Hawaii’s economy, which has been on an expected slowing trend over the past several years, could be hit hard by coronavirus travel concerns, according to the most recent University of Hawaii Economic Research Organization (UHERO) report.

While the number of visitors to Hawaii set another record in 2019, visitor spending fell last year as international spending languished. Now, the coronavirus represents a considerable but uncertain risk to Hawaii’s economy in 2020.

The conclusions of the report, titled “Coronavirus presents danger to Hawaii tourism,” declares the novel coronavirus (COVID-19) “the great unknown.”

UHERO looked back at Hawaii’s experience during the SARS epidemic in 2003, and concluded that much more significant visitor industry fallout could occur depending on the spread of the virus, the pace of containment, and the reaction of travelers to virus concerns especially. It is simply too early to know the extent of these risks.

The good news is that even during the SARS epidemic, UHERO says, visitor industry impacts were short-lived, and effects on jobs and income were hardly discernible.

Global Conditions

After a weak 2019, Hawaii’s external environment was posed for gradual improvement. In the U.S., manufacturing is in recession and a partial resolution of trade uncertainty should help to stabilize business fixed investment this year. With very healthy labor markets, consumer spending could continue to extend what is now a record-long U.S. economic expansion. The Federal Reserve’s three “insurance” interest rate cuts last fall and maintained lower rates will help support the recent uptick in residential investment and the broader economy.

In Japan, employment has surprised to the upside with a boosted women’s labor market engagement, but last fall’s tax hike has had a significant impact on growth. China’s ongoing slowing, the trade war, Brexit and industry-specific factors have depressed growth in many other countries. With some respite from these challenges, conditions were looking a bit brighter until the outbreak of the coronavirus.

Tourism

At the end of 2019, visitors spent on average about 8.5 days in Hawaii, likely reflecting rising hotel and other travel costs. However, growth in visitor numbers continues to be supported by expanding accommodations, such as transient vacation rentals, and transportation capacity.

The coronavirus presents the risk of substantial disruption to Hawaii travel, particularly from international markets, depending on the spread of the virus, the pace of containment and especially the reaction of travelers to virus concerns.

Employment & Income

With a smaller labor force and still-healthy economy, hiring conditions have remained tight. New claims for unemployment insurance remain at very low levels, and the unemployment rate has edged back downward. Categories that added a significant number of jobs last year include construction, healthcare and accommodation and food services.

For a full public summary, go to the University of Hawaii Economic Research Organization website. For a detailed analysis, subscribe to UHERO’s Forecast Project.

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