Tuesday, July 07, 2020
Hawai'i Free Press

Current Articles | Archives

Saturday, May 23, 2020
DBEDT: Hawaii Economy Will Shrink 12.1% in 2020
By News Release @ 5:15 PM :: 857 Views :: Economy, Tourism, COVID-19

HAWAI‘I MAY SEE DOUBLE DIGIT ECONOMIC DOWNTURN IN 2020

News Release from DBEDT, May 22, 2020

The Department of Business, Economic Development and Tourism (DBEDT) released its second quarter 2020 Statistical and Economic Report today. In the report, DBEDT projected that Hawai‘i’s economic growth will fall by 12.1 percent in 2020 due to the COVID-19 pandemic.

Current economic conditions

On March 4, 2020, Gov. David Ige issued an emergency proclamation to protect the health and safety of Hawai‘i’s citizens and mitigate damages caused by COVID-19. Since then, the governor has issued eight supplementary proclamations with a stay at home or place of residence order (effective March 25, Gov. Ige changed stay at home to safer at home in his 7th supplemental emergency proclamation signed on May 7th), self-quarantine for 14 days for all people arriving into the state (effective March 26), and self-quarantine for 14 days for all interisland travelers (effective April 1). Overall, the pandemic has weakened consumer demand, particularly in tourism and other sectors that require large social gatherings or personal close contact.

Initial unemployment claims started to surge during the week of March 16, and totaled 232,893, as of the end of May 16, 2020, increasing 2,081 percent from the same period a year earlier.

Data from the Department of Labor and Industrial Relations show that Hawai‘i’s unemployment rate in April 2020 jumped to 23.5 percent (not seasonally adjusted) with Hawai‘i ranking the third highest in the nation after Nevada and Michigan. 121,000 non-agriculture payroll jobs were lost in April as compared with April in 2019. The job loss was the highest for Accommodations at 64,000, followed by Food Services and Drinking Places at 41,000, and Retail Trade at 9,700. Overall the Hospitality sector lost 70,000 payroll jobs.

After declining 53.7 percent in March, the number of visitor arrivals was only 3,565 in the full month of April, while the average daily visitor arrivals in 2019 was 28,562. During the first 21 days of May, visitor arrivals to the state totaled 5,397, the daily visitor count (257 per day) now is more than double the April daily count (120 per day).

According to the Business Pulse Survey conducted by the U.S. Census Bureau between April 26 – May 2, which was a month into Hawai‘i’s stay at home order, 56.6 percent of the Hawai‘i businesses surveyed said that COVID-19 has had a large negative effect on their businesses and 81.1 percent of respondents said their operating revenues decreased in the week before the survey. 58 percent of responding businesses decreased employee hours, and 37.3 percent of respondents cut their workforce in the last week. Of the Hawai‘i businesses which responded, 39.3 percent thought that it will take more than six months for business to return to normal.

Most businesses surveyed had applied for some type of federal financial assistance, but half of businesses had not received assistance when they were surveyed. The first week of the survey corresponded with the opening of the second wave of federal funding for the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL). Businesses that did not get their applications submitted in time for the first round of funding were eligible to have their applications reviewed during the second round, which is still ongoing.

A survey conducted by the University of Hawai‘i Economic Research Organization and the Chamber of Commerce Hawai‘i released on May 5, 2020 indicated that statewide job losses between January and April 2020 were 41.7 percent for full time jobs and 41.3 percent for part time, respectively. Neighbor island counties were hit harder than Honolulu County in terms of jobs loss. When asked about the current business status in April, 36.1 percent of the respondents said they were completely shut down, 59.1 percent of the responded businesses were open with adjustments, only 4.8 percent of the responded businesses remained open regularly.

The U.S. Census Bureau released its second survey – the Household Pulse Survey on May 20, 2020. The results show that 55.1 percent of Hawai‘i workers that are on payroll and self-employed indicated that they lost employment income during the week of April 23-May 5, 2020. Hawai‘i was ranked the second highest state in percentage of workers who lost income in that period. During the week of May 5-May 12, 2020, the percentage of workers that lost employment income increased to 59.2 percent, making Hawai‘i the highest ranked state in the nation.

At the national level, the U.S. economic growth rate was at 0.3 percent during the first quarter of 2020 compared to the same quarter in 2019. The Blue Chip Economic Indicators report from May 10, 2020, which is the consensus of 50 economic forecasting organizations, projected that the U.S. economic growth rate for 2020 will decrease by 5.8 percent with quarterly economic growth rate at -9.4 percent for the second quarter, -7.3 percent for third quarter, and -5.9 percent for fourth quarter. The report projected a positive 4.0 percent U.S. economic growth for 2021, with the first quarter of 2021 at -3.1 percent. Its forecasts for foreign countries were all negative except China and India which showed small positive growth.

Assumptions

Since the global COVID-19 pandemic and accompanying tourism shutdown are unprecedented, Hawai‘i’s economic forecast cannot be generated using past trends; however, basic relationships between economic variables remain unchanged, such as the relationship between job count and unemployment, personal income and GDP. Due to the government assistance programs, there will be a significant increase in personal transfer receipts from the federal government, which consists of income payments to households in which no current services are performed. The federal assistance will be reflected in household spending.

The forecasts are based on the following facts and assumptions:

• Total non-agriculture job loss in the state in April was 121,000. Of that, 90,000 were lost in tourism-intensive industries (hospitality, trade and transportation), and the rest were in the non-tourism intensive industries.

• Small Business Administration PPP loans to Hawai‘i businesses totaled $2.6 billion as of May 20, 2020 and Economic Injury Disaster Loans (EIDL) totaled at $83.5 million, for a total small business loan of $2.7 billion.

• Assume 75 percent of $2 billion from SBA loans are being used for payroll.

• Based on data from the U.S. Bureau of Economic Analysis, total number of private employees was 546,700 and total private workers compensation was $34.3 billion in 2019 with an average compensation per employee at $62,682.

• Average compensation per month per worker is calculated to be $5,223 per month.

• Total jobs supported by small business loans should be equivalent to 382,900 workers.

• PPP loans need to be spent within eight weeks, then jobs supported should be 191,400 jobs for May and June.

• Assume visitor industry will start opening in September 2020 and will recover 30 percent of arrivals (from same month in 2019) in September and 45 percent in December 2020.

• No cruise visitors until second half of 2021.

• It will take six years for visitor arrivals to recover to the 2019 level, this is based on the 2009 Great Recession pace.

• It will take two years for local (non-tourism intensive sector) businesses to recover to the 2019 level, in terms of job count. This is based on the 2009 Great Recession pace.

Forecasting Results

Based on the above assumptions, DBEDT projects that Hawai‘i’s economic growth rate, as measured by the real gross domestic product GDP), will drop by 12.1 percent in 2020, then will increase at 0.7 percent in 2021, 0.6 percent in 2022 and 1.1 percent in 2023.

Hawai‘i will welcome 3.4 million visitors in 2020, a decrease of 67.5 percent from the 2019 level. Visitor arrivals will increase to 6.2 million in 2021, 8.3 million in 2022, and 9.4 million in 2023. Visitor arrivals will not reach the 2019 level until 2025, based on the assumptions.

Visitor spending will decrease more during the next few years due to the decrease in daily spending.

Non-agriculture payroll jobs will shrink by 9.5 percent in 2020, then will increase by 4.1 percent in 2021, 2.9 percent in 2022 and 1.3 percent in 2023. It is the same as the GDP, non-agriculture payroll jobs will not recover to the pre-crisis level until 2025.

Although the unemployment rate reached 23.5 percent in April, it will improve in May and June due to the PPP and EIDL funds. Overall for 2020, the average annual unemployment rate will be at 8.6 percent, then decrease to 7.3 percent in 2021, 6.5 percent in 2022 and 6.2 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 10.2 percent in 2020. This includes $6 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 on, personal income will increase between 2.6 and 2.8 percent.

The Hawai‘i consumer inflation rate, as measured by the Honolulu Consumer Price Index for urban consumers, will increase at rates between 0.5 to 1.7 percent for the next few years, these growth rates are lower than previously projected at about 2 percent.

Hawai‘i’s population is expected to be unchanged in 2020 and increase only at 0.1 percent in 2021, 0.3 percent each year thereafter. Although international migration (usually net in migration) may be stopped in 2020, domestic migration (usually net out migration) is likely to be on hold as well in 2020.

Hawai‘i was one of the hardest hit states economically, but is one of the safest states in the nation during this COVID-19 pandemic,” said DBEDT Director Mike McCartney. “While our economy will not recover overnight, Hawai‘i is well positioned because of our strong human will, innovative spirit and physical infrastructure. We are well positioned to go beyond recovery and evolve into a more balanced and diversified economy.”

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/.

PBN: DBEDT forecast predicts it will take 6 years for arrivals to recover

 

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

ALEC

Alliance Defending Freedom

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust 

Build More Hawaiian Homes Working Group

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Hawaiian

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT