally adjusted unemployment rate during the first four months of 2021 was the 6th highest in the nation and now dropped to the 19th highest during the first four months of 2022.
In April 2022, the total seasonally adjusted number of people employed either as payroll employees or self-employed was the highest since March 2020 at 645,700 and represents a 97.0 percent recovery compared to the pre-pandemic period of April 2019. Initial unemployment claims since March 2022 have been stable at 1,251 per week, lower than the same period, average weekly initial unemployment claims in 2019 at 1,318.
Non-agricultural payroll jobs grew 6.7 percent during the first four months of 2022 from the same period in 2021 and represent a recovery rate of 91.4 percent of the same period 2019 level. As of April 2022, payroll jobs in most of the industries have recovered over 90 percent as compared with April 2019 with information and federal government jobs fully recovered. Industries with less than 90 percent recovery include manufacturing, wholesale trade, transportation, financial activities, leisure and hospitality, and other services.
Percentage recovery of payroll jobs by industry by month: 2022
(compared to same month of 2019)
|Total non-agricultural payroll jobs
|Nat. Resources & Mining & Construction
|Transportation, Warehousing & Utilities
|Professional & Business Services
|Health Care & Social Assistance
|Leisure and Hospitality
Hawaii’s civilian labor force participation rate improved to 60.5 percent in April 2022, the highest since March 2020. The average civilian labor force participation rate in 2019 was 61.0 percent.
During the first quarter of 2022, average monthly job openings was 50,000 and the average monthly hires was 28,000, leaving 22,000 positions unfilled. Most of the unfilled jobs were in healthcare and tourism related industries.
Construction and Real Estate
Though value of total private building permits decreased 13.5 percent during the first four months of 2022, the large increase in private building permit value in 2021 (+43.9%) will keep the construction industry busy since construction work usually starts several months after obtaining permits. Residential building permit values increased 15.3 percent while permit values for commercial & industrial, as well as for additions and alterations declined.
A total of 1,284 residential units were authorized statewide during the first four months of 2022, representing a 2.4 percent increased from the same period in 2021. Of the residential units authorized during the first four months of 2022, 686 units (-13.2%) were single family homes, and 598 units (+28.9%) were condo units.
During the first quarter of 2022, there were 5,670 homes sold statewide, which represents a 1.2 percent increase from the same quarter in 2021. Of the homes sold in the first quarter of 2022, 2,690 units or 47.4 percent were single-family homes and 2,980, or 52.6 percent, were condo homes.
The average sale price for single-family homes in 2021 was $1,056,548, representing a 3 percent increase from the first quarter of 2021. The average sale price for condo homes was $708,074, an increase of 7.8 percent from the same quarter in 2021.
Of the homes sold during first quarter of 2022, 4,255 units or 75 percent were sold to local buyers and 25 percent were sold to out-of-state buyers. This is the same as the average percentages experienced between 2008 and 2021.
Honolulu Consumer Inflation Highest in the Last 30 Years
Prices in the Honolulu area, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), rose 7.5 percent in March 2022. It was the highest since 1991 when the annual rate was 7.2 percent. Hawaii’s rising inflation follows the national trend where the U.S. consumer prices increased 8.5 percent during the same month. The increase in inflation was partly driven by energy prices, which jumped 32.6 percent due to an increase in crude oil price. Supply chain disruptions also contributed to the higher inflation rate. Inflation rate for commodities in Honolulu was 11.9 percent in March 2022.
In fighting the high inflation rate, the Federal Reserve Bank increased the Federal Funds target rate by 50 basis points (0.5%) during the May 2022 FOMC meeting with more rate hikes expected in the following months. Higher interest rates have negative impact on investments, especially on home sales.
Uncertainty Rises with Increasing COVID-19 Cases
Hawaii’s new COVID-19 cases have been rising in recent weeks. At the time this report is published, daily new COVID-19 cases will be well over 1,000 per day. Even without government enforced restrictions; businesses, residents, and visitors will be cautious on their activities and therefore, economic activities will be negatively impacted.
In the current report, DBEDT predicts that Hawaii’s economic growth rate, as measured by real domestic product (GDP), will increase 3.2 percent in 2022 over the previous year. The economic expansion will continue with a 2.5 percent increase in 2023, 2.2 percent in 2024, and 2.0 percent in 2025. These projections are basically the same as those projected in the first quarter of this year.
The visitor arrivals forecast is projected to be 9.1 million in 2022, an increase from the projection made in the first quarter. Visitor arrivals are projected to increase to 9.7 million in 2023, 10.1 million in 2024, and 10.3 million in 2025, which is at the 2019 level. Visitor spending is projected to be $17.8 billion in 2022, which is about the same as the 2019 level. The increase in visitor expenditures is mainly driven by the increase in average daily visitor spending, which increased 27.9 percent during the first four months of 2022 from the same period in 2021. Visitor spending is projected to grow at 7.1 percent, 4.9 percent, and 3.0 percent, respectively for 2023, 2024, and 2025.
Non-agriculture payroll jobs are forecast to increase by 4.5 percent in 2022, then will increase by 3.2 percent in 2023, 2.6 percent in 2024, and 2.1 percent in 2025. For the current forecasting period (up to 2025), non-agriculture payroll jobs will recover to the pre-pandemic (2019) level by 2025.
The state unemployment rate will continue to improve as economic recovery continues. The rate (not seasonally adjusted) is projected to be 3.7 percent in 2022, 3.5 percent in 2023, 3.1 percent in 2024. It will finally decrease to 2.9 percent in 2025.
During the pandemic, personal income surged due to government transfers related to unemployment insurance payments and other CARES Act funds. As government support faded out in 2021, personal income is expected to decrease in 2022 by 0.9 percent, and then grow between 2.9 and 3.1 percent for the following years until 2025.
As measured by the Honolulu Consumer Price Index for urban consumers, inflation is expected to increase in 2022 to 6.0 percent, still lower than the projected U.S. consumer inflation rate at 7.1 percent. Hawaii consumer inflation will increase at rates between 2.8 and 2.1 percent in the following years until 2025. These inflation projections are higher than those projected last quarter (1Q 2022).
Statement by Director Mike McCartney
Hawaii’s economic recovery continues on a healthy path. In terms of real gross domestic product, our non-tourism sector has fully recovered while the tourism sector is showing strong recovery from the COVID-19 pandemic. Domestic travel remains strong although competition from other destinations will impact visitor arrival numbers. Japan visitors will slowly return to the Hawaiian Islands with the reduction of travel restrictions imposed by the Japanese government.
Bankruptcy filings continued declining during the pandemic period with a 33.9 percent decrease during the first four months of 2022, as compared with the same period in 2021.
We are now facing the challenges of higher inflation, shortage of labor, higher fuel costs, supply chain disruption, and a rise in COVID cases. The State is working with the energy companies to find alternative sources of oil to reduce the impact on oil prices due to the Ukraine War. Though it will take some time for the labor shortage to right itself, increasing labor force participation will be one of the key solutions to alleviate the economic situation in our state.
The full report is available at: dbedt.hawaii.gov/economic/qser.
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