Economist: Recovery will start ‘next week’
By CHRIS HAMILTON, Staff Writer
WAILEA – The long-awaited economic recovery will start in Hawaii and on Maui at the start of the new fiscal year – “also known as next week,” economist Paul Brewbaker told the Maui Chamber of Commerce on Friday. The state Council on Revenues chairman and principal owner of TZ Economics said that the recession already has ended and that his analysis predicted actual economic growth, not seen since the bottom fell out of the local and national economies nearly two years ago. “I think we’re on the threshold, but Maui is still lagging behind the rest of the state,” he said Friday after his speech. “The challenge I see is that perceptions are slow to adjust to the coming changes.” Brewbaker briefed about 130 Maui business leaders at a Chamber of Commerce luncheon at The Fairmont Kea Lani, Maui resort. His audience was ready to hear the upbeat forecast. “Come July 1, we’re ready to rock and roll,” said Maui Chamber of Commerce Executive Director Pamela Tumpap.
Real estate sales and construction remain relatively flat, although Brewbaker had some ideas to change that. But the good news is that the airlines are beginning to fill the void left by the bankruptcy of Aloha Airlines and ATA more than two years ago, Brewbaker said. There are more flights and more visitors coming to Maui. A recent study showed visitor-days are up 7.4 percent but are still down by about 8 percent from 2007. Still, tourism is on the verge of radical expansion, he said. Domestic and international travel is up, he noted. “And there’s choke Koreans, but they don’t know Maui exists,” he said. “So you’re going to have to work on your kim chee.”
U.S. gross domestic product peaked in the second quarter of 2008, before hitting bottom in the second quarter of 2009. “Going from a peak to the trough, that’s a recession,” Brewbaker said. However, the 2010 first-quarter gross domestic product was about 3 percent higher than a year ago, he said. “Sometime this summer, the country is going to punch through,” Brewbaker said. “And I know it doesn’t feel like it because you live on Maui, no offense, but the GDP growth rate was actually down 9 percent in 2009.” Obviously, he said, America is a consumer-driven economy, and a sign of the recovery is that the consumers are coming back, to a certain extent. “You know when you stopped seeing people at Macy’s and would (instead) see them at Ross? Well, they’re back at Macy’s,” Brewbaker said. Another sign of recovery is that business purchases of equipment and software are going back up, indicating that people are reinvesting in their companies, he said. “To really get this ball rolling, we need investment in housing and commercial retail development, though,” he said. The financial forecasts are all calling for 3 percent economic growth through 2011, he said. The Federal Reserve is a little more reserved, with a 2.7 gross domestic product growth estimate, he said. In Hawaii, layoffs and furloughs of public employees will delay recovery in the government sector, he said. But the return of tourists should expand income in the private sector.
Another bright spot is a Council on Revenues prediction that Hawaii will begin to see the barest of growth in tax collections – a welcome change after a gloomy period in which revenue estimates were revised downward again and again. “It’s going to end, and we are heading into the next expansion. So you need to start thinking about where we go from here,” he said. “Hey, you (chamber businesses) are still here! I know some didn’t make it. They’re gone. Now you gotta start looking down that road.” Maui’s unemployment remains high at more than 8 percent, while the state average is about 6.5 percent. Brewbaker indicated most job growth has been on Oahu and the state has not realized a jobless recovery. As as an aside, Brewbaker noted that Maui routinely has been named the best place to retire because real property taxes are so low. He suggested perhaps elected leaders or those seeking higher office should consider whether there needs to be a “realignment.” On the housing market, Brewbaker said investors and homebuyers need to start loosening the logjam of foreclosures, because banks won’t be the ones to do it. There are deals to be had, he added. “Maybe you should start to rethink and buy the foreclosures yourselves rather than waiting for the banks to decide what to do with them,” Brewbaker said. Brewbaker said he was perplexed somewhat by Maui’s home construction trends over the past several years. Virtually nothing is getting built, according to his numbers.
He wondered if the slowdown meant the real estate bubble had burst or if the county’s two-year-old work force housing ordinance was deterring construction. The ordinance requires developers to provide up to50 percent affordable homes if they want to build market-rate subdivisions. But Brewbaker said that simple math showed that the housing and construction market would turn around. The annual rate of new construction is 0.05 percent, and the population growth rate is 1 percent.”Either someone has to move – and it’s not me – or we are not building enough homes,” he said.
* Chris Hamilton can be reached at email@example.com.
Economist: Recovery will start ‘next week’