DBEDT Keeps Economic Forecast Unchanged for 2024NewsRead More DBEDT Keeps Economic Forecast Unchanged for 2024

For Immediate Release: September 5, 2024

HONOLULU-The Department of Business, Economic Development and Tourism (DBEDT) released its third quarter 2024 Statistical and Economic Report today. In the report, DBEDT kept its economic growth projections for 2024 unchanged from the previous quarter, at 1.3 percent. Stable growth will result from continued strength in construction industry activity, overcoming relative weakness in the tourism sector. DBEDT anticipates that the state's economic growth will return to sustained annual growth from 2025 due to a rebound in Japanese/international visitor numbers and continued construction activity statewide.

Economic Recovery Status

As of the first quarter of 2024, the latest federal economic data are available; Hawaii's economy recovered 98 percent from the fourth quarter of 2019 (pre-pandemic). While the non-tourism sector has fully recovered, the tourism sector (consisting of accommodation, transportation, retail trade, recreation and food services) has recovered only to 90 percent. By comparison, the U.S. economy has been fully recovered since the first quarter of 2021 and has grown at an annual rate of 2.2 percent during the last three years.

In terms of non-agriculture wage and salary jobs (not seasonally adjusted), the statewide job count was still 2.3 percent short compared with the job count in July 2019. While Hawaii County has fully recovered in job count, other counties are falling behind, especially Maui County. The job count in July 2024 in Maui County was only at 88.3 percent of the July 2019 level.

The level of visitor arrivals during the first seven months of 2024 was at 93 percent of the level experienced during the same period in 2019. Visitors from the U.S. markets continued to exceed 2019 levels (7.6% higher for U.S. West market and 1.4% higher for the U.S. East market), but the arrivals recovery rate from the Japan market was only 45.2 percent, the Canadian market recovery rate was 76.3 percent, and the recovery rate for all other markets was 80.7 percent. Visitor expenditures, measured in current dollars, decreased 3.9 percent year-to-date through July 2024.

Business sales, as measured by the general excise tax base, were slow during the first four months of 2024. Sales in theater, amusement, radio, and hotel rentals decreased during the first four months of 2024, reflecting the decrease in visitor arrivals and visitor spending during the period.

First Quarter 2024 Economic Data Promising

According to data from the U.S. Bureau of Economic Analysis, Hawaii's economic growth, as measured by the growth of real gross domestic product (GDP), was 1.8 percent during the first quarter of 2024 as compared with the same quarter in 2023. This growth rate was healthy because the average annual economic growth rate in the previous 20 years (2003-2023) was 1.4 percent.

During the first quarter of 2024, Hawaii personal income grew by 5.5 percent which was also higher than the 4.3 percent average annual growth rate of the previous 20 years. The largest component of personal income - earnings, which include wages and salaries, supplements to wages and salaries, and proprietors' income, and comprise more than 70% of total personal income, increased 7.0 percent compared to the first quarter of 2023. The largest earnings percentage increases occurred in Transportation and Warehousing (16.3%), Management of Companies and Enterprises (12.1%), Health Care and Social Assistance (10.7%), and State and Local Government (10.1%). The increases in earnings were due to increases in job counts and/or increases in wages.

Due to the stagnation of tourism this year, DBEDT expects that both GDP growth and personal income growth will be slowing down after the first quarter.

Construction Industry Booming

Based on the state contracting tax base, the Hawaii construction industry generated $11.8 billion in 2023, representing a 9.8 percent increase from a year earlier. During the first four months of 2024, the contracting tax base increased 12.7 percent. The construction payroll job count reached 41,200 during the first seven months of 2024, a record level for this industry.

The value of private building permits increased 19.1 percent during the first seven months of 2024. The value of permits for additions and alterations increased by 29.4 percent and the value of residential permits increased by 24.2 percent while the permit value for industrial and commercial projects decreased by 31 percent. However, the value of industrial and commercial permits accounted for only 7.9 percent of the total private permit value.

Consistent with the value of the building permits, the number of residential units authorized during the first half of 2024 increased 54.4 percent as compared with the same period in 2023.

Home Sales Increasing

Number of home sales recorded at the Hawaii Bureau of Conveyances increased 25.2 percent during the first half of 2024. These sales include homes sold through multiple listing services, homes sold by developers and homes sold among friends and relatives without listing their properties. Average sale prices increased 10.1 percent for single-family homes but decreased 1.5 percent for condos.

Of the total home sales during the first half of 2024, 27.8 percent were sold to out-of-state buyers, the highest percentage since 2011.

Labor Market Stabilizing

Three indicators suggest that Hawaii's labor market is stabilizing: (1) Hawaii unemployment rates (not seasonally adjusted) have been varying between 2.3 percent and 3.5 percent during the last two years. During the first seven months of 2024, Hawaii's unemployment rate averaged 2.9 percent and ranked as the seventh lowest among the states in the nation. As of July 2024, Hawaii's unemployment rate was 1.5 percentage points lower than the national average. (2) Hawaii's statewide average of weekly initial unemployment claims during the first eight months of 2024 was at 1,123, lower than the average weekly claims of 1,200 in 2019. (3) Job vacancies are declining. During the second quarter of 2024, the average number of job vacancies was 2,300 per month, much lower than the vacancies of 7,700 per month in 2019.

Consumer Inflation Remains High

Since November 2023, Hawaii consumer inflation has been higher than the nation and in May 2024, Hawaii's consumer inflation was at 5.2 percent, 1.9 percentage points higher than the nation. In July 2024, Hawaii consumer inflation decreased to 4.5 percent, still 1.6 percentage points higher than the nation. The high inflation was mainly driven by higher home rental costs which increased 12.4 percent in May and 10.8 percent in July 2024 as compared with costs a year earlier.

National and International Economic Conditions

According to the most recent (August 2024) economic projections by the top 50 economic forecasting organizations published in Blue Chip Economic Indicators, U.S. economic growth is expected to be 2.5 percent in 2024 and 1.8 percent in 2025. Economic growth in Canada, in Japan, and in the European countries are expected to be better in 2025 than 2024. The Japanese exchange rate is projected to be around 138 yen per dollar in 2025, which will encourage more Japanese visitors to travel to Hawaii.

The Federal Reserve has left interest rates unchanged at its meetings for a year. Most of the economists believe the first interest rate cut will occur at the September 2024 meeting.

Forecasting Results

In the newly released report, DBEDT predicts that the economic growth rate for Hawaii, as measured by the year-over-year percentage change in real GDP, will remain at 1.3 percent in 2024, the same as predicted in the previous quarter. Economic growth is expected to reach around 2.0 percent in 2025 and will continue at that rate through 2027.

Visitor arrivals are projected to decrease by 1.0 percent in 2024 and will improve starting in 2025 as the Japanese visitor market recovery accelerates. Full recovery in arrivals will not happen until 2027 when 10.3 million visitors will come to the state. Visitor spending is projected to be $20.7 billion in 2024 and is expected to increase to $23.9 billion by 2027.

As currently scheduled, total air seats are expected to increase by 2.6 percent during the September-November 2024 period, compared to the same period of the previous year. The increase in air seats is smaller than was expected in the previous quarter which led to the lower projections on visitor arrivals.

Non-agriculture payroll jobs are expected to grow at 0.8 percent in 2024 and then increase to 1.3 percent in 2025, 1.2 percent in 2026, and 1.0 percent in 2027. A full recovery of non-agriculture payroll jobs is expected to occur in 2027, when the total will reach 659,700 jobs, surpassing the 2019 total of 658,600.

The state unemployment rate is expected to be 2.8 percent in 2024 and will improve to 2.7 percent in 2025 and 2.5 percent in both 2026 and 2027.

Personal income is expected to grow at rates of around 4 percent in the next few years, similar to projections in the previous quarter.

As measured by the Honolulu Consumer Price Index for Urban Consumers, inflation is expected to be at 4.2 percent in 2024, which is higher than the projected U.S. consumer inflation rate of 3.0 percent for the same year. Hawaii consumer inflation is expected to decrease to 2.4 percent by 2027.

Hawaii's population is expected to decrease by 0.1 percent in 2024, remain flat in 2025, and then increase by 0.2 percent in 2026 and by 0.2 percent in 2027. These numbers are largely the same as projections in the previous quarter.

Statement of DBEDT Director James Kunane Tokioka

It is important to understand that the current slowdown in Hawaii's economic growth is temporary. While growth levels are below those seen a year ago and nationally, the state of the economy is robust. Construction, healthcare and private education continue to show strength - and the overall job count is increasing.

Tourism recovery has been slower than expected and is impacted by factors beyond our control such as foreign exchange rates and natural disasters. Typhoon Ampil caused flight cancellations from Japan in August of this year, and a few thousand visitors had to cancel their trips to Hawaii.

We expect the construction industry will continue to lead our economic recovery in the next few years. The construction in the Lahaina area has started and more than 14,000 affordable housing units are in the pipeline statewide. In addition, federal, state and county government agencies awarded nearly $10 billion in government contracts during the past two years, with majority of the projects in the construction area.

The full report is available at: dbedt.hawaii.gov/economic/qser.

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MEDIA CONTACTS:
Dr. Eugene Tian
Research and Economic Analysis Division
Department of Business, Economic Development & Tourism
(808) 586-2470
dbedt.hawaii.gov/economic

Laci Goshi
Department of Business, Economic Development & Tourism
(808) 587-9006
dbedt.hawaii.gov