By COLIN M. STEWART
Tribune-Herald Staff Writer
Hawaii Island’s economy continues its slow climb out of recession, thanks largely to a relatively quick recovery of its tourism industry, according to economist Leroy O. Laney.
“The good news is that the Hawaii Island economy is making progress,” he said Thursday afternoon at the 38th Annual Hawaii County Business Outlook Forum. “The bad news? Improvement is still slow. That’s been our main message for three years now, and it will likely continue for a while.
“We can be thankful in Hawaii that our main industry of tourism recovered as quickly as it did. For some local economies elsewhere, their mainstay of economic growth still hasn’t recovered, leaving them in a far worse position than ours. In fact, Hawaii Island could lead all of the state’s counties in visitor growth in 2012.”
Laney qualified that statement by explaining that Hawaii Island’s visitor industry experienced a slump in 2011, with Japanese tourists staying home after the March 2011 earthquake and tsunami, and the discontinuation of the direct JAL flight into Kona.
“But that strengthen’s 2012’s growth,” he said.
Big Isle tourism still has some hurdles to overcome, however.
“Hawaii Island’s visitor experience differs from other Neighbor Islands in one important regard: You can’t just check into your accommodations and comfortably see the entire island on a visit. This is a ‘chicken vs. egg’ problem. Full flights are needed to make new accommodations pay off, but those flights won’t be full unless an upgraded Hilo visitor plant attracts passengers.”
Meanwhile, average occupancy rates at Kohala Coast hotels are somewhat higher this year than in the two years previous, hovering just over 60 percent, he said. Kona Village, which suffered significant damage due to the Japanese tsunami last year, plans to begin redevelopment soon, and Hilo Harbor has reported an uptick in cruise passenger visits.
Also showing encouraging signs of growth was the Big Isle’s agricultural industry.
“The agriculture sector plays a more important role in the Hawaii Island economy than perhaps any other county,” Laney said. “And the picture this year is mostly upbeat.”
Forecasted macadamia nut production is expected to be up by about 15 percent for the coming season in West Hawaii due to favorable weather, while East Hawaii’s production will remain similar to last year. Meanwhile, prices are expected to remain strong, “at last year’s levels, or possibly better,” he said.
Isle coffee production is expected to be up by about 10 percent this year, largely due to good weather. However, he added, “the wild card is how much damage the coffee berry borer inflicts on the crop.”
Beef supply remains short, so ranchers are receiving good prices. Those prices are expected to remain high in the near future, with demand high for local grass-fed beef.
Other indicators of the isle’s economic health showed less promising growth.
Job creation on Hawaii Island remains 10 percent below its peak in December 2007, the month the national economy entered recession. The Big Isle’s job creation marginally lags behind the other three counties, and its jobless rate remains the largest in the state.
“An often cited reason that Hawaii Island unemployment is higher concerns the separation of population on the east side from jobs on the west side, but that should improve as Saddle Road extensions make it easier to commute,” Laney said.
The construction industry put up another bad year, with construction jobs on the isle about 50 percent below the 2007 peak.
“There has been a significant fallout of contractors since the slump began,” he said. “Nor does county private permit growth hold out much hope for the near future.
“Still, several public sector and commercial projects will be underway soon, including West Hawaii Community Health Center’s planned medical center at Kealakehe in North Kona, Kaiser Permanente’s proposed health center at Honokohau and the long anticipated Pier 4 at Hilo Harbor, which should significantly expand harbor capacity.”
Additionally, the University of Hawaii plans to begin its $9.7 million project to build the first phase of the Hawaii Community College Palamanui campus in West Hawaii.
In the area of real estate, residential sales appear to be leveling off after making a slight recovery in the past few years, Laney said. Vacancies continue to be high and rising in the commercial and industrial real estate markets, he added, with appraisers indicating that asking rents are too high to stimulate demand.
Among the projects that will make important contributions to the local economy in the coming years will be the Natural Energy Lab at Keahole Point, the Thirty Meter Telescope project at the Mauna Kea summit, and the University of Hawaii at Hilo’s $32 million University Village Student Housing project, which will house just over 300 students.
Laney, an economics professor with Hawaii Pacific University, was joined in presenting Thursday by Jack P. Suyderhoud, University of Hawaii at Manoa professor of business economics. Suyderhoud provided a broader perspective on the national and global economies.
“I’m sure that most of us in the room today are frustrated by the continued economic weakness we see not only in the U.S. but in other major global economies,” he said.
Among the challenges facing the U.S. is an “explosion of public debt.”
“(European Union) countries’ public debt has grown enormously since 2007,” he said. “However, it has been worse for the U.S.: We have seen our public debt as a percentage of (gross domestic product) more than double between 2003 and 2011.”
Meanwhile, U.S. borrowing from abroad has also skyrocketed, with foreigners now holding more than $5 trillion out of the U.S. government’s total debt of $15 trillion.
“This means that interest payments will flow out of the country, contributing to future balance of payment problems,” he said.
Interestingly, he added, the U.S., while being the source of the troubles leading to much of Europe’s bond market instability, has escaped relatively unscathed, with bond interest rates remaining low, compared to other nations, including Greece and Spain.
Email Colin M. Stewart at cstewart@hawaiitribune-herald.com.
