(BIVN) – The COVID-19 pandemic is taking heavy toll on the economy, and Hawaiʻi is already in a deep recession that will surpass anything that we’ve seen in our lifetimes.
That is the message from Dr. Carl Bonham, the Executive Director of UHERO, or the University of Hawaiʻi Economic Research Organization. On Monday, Bonham spoke to the State House Select Committee on COVID-19 Economic and Financial Preparedness.
Bonham and the state lawmakers met online using Zoom, due the shutdown of the State Capitol after a state senator was diagnosed with COVID-19. The virtual meeting was broadcast by the House and ʻOlelo TV.
“There’s really not any comparison that you can make to an economy where you’ve basically shut down hospitality and tourism and will remain shut down for several months,” Bonham said.
Dr. Bonham talked about a new UHERO forecast update entitled “Hawaii’s Economy is Shut Down to Deal with COVID-19”, which notes at the start that “much has changed since the interim forecast update that we released three weeks ago.”
The UHERO forecast update states:
In Hawaii, tourism has been deliberately shut down to try to isolate the Islands from additional transmission from outside the state. The Governor’s initial plea to potential visitors to stay away for a month has been followed by a mandatory two-week quarantine requirement, which has brought visitor arrivals essentially to zero. Airline flights to Hawaii have been reduced to “bare bones” levels, as the CEO of Hawaiian Airlines put it, and a number of hotels have closed their doors for now. Following the lead of county Mayors, the Governor announced a state-wide stay-at-home order that is intended to limit participation at work places to essential workers and limit trips outside the home to essential activities. All entertainment venues and parks have been shut down, and restaurants are limited to take-out service only. Hard to believe, but all of these unprecedented changes have unfolded over only a week or so!
While it is too early to assess the full impact of these dramatic actions on Hawaii’s economy, it is clear that they will be sharp and painful. The clearest indication of this pain is the surge of 80,000 new unemployment claims so far in March, with several filing days remaining in the month. Job counts will fall precipitously in industries tied to tourism and local activities now banned by the stay-at-home order. Other industries will suffer from the general decline in spending.
By the second quarter, we expect the non-farm job count to fall by more than 140,000 from its recent peak, a roughly 20% year-over-year decline. Losses to income will be somewhat less severe, because of enhanced unemployment benefits and the direct payments to US residents included in the recent federal recovery legislation, but they will still be historically large. Real personal income will fall about 5% by the fourth quarter. With a strong start to the year pre-virus and some recovery expected to commence by late spring and early summer, annual figures will show less severe drops. Still, the job count will average 11% lower than 2019 for the year as a whole, and real income will be more than 3% lower. Visitor arrivals for the year will be down an astounding 41%.
The UHERO forecast update also emphasized the uncertainty of the length of the pandemic, and said as a result of that and other factors, the road to local economic recovery could take long.