Report: ‘Meaningful’ economic recovery in Hawaii unlikely before mid-2021

Published: Sep. 25, 2020 at 5:44 PM HST|Updated: Sep. 25, 2020 at 5:48 PM HST
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HONOLULU, Hawaii (HawaiiNewsNow) - A surge in COVID-19 infections in July and August, the continued shutdown of tourism, a second stay-at-home order and a dearth of federal support means Hawaii is unlikely to experience any “meaningful” economic recovery until the middle of 2021, a new UH report concludes.

The latest forecast from the Economic Research Organization of the University of Hawaii notes that the state’s teetering steps toward recovery over the summer started to falter in mid-July, as a second wave of COVID-19 cases set in and aid to businesses through the Paycheck Protection Protection ran out.

So what is “meaningful” recovery?

“Any recovery from the depths of early spring ... is obviously meaningful for people to get back to work,” said Carl Bonham, director of UHERO. “The difference in where we are now is we’re actually looking at another decline in real income. Our current forecast only has a 2% job growth in 2021, which is very weak.”

Today, tens of thousands remain unemployed in Hawaii. Employment in the leisure and hospitality is less than half of its pre-pandemic level, and transportation, food service and retail have also been hit hard.

In fact, UHERO says, only the construction industry has avoided job losses.

As new COVID-19 cases plateau, the state is taking steps toward reopening. The governor has set Oct. 15 as the launch date for a pre-travel testing program seen as the first step toward rebooting tourism.

And the city has allowed most businesses to reopen, but with tough restrictions.

Restaurants, for example, can offer dine-in at 50% capacity but only to parties of five people or fewer who are members of the same household. And diners must make reservations and provide contact details.

Retailers, salons and other businesses have reopened with capacity limits, but gyms and bars remain closed.

Under the city’s current framework, those restrictions will stay in place through at least Oct. 22 — at which point some rules would ease while others would stay in place.

UHERO’s forecast notes that allowing trans-Pacific visitors to forgo a 14-day quarantine through the pre-travel testing program won’t trigger a flood of vacationers. While the program will attract some tourism, UHERO predicts significant gains in Hawaii’s top industry are unlikely before the second half of 2021.

But, Bonham added, the pre-travel testing program will make a difference for businesses “assuming that we get this right.” He noted that government needs to deliver — and so do the residents of Hawaii.

“The pre-flight test is crucial not just to keep us safe but it also helps visitors to feel more confident,” he said.

And where tourism goes so goes the state.

UHERO said recovery of the broader local economy will depend largely on conditions in the tourism industry, along with government efforts to control the spread of COVID-19, and state and federal economic policies.

“Under an optimistic scenario, gains in the availability of rapid virus tests would enable a more rapid recovery in visitor numbers,” the report said. But in the report’s “pessimistic scenario,” a slower reopening of the tourism industry would widen state budget deficits and require government worker furloughs.

“The aggregate result of all of this would be persistently weak employment and income, with unemployment remaining above 8% until 2022,” UHERO said, in its report.

“To avoid a deeper macroeconomic failure, we must maintain the recent progress in bringing this second virus wave under control, and the state and local governments ... must execute flexible plans for the safe and expeditious resumption of trans-Pacific travel and the reopening of the broader economy.”

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