Local Economy a ‘Mixed Bag’
Economists share analyses and predictions at economic outlook forum. “…the recession served to pull the scab off the long-term wound of our economy—that wound is debt.”
Article From: Maui Weekly
Dr. Jack Suyderhoud, professor of business economics at the University of Hawai‘i at Mānoa Shidler College of Business, and Dr. Leroy Laney, First Hawaiian Bank economic advisor and professor of economics and finance at Hawai‘i Pacific University, presented their economic analyses during the 37th Annual First Hawaiian Bank Economic Outlook on Friday, Sept. 16.
For many, it may have been uncertain if the analysis presented at this year’s First Hawaiian Bank Economic Outlook Forum was good news or bad news. But after taking a look at the big financial picture, one thing seemed certain: Maui County is creeping along the road to recovery. More than 200 residents filled the Elleair Ballroom of the Maui Beach Hotel on Friday, Sept. 16, for coffee, breakfast and the 37th Annual First Hawaiian Bank Economic Outlook Forum featuring local economists Dr. Leroy Laney and Dr. Jack Suyderhoud.
“Overall, Maui’s economy this year is a mixed bag,” said Laney, First Hawaiian Bank economic advisor and professor of economics and finance at Hawai‘i Pacific University. “Maui’s visitor industry is doing extremely well, thanks to its resilient upscale image… with resulting higher room rates and a welcome growth in airlift, including flights from secondary Mainland cities.” Total airline seats for Maui “have increased dramatically so far in 2011,” with far stronger growth than anywhere else in Hawai‘i—an increase of more than 11 percent this year, Laney reported.
“A big reason is the fact that Maui has been picking up direct flights by Hawaiian and Alaska Airlines from secondary cities in the U.S. and Canada. That, combined with aggressive marketing in those cities, has paid off,” he said.
As a result, hotels have been able to raise their room rates, and Maui now has the highest average daily room rate in the state. “So reputation does pay off,” said Laney. With its unique juxtaposition of small town charm and big city sophistication, Maui offers “a combination that’s hard to top.”
But while tourism may be a boon for Maui County, it isn’t an economic panacea. “Tourism alone cannot be relied upon to bring Maui back to better times,” said Laney. “The job total continues to struggle to return to pre-recession levels [and] unfortunately, other sectors of Maui’s economy, especially the construction industry, continue to lag significantly. Residential construction is down practically everywhere now, but any progress to resuscitate overall construction—public or private—would result in a more balanced and sustained recovery for Maui.”
The anemic construction industry is contributing to the lag in job creation and the uptick in unemployment across Maui County, Laney said. “Maui continues to lose jobs, the only county in the state for which that’s consistently the case,” he pointed out. “Even though the official end to the recession occurred some time ago… although the visitor industry is doing quite well, weakness in other sectors of Maui’s economy simply overwhelms that strength.”
Laney predicted that gradual declines in Maui’s unemployment rate “will likely continue in the future. But there remains a stark contrast between the current jobless rate and the 2 percent number that prevailed in the peak year of 2007.”
However, he said, “Help may be on the way,” citing several projects slated for construction, such as Alexander & Baldwin’s Maui Business Park Phase II in Kahului and the 138-room Courtyard by Marriott around the corner from the Kahului Airport.
In addition, economic growth is evident on the campus of University of Hawai‘i Maui College, which has seen a significant increase in enrollment—nearly 33 percent in two years. “One growth area in the Maui economy, which also helps to diversify it, is the recently renamed UH Maui College,” said Laney. “The name change reflects the addition of four-year degrees to its curriculum, the first UH community college to grant such degrees.”
Taking a look at the bigger picture—the U.S. and global economies—Dr. Jack Suyderhoud, professor of business economics at the University of Hawai‘i at Mānoa Shidler College of Business, described an invaluable opportunity to mold the future by looking at the past—and the present. “A few years down the road, when historians and economists look back on the Great Recession of 2007-09, it will not be regarded so much as a painful transitory period, but rather as the moment when the long-term weaknesses of the U.S. economy became glaringly exposed,” he said. “In that sense, the recession served to pull the scab off the long-term wound of our economy—that wound is debt.”
Debt is the most formidable obstacle to financial recovery, he said, and the longer we take to deal with it, the longer it will take to see adequate economic growth.
“I’m hoping that the limited progress made on debt reduction will help stabilize short-term expectations,” said Suyderhoud. However, he said, if capital markets believe that the U.S. is not serious about reducing its structural deficits, “this may spook consumers and business investments.” The result? “That could indeed push us into the second dip,” Suyderhoud said. “But I’m deeply hopeful that will not be the case… how we handle debt reduction and rebalancing the economy in the next few months will tell us a lot about our long-term prospects.”
For more information about the 2011-12 Economic Forecast for Maui County, visit the First Hawaiian Bank Website at http://www.fhb.com.