Island economy growing, but only slowly

The good news, two economists said during First Hawaiian Bank’s annual economic outlook summit Thursday, is the economy isn’t getting worse.

The bad news, Jack Suyderhoud and Leroy Laney said, is the economy isn’t going to pick up speed as it grows next year.

Laney, an economic adviser to the bank and a professor at Hawaii Pacific University, started off his talk by noting the definitions of recession — when the economy shrinks — and recovery — when the economy returns to positive growth.

“Using these definitions, without much growth at all, we’re going to enter a new growth phase,” Laney said.

Real personal income needs to grow only 0.5 percent this year to have returned to the 2008 peak, while the state’s real domestic gross product needs to grow only 0.2 percent this year to reach the same level as its peak in 2008, Laney said. But people don’t feel like they’ve exited recession conditions, he said.

“Most people don’t go by the formal definitions economists use,” Laney said. “They look at more tangible measures like job creation, something they feel quickly and acutely in their daily lives.”

Hawaii has about 6 percent fewer jobs now than it did when job numbers peaked in December 2007, he said. The gap is likelier bigger on neighbor islands, which he said have lagged behind Oahu in job growth. One positive sign Laney noted was significant improvement in Maui County, which had the slowest job growth in the state several years ago, but which is now closing in on Oahu’s levels.

The state is lucky that tourism has rebounded as well as it has, Laney said, even if those gains haven’t been spread to other sectors of the state economy, such as construction. He said that failure to spread the economic growth is a frustrating factor Hawaii’s residents face.

The much-touted Chinese tourist visa waiver program, or even an easing of visa requirements, would be a good thing, Suyderhoud said, but might not bring the economic boom some politicians claim.

“We have over 7 million tourists (annually),” Suyderhoud said. “There’s also a capacity limit in the short run. If you have a million more Chinese tourists, it may displace a million other tourists. You may not get a net gain.”

Laney said the introduction of more Chinese tourists would be a big boost for the economy.

“Wouldn’t it be nice to have another kind of hotel boom here or other accommodations?” Laney said, referring to the surge of hotels built in the late 1980s to accompany the Japanese tourism boom. “There’s a lot of people who would like to see that come back.”

Suyderhoud said Hawaii’s residents are conflicted, though, about such development.

He called the economic recovery tepid, but noted the recession is far enough in the past now that any new drop in growth would be its own event, not a double-dip recession. In the short-term, the 2012 presidential election shouldn’t have much impact on the county’s economy, unless the next president and Congress take no action to address the country’s “rebalancing” problems.

Europe’s fiscal problems are continuing, and that can affect the U.S economy as well, Suyderhoud said. The global economy also faces a challenge as economic growth in China and India slows, he added.

“For the rest of 2012 and 2013, global growth is expected to remain positive, but at lower rates than previously predicted,” he said.

Prior to the presentations, Laney touched on the potential impact the Keauhou Beach Resort closure may have on the West Hawaii economy.

The number of jobs lost, 112, is “sizable,” Laney said. “It’s also a blow to people that the hotel is closing and there’s nothing to succeed it. That entire end of the visitor plant (region) is in bad shape.”