Eugene TianDepartment of Business, Economic Development & Tourism

to the

Current Hawaii Economic Conditions

Committee on Ways and Meansand

Committee on Finance

January 3, 2019

Summary of Current Hawaii Economic Conditions

• Lowest unemployment rate in Hawaii’s history and lowest in the nation, 2.2% Y-T-D through November 2018

• Record high level of labor force, employment, and job count

• Non-ag Payroll job grew 1.7%, adding 11,100 jobs through November 2018

• Tourism industry growth strong, 6.1% for arrivals and 8.0% for expenditures Y-T-D through November

• Value of private building permit increased 0.2% Y-T-D through November

• Median home sale prices continue to increase on all counties for both single family and condos

• Home sales decreased on Oahu and Big Island for both single family and condo but increased significantly on Maui and Kauai

• General excise tax revenue increased 2.5%, individual income tax increased 12.8% through November

The U.S. and World Economies

Trough PeakExpansion

MonthsOctober 1945 (IV) November 1948(IV) 37October 1949 (IV) July 1953(III) 45May 1954 (II) August 1957(III) 39April 1958 (II) April 1960(II) 24February 1961 (I) December 1969(IV) 106November 1970 (IV) November 1973(IV) 36March 1975 (I) January 1980(I) 58July 1980 (III) July 1981(III) 12November 1982 (IV) July 1990(III) 92March 1991 (I) March 2001(I) 120November 2001 (IV) December 2007(IV) 73June 2009 (II) As of January 2019 115Average Expansion, 1945-2009 (11 cycles) 58.4

____________________Source: National Bureau Economic Research, US Business Cycle Expansions and Contractions

U.S. business cycles reference dates

Period U.S. Hawaii1957-1967 4.3% 6.5%

1967-1977 3.1% 5.1%

1977-1987 3.2% 3.3%

1987-1997 3.1% 1.9%

1997-2007 3.0% 2.4%

2007-2017 1.4% 1.1%

1957-1987 3.5% 4.9%

1987-2017 2.5% 1.8%

____________________Source: U.S. Bureau of Economic Analysis and Hawaii DBEDT

Hawaii’s economy has gone through different growth path than the U.S.

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

HI US

Hawaii below US

US and Hawaii GDP growth

Hawaii opposite US

0.0

20.0

40.0

60.0

80.0

100.0

120.0

May

-05

Aug-

05N

ov-0

5Fe

b-06

May

-06

Aug-

06N

ov-0

6Fe

b-07

May

-07

Aug-

07N

ov-0

7Fe

b-08

May

-08

Aug-

08N

ov-0

8Fe

b-09

May

-09

Aug-

09N

ov-0

9Fe

b-10

May

-10

Aug-

10N

ov-1

0Fe

b-11

May

-11

Aug-

11N

ov-1

1Fe

b-12

May

-12

Aug-

12N

ov-1

2Fe

b-13

May

-13

Aug-

13N

ov-1

3Fe

b-14

May

-14

Aug-

14N

ov-1

4Fe

b-15

May

-15

Aug-

15N

ov-1

5Fe

b-16

May

-16

Aug-

16N

ov-1

6Fe

b-17

May

-17

Aug-

17N

ov-1

7Fe

b-18

May

-18

Aug-

18N

ov-1

8

U.S. Consumer Sentiment Index

____________________Source: Federal Reserve Bank of St. Louis, University of Michigan Survey of Consumers

0

0.5

1

1.5

2

2.5

3

3.5

Apr-

13M

ay-1

3Ju

n-13

Jul-1

3Au

g-13

Sep-

13O

ct-1

3N

ov-1

3De

c-13

Jan-

14Fe

b-14

Mar

-14

Apr-

14M

ay-1

4Ju

n-14

Jul-1

4Au

g-14

Sep-

14O

ct-1

4N

ov-1

4De

c-14

Jan-

15Fe

b-15

Mar

-15

Apr-

15M

ay-1

5Ju

n-15

Jul-1

5Au

g-15

Sep-

15O

ct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-

16M

ay-1

6Ju

n-16

Jul-1

6Au

g-16

Sep-

16O

ct-1

6N

ov-1

6De

c-16

Jan-

17Fe

b-17

Mar

-17

Apr-

17M

ay-1

7Ju

n-17

Jul-1

7Au

g-17

Sep-

17O

ct-1

7N

ov-1

7De

c-17

Jan-

18Fe

b-18

Mar

-18

Apr-

18M

ay-1

8Ju

n-18

Jul-1

8Au

g-18

Sep-

18O

ct-1

8N

ov-1

8De

c-18

DJIA SP 500

Stock Market Indicators

____________________*As of 12/27/2018Source: Federal Reserve Bank of St. Louis

1,0000 for DJIA; 1,000 for SP

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

Oct

-90

Apr-

91O

ct-9

1Ap

r-92

Oct

-92

Apr-

93O

ct-9

3Ap

r-94

Oct

-94

Apr-

95O

ct-9

5Ap

r-96

Oct

-96

Apr-

97O

ct-9

7Ap

r-98

Oct

-98

Apr-

99O

ct-9

9Ap

r-00

Oct

-00

Apr-

01O

ct-0

1Ap

r-02

Oct

-02

Apr-

03O

ct-0

3Ap

r-04

Oct

-04

Apr-

05O

ct-0

5Ap

r-06

Oct

-06

Apr-

07O

ct-0

7Ap

r-08

Oct

-08

Apr-

09O

ct-0

9Ap

r-10

Oct

-10

Apr-

11O

ct-1

1Ap

r-12

Oct

-12

Apr-

13O

ct-1

3Ap

r-14

Oct

-14

Apr-

15O

ct-1

5Ap

r-16

Oct

-16

Apr-

17O

ct-1

7Ap

r-18

Oct

-18

Leading Economic Index for the United States

____________________Source: Federal Reserve Bank of Philadelphia

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

Spread GDP

Interest rate spread and economic growth(10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity )

Source: Federal Reserve Bank of St. Louis and U.S. Bureau of Economic Analysis

0.37 on 12/26/18

%

Economy 2015 2016 2017 2018 2019USA. 1.4 1.5 2.3 2.9 2.6

Canada 0.9 1.4 3.0 2.1 2.0

Japan 2.8 1.0 1.7 1.0 1.1

S. Korea 2.1 2.9 3.1 2.6 2.6

Hong Kong 1.5 2.2 3.8 3.4 2.6

Taiwan 6.7 1.4 2.9 2.6 2.2

China 6.9 6.7 6.9 6.6 6.2

United Kingdom 1.9 1.8 1.7 1.3 1.4

Germany 1.2 2.2 2.5 1.7 1.7

France 1.8 1.1 2.3 1.6 1.6

Eurozone 2.6 1.9 2.5 1.9 1.7

Australia -3.5 2.6 2.2 3.2 2.7

Brazil 1.4 -3.5 1.0 1.3 2.4

Most of the world economies will have slower growth in 2019

____________________Source: Blue Chip Economic Indicators, December 10th, 2018

Hawaii’s General Economy

-6

-5

-4

-3

-2

-1

0

1

2

3

4

520

06:1

2006

:220

06:3

2006

:420

07:1

2007

:220

07:3

2007

:420

08:1

2008

:220

08:3

2008

:420

09:1

2009

:220

09:3

2009

:420

10:1

2010

:220

10:3

2010

:420

11:1

2011

:220

11:3

2011

:420

12:1

2012

:220

12:3

2012

:420

13:1

2013

:220

13:3

2013

:420

14:1

2014

:220

14:3

2014

:420

15:1

2015

:220

15:3

2015

:420

16:1

2016

:220

16:3

2016

:420

17:1

2017

:220

17:3

2017

:420

18:1

2018

:220

18:3

Leading Index Real GDP Growth

Hawaii leading index and real GDP growth

____________________Source: Federal Reserve Bank of St. Louis, US Bureau of Economic Analysis

23.714.4

11.010.9

9.35.8

5.14.5

3.83.8

3.32.72.5

1.91.9

0.8-0.2-0.3

-0.7-1.4

-2.7

-5.0 0.0 5.0 10.0 15.0 20.0 25.0

Real estate and rental and leasingAccommodation and food services

Retail tradeHealth care and social assistanceTransportation and warehousing

Administrative and waste management servicesState and local government

Wholesale tradeManagement of companies and enterprises

ConstructionProfessional, scientific, and technical services

Finance and insuranceInformation

Arts, entertainment, and recreationManufacturing

Other services, except governmentUtilitiesMining

Agriculture, forestry, fishing, and huntingEducational services

Federal goverment

Percent of Total Growth

Sector Contribution to Real GDP Growth: 2010-2017Real GDP growth = 11.9% between 2010-2017, Real Estate sector contributed the most

____________________Source: BEA

23.011.4

10.79.4

8.88.0

6.45.8

3.32.92.82.82.7

1.91.6

1.10.5

0.20.1

-0.1-0.9

-2.3

-5.0 0.0 5.0 10.0 15.0 20.0 25.0

Accommodation and food servicesTransportation and warehousingHealth care and social assistance

ConstructionAdministrative and waste management services

Retail tradeOther services, except government

Real estate and rental and leasingArts, entertainment, and recreation

ManufacturingProfessional, scientific, and technical services

Management of companies and enterprisesState and local government

Finance and insuranceUtilities

Educational servicesFarm employment

Wholesale tradeForestry, fishing, and related activities

MiningInformation

Federal goverment

Sector Contribution to Employment Growth: 2010-2017Employment growth = 11.8% between 2010-2017, tourism sectors contributed the most to the growth

____________________Source: BEA

14.213.3

10.910.2

7.76.0

5.34.7

4.64.5

3.63.2

2.82.7

1.81.7

1.40.9

0.30.20.00.0

0.0 5.0 10.0 15.0 20.0 25.0

Accommodation and food servicesState and local government

Health care and social assistanceConstruction

Transportation and warehousingAdministrative and waste management services

Retail tradeProfessional, scientific, and technical services

Other services, except governmentFederal goverment

Real estate and rental and leasingFinance and insurance

Management of companies and enterprisesWholesale trade

ManufacturingArts, entertainment, and recreation

UtilitiesEducational services

InformationFishing, hunting, and trapping

FarmMining

Sector Contribution to Earnings Growth: 2010-2017Earnings growth = 30.1% between 2010-2017, Accommodation and food services sector contributed the most

____________________Source: BEA

-15

-10

-5

0

5

10

15

198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017

Real GET Real GDP growth

Hawaii real GET revenue and real GDP growth rates

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Non-Ag jobs Real GDP growth

Hawaii non-ag payroll jobs and real GDP growth rates

Year Overall ranking

Personal income

Population Employment

2018 46 51 48 16

2017 31 21 47 38

2016 13 8 33 6

Hawaii Ranking of Index of Economic Momentum

Source: FFIS, State Policy Reports

-7.9 -8.1

20.5 22.1

16.9 20.6

49.3 41.4

15.0 14.0

6.2 10.0

-20%

0%

20%

40%

60%

80%

100%

1998-2008 2008-2018

Contribution to Retirement Investment income Transfer receipts

Wage & Salaries Supplemental to W&S Proprietors income

Personal transfer receipts contributes more to personal income growth

Personal income growth, 5.6% a year

Personal income growth, 3.2% a year

Labor Market Conditions

Statewide labor force & employment flattening

685,550

670,150

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Labor force Employment

____________________*2018 number is November YTD numberSource: Hawaii State Department of Labor and Industrial Relations.

67.6

60.862.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Hawaii labor force participation rate increased in recent years

Source: Bureau of Labor Statistics

%

Unemployment rate has been at record low level for past 11 months and the lowest in the nation since late 2016

____________________1/ Not seasonally adjustedSource: U.S. Bureau of Labor Statistics, Hawaii State Department of Labor & Industrial Relations

0.0

2.0

4.0

6.0

8.0

10.0

12.0Ja

n-04

Apr-

04Ju

l-04

Oct

-04

Jan-

05Ap

r-05

Jul-0

5O

ct-0

5Ja

n-06

Apr-

06Ju

l-06

Oct

-06

Jan-

07Ap

r-07

Jul-0

7O

ct-0

7Ja

n-08

Apr-

08Ju

l-08

Oct

-08

Jan-

09Ap

r-09

Jul-0

9O

ct-0

9Ja

n-10

Apr-

10Ju

l-10

Oct

-10

Jan-

11Ap

r-11

Jul-1

1O

ct-1

1Ja

n-12

Apr-

12Ju

l-12

Oct

-12

Jan-

13Ap

r-13

Jul-1

3O

ct-1

3Ja

n-14

Apr-

14Ju

l-14

Oct

-14

Jan-

15Ap

r-15

Jul-1

5O

ct-1

5Ja

n-16

Apr-

16Ju

l-16

Oct

-16

Jan-

17Ap

r-17

Jul-1

7O

ct-1

7Ja

n-18

Apr-

18Ju

l-18

Oct

-18

PercentHonolulu State of Hawai'i United States

Nov. 2018 1/

United States 3.5%State 2.6%Honolulu 2.5%

624,850

662,600

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Non-ag. payroll job count continues to grow

____________________*2018 number is November YTD numberSource: Hawaii State Department of Labor and Industrial Relations.

-400

-600

-200

-100

0

100

100

200

400

400

600

600

900

2,300

2,500

4,300

-1,000 0 1,000 2,000 3,000 4,000 5,000

Retail Trade

Manufacturing

Information

Nat. Resources, Mining, Constr.

Federal Government

Educational Services

State & Local Gov.

Arts, Entertainment & Recreation

Wholesale Trade

Other Services

Transp., Warehousing, Util.

Accommodation

Financial Activities

Health Care & Social Assistance

Professional & Business Services

Food Services & Drinking Places

Statewide gained 11,100 non-ag payroll jobs in November YTD 2018

____________________Source: Hawaii State Department of Labor and Industrial Relations.

Construction and Real Estate

Value of private construction permits flat Y-T-D through November 2018

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000N

ov-0

6Fe

b-07

May

-07

Aug-

07N

ov-0

7Fe

b-08

May

-08

Aug-

08N

ov-0

8Fe

b-09

May

-09

Aug-

09N

ov-0

9Fe

b-10

May

-10

Aug-

10N

ov-1

0Fe

b-11

May

-11

Aug-

11N

ov-1

1Fe

b-12

May

-12

Aug-

12N

ov-1

2Fe

b-13

May

-13

Aug-

13N

ov-1

3Fe

b-14

May

-14

Aug-

14N

ov-1

4Fe

b-15

May

-15

Aug-

15N

ov-1

5Fe

b-16

May

-16

Aug-

16N

ov-1

6Fe

b-17

May

-17

Aug-

17N

ov-1

7Fe

b-18

May

-18

Aug-

18N

ov-1

8

Residential Commercial & Industrial Additions & Alterations

12 Month Moving Average of Building Authorizations

____________________Source: County building departments and U.S. Census Bureau.

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1,000.0

2006

:Q1

2006

:Q2

2006

:Q3

2006

:Q4

2007

:Q1

2007

:Q2

2007

:Q3

2007

:Q4

2008

:Q1

2008

:Q2

2008

:Q3

2008

:Q4

2009

:Q1

2009

:Q2

2009

:Q3

2009

:Q4

2010

:Q1

2010

:Q2

2010

:Q3

2010

:Q4

2011

:Q1

2011

:Q2

2011

:Q3

2011

:Q4

2012

:Q1

2012

:Q2

2012

:Q3

2012

:Q4

2013

:Q1

2013

:Q2

2013

:Q3

2013

:Q4

2014

:Q1

2014

:Q2

2014

:Q3

2014

:Q4

2015

:Q1

2015

:Q2

2015

:Q3

2015

:Q4

2016

:Q1

2016

:Q2

2016

:Q3

2016

:Q4

2017

:Q1

2017

:Q2

2017

:Q3

2017

:Q4

2018

:Q1

2018

:Q2

2018

:Q3

Government contract awarded increased 39.3% during first 3Qs in 2018$ mil.

Island

Single Family Homes Condo Homes

Closed sales Median price Closed sales Median price

Oahu -5.6% 4.2% -2.3% 4.9%

Maui 3.2% 2.4% 16.8% 12.1%

Hawaii -6.4% 1.4% -4.5% 12.7%

Kauai 7.8% 5.8% 12.0% 5.9%

Real estate market statistics are mixed (% change btw. Nov. 2017 YTD and Nov. 2018 YTD)

____________________Source: Hawaii Information Service on behalf of Hawaii Island Realtors and the Kauai Board of Realtors, the Honolulu Board of Realtors, and Realtors Association of Maui.

Island

Single Family Homes Condo Homes

Nov. 2017 YTD Nov. 2018 YTD Nov. 2017 YTD Nov. 2018 YTD

Oahu $758,000 $790,000 $405,000 $425,000

Maui $695,000 $712,000 $446,000 $500,000

Hawaii $350,000 $355,000 $310,500 $350,000

Kauai $668,000 $706,950 $425,000 $450,000

Median Home Prices: Nov. 2017 YTD and Nov. 2018 YTD

____________________Source: Hawaii Information Service on behalf of Hawaii Island Realtors and the Kauai Board of Realtors, the Honolulu Board of Realtors, and Realtors Association of Maui

Tourism

Visitor arrivals by air increased 6.2% during the first 11 months of 2018

400,000

450,000

500,000

550,000

600,000

650,000

700,000

750,000

800,000

850,000

900,000

950,000

1,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Visit

or A

rriv

als

2016

2017

2018

____________________Source: Hawaii Tourism Authority

Visitor expenditures increased 8.0% during the first 11 months of 2018

500

700

900

1,100

1,300

1,500

1,700

1,900

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Visit

or e

xpen

ditu

res

2016

2017

2018

$mil.

____________________Source: Hawaii Tourism Authority

US and Japanese visitor arrivals by air

52.0%

64.7%

32.8%16.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

*

% US Japan

____________________*First 11 monthsSource: Hawaii Tourism Authority, DBEDT

Hawaii Visitor Arrivals and Expenditures

7.0 7.3 8.0 8.2 8.3 8.7 8.9 9.4 9.9 10.1 10.3 10.4

0.0

2.0

4.0

6.0

8.0

10.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Calendar Year

$11,066 $12,158$14,365 $14,521 $14,973 $15,111 $15,911 $16,809 $18,312 $19,075 $19,771 $20,476

$0

$5,000

$10,000

$15,000

$20,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Calendar Year

Visitor Arrivals （million）

Visitor Expenditures （$million）

Millions

Millions

____________________Source: Hawaii Tourism Authority and DBEDT

MARKET 2019 2018 % change

TOTAL 9,972,392 9,925,183 0.5

US WEST 6,201,512 6,131,662 1.1

US EAST 909,988 862,886 5.5

JAPAN 1,505,958 1,526,386 -1.3

CANADA 383,362 343,038 11.8

OTHER ASIA 354,096 426,206 -16.9

OCEANIA 381,890 400,932 -4.7

OTHER 235,586 234,073 0.6

Air seats in first 9 months of 2019 on scheduled flights by market

____________________Source: Hawaii Tourism Authority

Airport 2019 2018 % change

STATE TOTAL 9,972,392 9,925,183 0.5

Honolulu 6,125,540 6,160,927 -0.6

Kahului 2,070,942 1,994,575 3.8

Kona 985,217 979,605 0.6

Hilo 34,362 42,343 -18.8

Lihue 756,331 747,733 1.1

Air seats in first 9 months of 2019 on scheduled flights by airport

____________________Source: Hawaii Tourism Authority

Indicator

Annual average growth, %

2018 2019 2020

30 years, 1987 - 2017

20 years, 1997 -2017

Real GDP 1.8 1.8 1.0 1.2 1.4

Real personal income 1.7 2.0 1.6 1.7 1.7

Honolulu inflation rate 2.8 2.2 2.0 2.3 2.5

Non-Ag wage and salary jobs 1.0 1.0 1.2 0.9 0.9

Unemployment rate 1/ 4.4 4.6 2.3 2.5 3.0

Visitor arrivals by air 1.6 1.6 5.8 1.8 1.5

Hawaii’s economy will grow at lower pace in next few years

____________________1/ Average of 30 years, 1987 – 2017.Source: DBEDT