The most recent University of Hawaiʻi Economic Research Organization report shows that Hawaiʻi’s economy, which has been on an expected slowing trend over the past several years, could be hit hard by coronavirus travel concerns, according to a recent UH news release.

While visitor arrivals racked up another record year in 2019, real visitor spending fell last year as international spending languished. Now the coronavirus represents a considerable—if as yet uncertain—risk to Hawaiʻi’s economy in the year to come.

Hawaiʻi’s experience during the 2003 SARS epidemic suggests that much more significant visitor industry fallout could occur, depending on the spread of the virus, the pace of containment and especially the reaction of travelers to virus concerns. It is simply too early to know the extent of these risks.

The good news is that even during the SARS epidemic, visitor industry impacts were short-lived, and effects on jobs and income were hardly discernible.

Global Conditions

After a weak 2019, Hawaiʻi’s external environment was posed for gradual improvement. In the U.S., manufacturing is in recession and a partial resolution of trade uncertainty should help to stabilize business fixed investment this year. With very healthy labor markets, consumer spending could continue to extend what is now a record-long U.S. economic expansion. The Federal Reserve’s three “insurance” interest rate cuts last fall and maintained lower rates will help support the recent uptick in residential investment and the broader economy.

In Japan, employment has surprised to the upside with a boosted women’s labor market engagement, but last fall’s tax hike has had a significant impact on growth. China’s ongoing slowing, the trade war, Brexit and industry-specific factors have depressed growth in many other countries. With some respite from these challenges, conditions were looking a bit brighter until the outbreak of the coronavirus.

Tourism

At the end of 2019, visitors spent on average about 8.5 days in Hawaiʻi, likely reflecting rising hotel and other travel costs. However, growth in visitor numbers continues to be supported by expanding accommodations, such as transient vacation rentals, and transportation capacity.

The coronavirus presents the risk of substantial disruption to Hawaiʻi travel, particularly from international markets, depending on the spread of the virus, the pace of containment and especially the reaction of travelers to virus concerns.

Employment and Income

With a smaller labor force and still-healthy economy, hiring conditions have remained tight. New claims for unemployment insurance remain at very low levels, and the unemployment rate has edged back downward. Categories that added a significant number of jobs last year include construction, healthcare and accommodation and food services.

For a full public summary, go to the University of Hawaiʻi Economic Research Organization website. For a detailed analysis, subscribe to UHERO’s Forecast Project.


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