HONOLULU – The Department of Business, Economic Development and Tourism (DBEDT) released its third quarter 2020 Statistical and Economic Report today. In the report, DBEDT projected Hawai‘i’s economy will contract by 12.3 percent in 2020, a slight deterioration from the 12.1 percent contraction forecast in May. The revision is mainly due to the delayed pre-test program for trans-Pacific travel and the two-week Stay-at-Home, Work-from-Home order for Oʻahu.
Current COVID-19 conditions
As of Aug. 27, 2020, Hawai‘i had a total of 7,566 confirmed COVID-19 cases and 55 deaths. Though Hawai‘i had one of the lowest confirmed cases per 100,000 population (3rd lowest in the U.S. with 534 cases per 100,000 population as of August 27, 2020), the growth of confirmed COVID-19 cases accelerated significantly since August 3, 2020. Before August 3, the average daily confirmed cases was 15 and since then the average daily confirmed cases surged to 213. Hawai‘i was ranked the lowest per capita confirmed cases in the nation before August 3, but the ranking jumped to 18th place during the period of August 3 and August 27.
Due to the increase in confirmed COVID-19 cases in Hawai‘i and in many of the states where Hawai‘i visitors were arriving from and where Hawai‘i residents often visited such as California, Arizona and Nevada, Gov. David Ige has announced that the start of the pre-test program for U.S. mainland visitors to Hawai‘i initially planned to start on Sept. 1, 2020 has moved to Oct.1, 2020.
Current Economic Conditions
Hawai‘i’s economy has been greatly impacted by the COVID-19 pandemic. During the April-July 2020 period, the average unemployment rate (not seasonally adjusted) was 18.5 percent which was the historical high unemployment rate in the State for that period. Hawai‘i lost 115,000 non-agriculture payroll jobs during the April-July period as compared with the same period a year ago. All industry sectors lost jobs except construction and federal civilian jobs. The leisure and hospitality sector accounted for 58.7 percent of the total job loss at 67,500. As a subset of leisure and hospitality sector, the accommodation industry lost 65.8 percent of its workforce during the April-July period and ranked the largest, followed by food services and drinking places at 47.5 percent lost and art, entertainment & recreation with 46.6 percent of its job count lost. Natural resource, mining, & construction sector gained 0.5 percent or 200 jobs, federal civilian job count was flat during this period. Overall, statewide non-agriculture payroll jobs decreased by 17.7 percent in the second quarter of 2020.
Hawai‘i initial unemployment claims started to rise in the middle of March and peaked at 53,112 during the first week of April and then gradually declined. During the third week of August, initial unemployment claims were still above 5,000 per week. During 2012-2019 period, the weekly initial unemployment claims averaged at 1,442 per week.
Visitor arrivals to the State during the second quarter of 2020 totaled 30,748, a decrease of 98.8 percent from the same quarter in 2019. However, these visitors stayed longer in Hawaii with an average length of stay at 27.3 days. In 2019, the visitor average length of stay was 8.8 days.
State general excise tax, an indicator for current economic activities, decreased by 24.6 percent during the second quarter of 2020 as compared with the same quarter in 2019.
The value of private building permits showed a decrease of 14.3 percent during the second quarter of 2020. The largest decrease occurred in the additions and alterations category which was down by 40.7 percent. Value of residential building permits was down by 3.9 percent and the value for commercial and industrial category was up by 101.2 percent during the same period. Though the value of private building permits was down, state government spending on capital investment projects (CIP) was up by 10.7 percent during the same time period. State government spent an average of nearly $1.5 billion a year on CIP projects during the last three years (2017-2019).
According to a survey conducted by DBEDT with partners with other 15 private entities, about 60 percent of Hawai‘i businesses were closed at the beginning of the pandemic, and as of the first week of July, only 16 percent remained closed with 84 percent either full open or partially open for business.
As of August 26, 2020, federal funds allocated to Hawai‘i totaled $9.03. billion. Most of these federal funds has been or will be received as household income and will be spent by Hawai‘i households. These funds helped mitigate the economic impact from COVID-19. The total amount of federal funding available to Hawai‘i is identified to be about $11.3 billion. Some of that total has not been drawn by the state such as the Municipal Liquidity Facility fund with $2.7 billion available for the state and county government to borrow.
At the national level, the U.S. economic growth rate was at 0.3 percent during the first quarter and declined by 9.1 percent in the second quarter, as compared to the same quarter in 2019. The Blue Chip Economic Indicators report from Aug. 10, 2020, which is the consensus of 50 economic forecasting organizations, projected that the U.S. economic growth rate for 2020 will decrease by 5.2 percent with quarterly economic growth rate at -6.2 percent for the third quarter, -5.4 percent for fourth quarter. The report projected a positive 3.8 percent U.S. economic growth for 2021, with the first quarter of 2021 at -2.8 percent and increase between 4.7 percent and 8.7 percent for rest of the quarters in 2021. The Blue Chip forecasts for foreign countries were all negative, except for China and India, which showed small growth.
The current version of the economic forecast assumes that the state will start the pre-test program for trans-Pacific travelers in early November and no further lockdown of major businesses after the two-week Stay-at-Home, Work-from-Home Order for Oʻahu which started on August 27, 2020. DBEDT now projects that Hawai‘i’s economic growth rate, as measured by the real gross domestic product GDP, will drop by 12.3 percent in 2020, then will increase at 2.1 percent in 2021, 2.0 percent in 2022 and 1.2 percent in 2023. The 2020 economic growth rate is now slightly worse than that projected in the previous quarter mainly due to the delayed reopening of trans-Pacific tourism and the two-week lockdown on Oahu. Economic growth rates for 2021-2023 are revised upward from those projected in the second quarter.
Hawai‘i is forecast to welcome 2.9 million visitors in 2020, a decrease of 71.9 percent from the 2019 level. Visitor arrivals will increase to 7.2 million in 2021, 8.3 million in 2022, and 9.4 million in 2023. Visitor arrivals will not reach the 2019 level until 2025.
Visitor spending will decrease more during the next few years due to the assumption that daily spending will decrease caused by weak demand.
Non-agriculture payroll jobs will shrink by 12.1 percent in 2020, then will increase by 8.5 percent in 2021, 2.0 percent in 2022 and 1.5 percent in 2023. Like the GDP growth, non-agriculture payroll jobs will not recover to the pre-crisis level until 2025.
The state unemployment rate is now projected to be 10.9 percent in 2020, then decrease to 7.2 percent in 2021, 6.6 percent in 2022 and 6.3 percent in 2023. These rates are much higher than the average Hawai‘i unemployment rate of 2.5 percent between 2017 and 2019.
Nominal personal income is expected to decrease by 12.1 percent in 2020. This includes $7 billion in federal government transfer payments which consists of the SBA’s PPP and EIDL loans, the federal stimulus checks and unemployment insurance. Without the federal assistance, personal income would have decreased by 23 percent in 2020. From 2021 and beyond, personal income will increase between 3.0 and 5.3 percent.
The Hawai‘i consumer inflation rate, as measured by the Honolulu Consumer Price Index for urban consumers, will increase at rates between 1.4 to 1.8 percent for the next few years. These growth rates are higher than those projected in the previous quarter. During the first seven months of 2020, Honolulu consumer inflation was 1.5 percent and 1.3 percent during the April-July period.
The DBEDT Quarterly Statistical and Economic Report contains 136 tables of the most recent quarterly data on Hawaii’s economy as well as explanations of the trends in these data.
The full report is available at: dbedt.hawaii.gov/economic/qser/.
Statement by Director Mike McCartney
“The global COVID-19 pandemic is the most disruptive and challenging event in our lifetime. Its impact is reflected in our 2020 Economic Forecast.
So, first things first: We must unite around a single, immediate purpose to stop the spread of COVID-19. Let us rally around our healthcare and public health officials by doing our part to regain our community’s health so we can start and sustain our economic recovery.
Second: Federal support and the infusion of $9.03 billion has helped to reduce the negative impact on Hawai‘i’s economy. Future infusion of funds will be beneficial.
Third: The safe and responsible reopening of trans-Pacific travel will create economic momentum.
Finally, it’s the collective spirit, inner strength, intelligence and innovative nature of Hawai‘i’s people that has always overcome disruptive and challenging events like we face today. Together again we will be able to accomplish great things.”
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About the Department of Business, Economic Development & Tourism (DBEDT)
DBEDT is Hawaii’s resource center for economic and statistical data, business development opportunities, energy and conservation information, and foreign trade advantages. DBEDT’s mission is to achieve a Hawaii economy that embraces innovation and is globally competitive, dynamic and productive, providing opportunities for all Hawaii’s citizens. Through its attached agencies, the department fosters planned community development, creates affordable workforce housing units in high-quality living environments, and promotes innovation sector job growth.
Dr. Eugene Tian
Research and Economic Analysis Division
Department of Business, Economic Development & Tourism