Hawai‘i Outlook Byron Gangnes, Carl Bonham April 15, 2003 UHERO Hawaii Outlook, April 15, 2003 Hawai‘i Outlook Byron Gangnes, Carl Bonham April 15, 2003 http://www.uhero.hawaii.edu Copyright UHERO 2003. All rights reserved. Copyright UHERO 2003

Tourism Struggle Won’t Derail Economy UHERO Hawaii Outlook, April 15, 2003 Tourism Struggle Won’t Derail Economy War and SARS have created tourism setback Japan side will take quite a while to recover But Hawaii economy will continue to grow Moderately strong income growth and now a bona fide job market recovery Uneven performance by sector Big risks UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Visitor Market Not Quite Recovered Before War Fears UHERO Hawaii Outlook, April 15, 2003 Visitor Market Not Quite Recovered Before War Fears 02q4 Total arrivals down 6% from 00q4. Feb 2003 US arrivals off just 5%, Japanese arrivals up 9% (but still dowen 20% from 2001 levels) – down 30% recently UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Job Market Recovery is Here UHERO Hawaii Outlook, April 15, 2003 Job Market Recovery is Here No of filled jobs hit an all-time high in Dec. Significant employment growth has occurred in past couple months—Jan and Feb up 3% from 2002. Urate fell to 3% in February, lowest in more than a decade UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Job Picture Uneven Percent Change in Jobs Year over Year UHERO Hawaii Outlook, April 15, 2003 Job Picture Uneven Percent Change in Jobs Year over Year Oct-Dec 2001 Average Apr-June 2002 Average Jan-Feb 2003 Average Total Non-Ag. Jobs -1.7% -0.5% 3.1% Construction -4.3 3.9 8.9 Profess, Business 1.5 3.0 5.9 Health Care 2.8 1.9 3.2 Accommod., Food -5.9 -3.0 3.1 Telecomm -6.1 -9.6 -4.8 Government 1.7 3.7 Air transportation: -8.9, -10.9, 4.0 Telecomm: -6.1, -9.6, -4.8 Information -6.8 -3.4 -1.9 UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Robust Income Growth UHERO Hawaii Outlook, April 15, 2003 Income growth generally in same sectors showing job growth (low interest rate sectors: fin svcs, construction; state & local gov; drops in transport, communi, utils, hotels) Fourth quarter income numbers due out next week UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Hot Home Resales UHERO Hawaii Outlook, April 15, 2003 March: Oahu condo sales up 48%, condo price up 23% SF home sales up 7.2%, prices up 17.1% AND PERMITS ARE STILL WAY UP (31% in 4th qtr) UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Looking Forward: The External Environment UHERO Hawaii Outlook, April 15, 2003 Looking Forward: The External Environment US economy has faltered War jitters reinforced weak consumer confidence, profitability, labor market Expect gradual strengthening now that war uncertainty gone, but no snap back Japanese economy still struggling to grow Has expanded for the past year Business outlook still negative and consumer sentiment has worsened. Deflation and underlying structural problems persist. Expect further muddling on… US: RGDP last year was 2.4% higher than in 2001 (considerable quarter-to-quarter volatility) Japan output has been growing since 1st qtr of 2002, but much is climb back from recession levels. For 2002 as a whole, RGDP up just 0.3% UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Global Economy No Support UHERO/LINK Fall Forecast UHERO Hawaii Outlook, April 15, 2003 Global Economy No Support UHERO/LINK Fall Forecast UHERO 4/03; EU is Economist 4/19/03 UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

UHERO Spring Forecast Another weak year for Hawaii tourism UHERO Hawaii Outlook, April 15, 2003 UHERO Spring Forecast Another weak year for Hawaii tourism Job market’s newfound strength will continue, as will moderate income growth Service areas, health, finance, construction will lead Some income cooling in 2004. Inflation will pick up, only a little UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Arrivals will be weak US vis. will rise 1.6% JA vis. will fall 8.6% UHERO Hawaii Outlook, April 15, 2003 Arrivals will be weak US vis. will rise 1.6% US arrivals have been running about even with last year; JA down 30% Recent NW and JAL announced lift reductions seem to assure that this will continue into the Spring US: 1.6% in 2003, 4.8% in 2004 JA: -8.6% in 2003, 25.5% in 2004 Total arrivals: -1.3 in 2003 and 9.8 in 2004 JA vis. will fall 8.6% UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

Job Growth Will Continue UHERO Hawaii Outlook, April 15, 2003 Job Growth Will Continue Payroll jobs up 2.3% in 2003 and 2.2% in 2004 Construction jobs up another 10% this year Employment growth will be even higher because rebound has just occurred: 3.4% in 2003 UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003 Copyright UHERO 2003

And So Will Income Growth UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003

Inflation Will Rise a Little UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003

Summary and Risks More of the “disconnect” between tourism and the broader economy. Aggregate strength will hide weakness in some sectors, regions More than normal uncertainty about the external environment Security situation, illness, and economy A mixed view: optimistic about local economic strength but nervous about external dangers. UHERO Hawaii Outlook, April 15, 2003 Copyright UHERO 2003

Hawai‘i Outlook Byron Gangnes, Carl Bonham April 15, 2003 UHERO Hawaii Outlook, April 15, 2003 Hawai‘i Outlook Byron Gangnes, Carl Bonham April 15, 2003 http://www.uhero.hawaii.edu Copyright UHERO 2003. All rights reserved. Copyright UHERO 2003