A leading Hawaii economist believes the state’s economy might not completely recover from the Kilauea eruption before the next major economic recession.
Paul Brewbaker, principal of Hawaii consultancy TZ Economics, delivered a keynote presentation at the annual membership meeting of the Hawaii Island Economic Development Board last Wednesday, in which he expounded on the future of the state’s economy, particularly following the devastating eruption.
The 2018 eruption, Brewbaker said, represented a disruption to the state’s economy roughly on par with those caused by 9/11 — when a widespread fear of flying caused visitors to the island to drop precipitously — and the concurrent closures of Aloha Airlines and ATA Airlines in 2008. While the economy eventually rebounded from those disruptions, Brewbaker said this time might be different.
Even before the eruption, unemployment was rising statewide, Brewbaker said, which he explained is possibly indicative of an upcoming nationwide economic recession. And, after the eruption began in May, unemployment in Hawaii County rose from 2.3 percent to 3.5 percent.
Unemployment has been declining steadily for a decade since the 2008 recession, when it reached more than 10 percent. The post-eruption spike in unemployment abruptly reversed that trend and has yet to correct itself.
Meanwhile, economic growth throughout the state has slowed during the past several years. While median single-family home values have increased in the past decade, that increase has slowed year-by-year, reaching about $400,000 on the Big Island in February, shy of the peaks before the 2008 recession. That slowing in growth is not necessarily reflected on the mainland, Brewbaker said. While home values on the Big Island generally matched those in Southern California through the ’90s and during the 2008 recession, they have trended behind Southern California values for the past several years, with the gap seemingly widening.
“There’s something going on in SoCal that we’re missing,” Brewbaker said.
Brewbaker said construction throughout Hawaii is generally stagnant. The construction industry had been losing jobs steadily since 2016, well before the eruption.
The Big Island spent about as much on new construction in 2018 as it did in 1969, adjusting for inflation, while spending on altering existing construction has nearly quadrupled since then. Brewbaker partly attributed this to demographic shifts throughout the state, particularly a general exodus of younger skilled workers as they find better job opportunities on the mainland.
While some economic trends seem to indicate an impending financial recession, Brewbaker said there is a chance the cyclical “roller coaster” of the national economy might instead be stabilizing into an “escalator”: a shallower, steadier upward slope without massive fluctuations such as 2008.
While job growth and home sales prices have increased more slowly than in the years preceding 2008, they have also had fewer peaks and valleys since the recession as well.
Whether a recession is averted, however, depends on the U.S. and the rest of the world “not screwing it up,” Brewbaker said, suggesting that economic stability partially depends on the nation ending its present trade war with China, which he said is pointless and actively harming American industries.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.