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Friday, September 24, 2021
UHERO: Delta Wave Swamps Tourism
By News Release @ 5:33 PM :: 919 Views :: Economy, Tourism, COVID-19

UHERO Forecast for the State of Hawaii: Delta wave swamps tourism, but return to recovery expected

From UHERO,  September 24, 2021 (excerpt)

Hawaii’s recovery has experienced a setback with the recent surge in COVID-19. Record virus numbers and preventive policy responses have caused an abrupt tourism pullback and are signaling a near-term decline in overall economic activity. While the Delta wave may now have turned the corner, we are in for a period of weakness before growth resumes late in the year. The end to federal fiscal support will weigh on recovery going forward, and a full return to pre-pandemic conditions remains several years down the road.

Executive Summary

Hawaii’s recovery has experienced a setback with the recent surge in COVID-19. Record virus numbers and preventive policy responses have caused an abrupt tourism pullback and are signaling a near-term decline in overall economic activity. While the Delta wave may now have turned the corner, we are in for a period of weakness before growth resumes late in the year. The end to federal fiscal support will weigh on recovery going forward, and a full return to pre-pandemic conditions remains several years down the road.

• US economic recovery began in earnest in the second half of 2020, bringing output above its previous peak by the second quarter of this year. The Delta COVID-19 wave threatens to slow US and global activity. Even before this, the recovery had been mixed, with labor markets lagging. Beyond this pandemic surge, global recovery will resume, but prospects are bleak for the poorest countries where vaccination progress has been painfully slow.

• Visitors from the US mainland reached an all-time high in July, driven by healthy US incomes and pent-up demand. Occupancy rates across all accommodations reached 80%. But after the surge in Covid-19 cases, the number of visitors fell sharply, prompted by virus concerns, new preventive measures, and Governor Ige’s request for visitors to delay Hawaii vacations. International visitors, who have been absent in the recovery so far, will begin to return in 2022, reaching more than half their pre-pandemic level by the middle of the year. Overall arrivals will recover from the fall slump by early summer.

• The labor market faces pandemic-induced weakness and structural challenges. Hiring has been slow despite the large number of job openings. School and childcare closures, enhanced unemployment benefits, and ongoing virus concerns have discouraged re-employment. As a result, there are significant shortages of workers in a number of sectors. While employment gains will resume, job numbers will not match pre-pandemic levels for several years.

• The end of federal pandemic support will significantly reduce income for many families. This includes the end of special unemployment programs that supplemented weekly benefits, extended eligibility periods, and extended benefits to contract workers. The Child Tax Credit that began mid-July will help, but is slated to end in December. Incomes will decline into early next year before growth resumes.

• Housing markets have been hot, paralleling developments on the US mainland. Low interest rates and demand from mainland buyers have helped boost Hawaii home resale prices to new records. Rents have turned up at the same time that the eviction moratorium is ending. Residential homebuilding has been strong, and there has been some improvement in commercial occupancy, although temporary retail and restaurant closures threaten this progress.

• The future path for the economy remains very uncertain, with risks tilted to the downside. In our baseline forecast we expect the adverse impact of the Delta variant and associated restrictions to continue through the fall. The pessimistic scenario considers the possibility that persistent restrictions due to Covid-19 could weigh more heavily on economic activity in Hawaii, on the US mainland, and globally. The optimistic scenario envisions a faster recovery from the Delta variant and a return of pent-up demand leading to a strong winter season and more rapid return to employment and income recovery…

read … Full Report

SA: Hawaii’s economy is expected to resume recovery in November

CB: The ‘Delta Tide May Be Turning,’ But Hawaii’s Economic Recovery Is Slow

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