UHERO Executive Director Carl Bonham provides a summary of the 2023 third quarter forecast report in this episode of “UHERO Focus”
UHERO Forecast for the State of Hawaiʻi: Wildfires deliver heavy blow to Maui economy
from UHERO, September 22, 2023
The tragic Maui wildfires have inflicted deep pain and loss on the affected communities, and sorrow among all of Hawaii’s residents. There are also economic costs for the county and the state as a whole, many of which will last well into the future.
In our first forecast since the fires, we assess the implications of the fires’ aftermath for the path of the Maui economy over the next several years, and what that will mean for the state economy.
* * * * *
The tragic Maui wildfires have inflicted deep pain and loss on the affected communities, and sorrow among all of Hawaii’s residents. There are also economic costs for the county and the state as a whole, many of which will last well into the future. In our first forecast since the fires, we assess the implications of the fires’ aftermath for the path of the Maui economy over the next several years, and what that will mean for the state economy.
• Maui experienced a severe economic disruption in the wake of the wildfires. Visitor arrivals plunged by nearly three-quarters, as travelers responded to the fires’ horror and early appeals to stay away. Maui lost more than $13M of visitor spending each day in the weeks following the fire.
• We already see the beginnings of Maui tourism recovery. Central and South Maui resorts will be the first areas to see substantial recovery. The planned October 8 reopening of unaffected West Maui resort areas will restart tourism in the region, although we expect recovery there to be gradual.
• By the end of this year, we expect Maui visitor arrivals to reach more than 50% of their 2022 level, rising to 80% by the end of 2024. Gains will be gradual thereafter, because of continued temporary housing needs and lingering reluctance of some travelers. Tourism businesses will remain under considerable economic pressure. A complete recovery will not be reached within this forecast period.
• The employment effects of the fires have been rapid and severe. The fires destroyed the vast majority of businesses and jobs in Lahaina. Across Maui, local businesses are struggling from the lower visitor numbers. The initial shock has sent the jobless rate surging, and Maui unemployment will soar above 11% in the fourth quarter. Unemployment will only gradually recede and will not dip below 4% until late-2026.
• The fire in Lahaina displaced thousands of families, and rebuilding homes will take many years. Homes made up 86% of the roughly 2,200 lost structures, about 3% of Maui’s housing stock. The State and County are working to find longer-term housing for about 7,000 displaced persons that are now being accommodated in hotels, timeshares, and TVRs. Recovery workers and an eventual army of construction laborers must also be housed. Until substantial rebuilding can be accomplished, these needs will press hard on the already tight and expensive Maui housing market.
• While the Maui wildfires will lead to sharp and persistent economic losses on the Valley Isle, spillovers to the rest of Hawaii will be limited. Because Maui represents a significant share of Hawaii tourism, aggregate visitor industry measures will of course fall. And the external conditions that underpin Hawaii tourism remain unsettled. The US economy now looks likely to avoid recession, but further Fed rate increases could upset that. Global conditions have weakened, both in Europe and China, and the renewed fall of the yen will hinder the slow Japanese visitor market recovery.
• Construction projects in other counties will have to compete with Maui recovery needs, but in most sectors we do not expect significant changes from the forecast we were developing before the fires. Statewide job growth will dip below 2% this year and to 1% in 2024. A likely federal government shutdown threatens further disruption. The number of jobs thereafter will be a bit above our previous forecast as rebuilding ramps up.
• Real personal income will be adversely affected by employment losses on Maui, even with federal support for Maui families. Statewide income growth will slow to below 2% in 2024. Gross domestic product will be raised somewhat by rebuilding, but this does not capture the value of lost homes and businesses and the non-pecuniary costs of displacement, trauma, and so forth.
• Tax revenues will be hit hard by the disaster. The reopening of West Maui will help to reduce Maui revenue losses, as will Maui’s 0.5% GET surcharge that begins January 1. The State Council on Revenues has reduced its forecast for State General Fund revenues for Fiscal 2024 to just 1.3% growth, down from an earlier estimate of 4.0%. Depending on the level of federal funding, the State will incur substantial recovery costs for at least the next half-decade.
• In developing these forecasts, we have had to deal with a range of uncertainties about Maui’s recovery: how long it will take, what resources will be needed, and the response of potential Maui visitors. As more information becomes available, we will be able to refine these forecasts in the months and years to come.
Link: Forecast Figures
AP: Hawaii economists say Lahaina locals could be priced out of rebuilt town without zoning changes
SA: University of Hawaii report details ‘heavy blow’ to Maui’s economy after fires
CB: UH Economists Give 'Initial Take' On Maui's Long Road To Recovery