The Department of Business, Economic Development, and Tourism (DBEDT) released its second-quarter 2021 Statistical and Economic Report today. DBEDT revised its economic growth projection for 2021 to 3.5 percent, up from the 2.7 percent projected in February this year. The projected improvement is based on the following developments during the past few months:

• The American Rescue Plan Act (ARPA) of 2021 allocated approximately $6 billion to Hawai‘i (all entities including households, businesses, and government). Including all the bills passed in 2020 and thus far in 2021, total federal funds allocated to the entire state totaled $18.6 billion. Much of the amount is being spent or will be spent in 2021.
• During the month of March 2021, visitor arrivals recovered 47.5 percent from the same month in 2019.  It is estimated that April 2021 arrival recovery will be 59.2 percent and the recovery during the first 24 days of May at 74.1 percent. The recovery rate accelerated much faster than previously reported with the majority of visitors being domestic travelers.
• Total air seats to Hawai‘i in May recovered 78.2 percent from the same month in 2019, and the June airline schedule will recover over 89 percent of the seats. Seats from domestic flights in May are 3.2 percent more than those in May 2019, and seats scheduled for June will be 14.3 percent more than June 2019.
• New flights are being added including a new flight by Hawaiian Airlines between Honolulu and Austin and between Phoenix and Maui. United is adding frequency to routes between Washington D.C. and Honolulu and Newark and Maui. Southwest Airlines has also announced new routes between all four major airports in the state and Las Vegas, Los Angeles, Phoenix, and San Diego.
• The total number of bankruptcy filings in Hawai‘i declined 11.3 percent during the first four months of 2021 as compared with the same period in 2020, after declining 8.6 percent in 2020 from 2019.
• Non-agriculture payroll job count recovered 85.5 percent as of April 2021 as compared with the same month in 2019.
• April 2021 registered the historical record high level of individual income tax collection at more than half a billion for the single month and general excise tax collection was also relatively high, resulting in a surge in general fund revenue at more than $1 billion for a single month, which is the highest on record. The increase in individual income tax revenue in April 2021 can be attributed to the increase in personal income in 2020 by 5.8 percent and the state tax filing deadline remaining on April 20, 2021, for the tax year 2020.
• According to the Hawai‘i Commercial Rent Survey, 92 percent of Hawai‘i businesses were open, either in full or in partial, as of March 2021, an improvement from 83.9 percent in July 2020, 76 percent in September 2020, and 89.6 percent in December 2020.
• Continued improvement in the U.S. economy will help Hawai‘i’s economic growth. In the most recent (May 10, 2021) economic forecast by Blue Chip Indicators, U.S. economic growth rate is revised upward to 6.6 percent for 2021, much higher than its February projection at 4.9 percent.
• As of May 24, 2021, 39.9. percent of Americans were fully vaccinated while 49.5 percent were vaccinated with at least one dose. Vaccination rates for Hawai‘i with at least one dose were 65.3 percent and with full vaccination at 46.9 percent. Hawaii ranked the second highest in terms of vaccination rates with at least one dose and ranked the 7^th highest with full vaccination. The majority of Americans will be vaccinated by the end of July this year when tourism activities are expected to increase.

Industry employment one year after the pandemic

While the total non-agriculture payroll job count was still 14.5 percent (recovery is 85.5 percent), lower in April 2021 as compared with January 2020 (the period represented before the pandemic), all of the industries have seen improvement in hiring back employees except the Federal government. The loss in federal jobs was mainly due to the completion of the 2020 Census.  In 2020, the U.S. Census Bureau hired more than 1,000 enumerators in Hawai‘i to help residents complete the Census forms which were completed in October that year.

The construction industry performed the best with full recovery by April 2021 at 101.9 percent of the January 2020 level (1.9 percent higher than the pre-pandemic level). Data on the value of private building permits increased 2.3 percent during the first quarter of 2021, indicating that this industry has recovered and is stable.

Other than construction, the hospitality sector has improved the most and consists of art, entertainment and recreation, accommodations, and food services industries. This sector lost 53.2 percent of its payroll jobs in April 2020 (with 46.8 percent of jobs remaining).  In April 2021, the hospitality sector recovered to 67.7 percent of the pre-pandemic level.

Forecasting Results

In the current report, DBEDT predicts that Hawai‘i’s economic growth rate, as measured by the growth of real gross domestic product (GDP), will be at 3.5 percent this year over the previous year. The economic expansion path is predicted to continue with a 3.0 percent increase in 2022, 2.3 percent in 2023, and 1.8 percent in 2024.

Visitor arrivals are now projected to reach 6.6 million in 2021, about a 64 percent recovery from the 2019 level. This visitor arrival projection is about 1.1 million more than the projection made in the previous quarter. Visitor arrivals are projected to increase to 8.6 million in 2022, 9.5 million in 2023, and 10.1 million in 2024.  Full recovery of tourism to pre-COVID levels will be beyond 2024.

DBEDT expects that domestic visitor arrivals will be fully recovered by the end of this year, but international arrivals will be still lagging by 95 percent (5 percent recovery) due to the low vaccination rate and the crises happening worldwide.

Non-agriculture payroll jobs are forecast to increase by 8 percent in 2021, then will increase by 3.4 percent in 2022, 1.6 percent in 2023, and 1.4 percent in 2024.  As with GDP growth, non-agriculture payroll jobs are not expected to recover to pre-pandemic levels until after 2024.

The state unemployment rate will gradually improve as economic growth returns. The rate is projected to be 7.7 percent in 2021, 6.3 percent in 2022, 5.6 percent in 2023, and 5.0 percent in 2024. These projected rates are better than the ones projected in the previous quarter but are much higher than the average Hawai‘i unemployment rate of 2.5 percent between 2017 and 2019.

Federal funds allocated to all entities in Hawai‘i are estimated to be about $7.2 billion from the bills passed in 2021, lower than the $11.4 billion allocated to Hawai‘i from bills passed in 2020. With the reopening of the economy, personal transfer receipts from the Federal government, mainly the unemployment benefits, is expected to be smaller than the amount paid in 2020. This will likely result in a decrease in nominal personal income.  Nominal personal income is expected to decrease in 2021 by 0.9 percent and will further decrease by 2.5 percent in 2022 due to the reduction in unemployment benefits.

As measured by the Honolulu Consumer Price Index for urban consumers, inflation is expected to increase in 2021 to 2.5 percent, from 1.6 percent in 2020, and remain above the 2 percent level for the next few years. During the first four months of 2021, Hawai‘i has seen price increases in food and housing. Inflation in energy surged in April with a 12.4 percent increase.  Overall, in the U.S., inflation is expected to increase. The Blue Chip Economic Indicators projected that U.S. inflation will be at 2.7 percent in 2021, higher than its February projection at 2.3 percent.

Statement by Director Mike McCartney

“It is encouraging to see the positive new developments taking place in our economy. The visitor industry recovery is accelerating from the domestic markets in the past few months.  According to the estimate by our researchers, domestic visitor recovery is at about 100.9 percent during the first 24 days of May.

“The recovery from domestic visitors will especially help the neighbor island economies that are more dependent on visitors, especially on domestic tourism. In 2019, domestic visitors accounted for 88.4 percent of Kaua‘i’s total visitors, that percentage was 85.2 percent for Maui County, and 77.2 percent for Hawai‘i County, while 57.1 percent of O‘ahu visitors were from the U.S. mainland. We need the tourism recovery to call back our laid-off workers.  As of April this year, there were still 41,000 workers waiting to be called back in the hospitality sector alone.

“Due to the lagging in tourism recovery from the international market, we expect the full recovery of our tourism industry will be beyond 2024. This is because international visitors accounted for one-third of the total visitors and their daily spending is higher than U.S. visitors ($215.8 person per day for international visitors versus $188.3 for U.S. visitors in 2019).”

The full report is available at dbedt.Hawai‘i.gov/economic/qser/.