University of Hawaii economists are warning that the statewide labor force likely will continue to lag pre-pandemic levels for several years, extending challenges for many employers.
The situation is expected to become particularly acute on Maui, where rebuilding Lahaina from the August 2023 wildfire is in an early stage primed to pick up considerably in 2025 and last many years.
The University of Hawaii Economic Research Organization described its expectations for the local labor market as part of its latest forecast for the state economy in a report released publicly today.
Carl Bonham, UHERO executive director, said the labor situation is a key factor expected to keep Hawaii’s economy in a slow-growth mode and is due to an aging population, low birthrates, residents leaving the state and relatively few people moving to Hawaii.
“The overall population picture is — I think that the best you could say about it is population would be flat,” Bonham said Thursday in a news media briefing. “And that means no labor force growth; it means slower economic growth.”
Right before the COVID-19 pandemic began affecting the local labor market, there were 662,400 people in Hawaii with nonfarm jobs in February 2020, according to UHERO data. This count had rebounded to 632,700 in 2023, representing a growth rate of 2.4%, but is forecast to rise just 0.7% this year followed by gains of 0.7% or 0.8% in each of the next three years to reach 650,500 in 2027.
Bonham said a full re- covery is projected for mid-2030.
“No business that I know of would tell you, ‘Oh yeah, no problem, we got plenty of workers,’” he said. “They’re all struggling.”
Hawaii, according to UHERO, is one of only three states that have yet to see job levels fully recover from pre-pandemic levels, and is furthest behind with a 3.5% lag. Louisiana is down 1.5% and Maryland is down 0.5%.
On Maui, job supply and demand is dramatically out of whack due to job losses related to the fire disaster, which killed 102 people, destroyed roughly 3,500 homes along with hundreds of businesses, and curtailed tourism.
UHERO’s report said Maui County’s labor force is down 5% from pre-fire levels, implying a loss of about 4,200 workers. That represents a partial recovery from an initial loss of about 7,000 jobs in the immediate aftermath of the fire.
Several hundred temporary homes are under construction on Maui for fire survivors, and more than a dozen in Lahaina are being rebuilt, while a pipeline of permit applications and issued permits for rebuilding destroyed homes continues to grow.
Bonham expects that sometime within the next year, labor shortages will become a problem on Maui, in jobs tied to both tourism and rebuilding Lahaina.
Maui needs an estimated 2,000 additional construction workers for rebuilding, according to UHERO’s report, which said statewide demand for construction workers and materials is expected to drive up building costs by over 20% by 2027 compared with 2022.
Earlier this month the state Department of Business, Economic Development and Tourism said in its own economic forecast that the number of construction jobs during the first seven months of this year had reached an industry record at 41,200, driven in part by large government projects.
Overall, UHERO forecasts that Hawaii’s economy will grow 1% this year after 3.6% growth in 2023.
In 2025, statewide economic growth is expected to be 2.8%, followed by 2.3% in 2026. These measures pertain to the value of all goods and services adjusted for inflation, known as real gross domestic product, or real GDP.
Inflation, which the federal government measures only for Oahu, is projected to be 4.9% this year, up from 3.1% in 2023. Inflation in 2025 is expected to be 3.4%, followed by 2.6% in 2026.
UHERO noted that much of the recent relatively high inflation is due to higher asking rates for housing rent and that this does not affect many renters or residents who live in homes they own.
The report also noted that increases in personal income have been higher than inflation outside of rental housing, giving many residents more purchasing power.
Hawaii’s biggest industry, tourism, is expected to continue rebounding from pre-pandemic levels, with visitor arrivals rising 0.9% this year to 9.73 million after a 4.5% gain in 2023. In 2025 the arrival count is expected to rise 4% to 10.12 million, followed by a 1.7% gain in 2026 to 10.29 million, which would eclipse the 2019 record of 10.24 million.
UHERO said in its report that arrivals are up this year on all islands except Maui, where volume is down about 25% from before the Lahaina fire.
“There’s sort of a tale of two economies,” Bonham said, “with Maui on what is going to be a long recovery process and the rest of the state holding up better than you might have expected.”
ECONOMIC CONSTRAINT
UHERO expects Hawaii’s economy will be challenged by constrained job growth over the next few years amid rebounding tourism and overall growth, or real GDP, expected to be lower than in 2023.
CATEGORY 2023 2024 2025 2026
Visitor arrivals* 9.6M 9.7M 10.1M 10.3M
Nonfarm payrolls 2.4% 0.7% 0.8% 0.7%
Unemployment rate** 3.0% 3.0% 2.7% 2.7%
Inflation rate*** 3.1% 4.9% 3.4% 2.6%
Real visitor spending**** 2.3% -4.0% 0.2% 0.4%
Real personal income**** 2.1% 1.4% 1.7% 1.4%
Real GDP**** 3.6% 1.0% 2.8% 2.3%
* Arrivals by air; ** Percentage of workforce;
*** Only for Honolulu; **** Inflation-adjusted
Source: University of Hawaii
Economic Research Organization
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