HONOLULU (HawaiiNewsNow) – Hawaii remains headed for a mild recession next year.
That’s the takeaway from the latest forecast from the University of Hawaii Economic Research Organization.
“We’ve been relying on strength in the U.S. economy for the last several years to support tourism,“ said UHERO Executive Director Carl Bonham during a press conference about the report.
Now that strength has fizzled, and UHERO economists say the state is feeling the impacts of federal policies like job cuts, immigration crackdowns, and new tariffs.
“We’ve seen really a pretty sharp downturn in tourism since the early part of the spring,” Bonham said. “Things like measures that we follow, like real consumption spending, has really very much stalled out. The U.S. housing market’s basically in recession, manufacturers in recession.”
Another concern is the dramatic drop in the number of jobs being added each month — plunging 80% on average from three months ago.
“U.S. job growth has really weakened. And then the same thing is true for Hawaii,” Bonham explained.
Federal employment in Hawaii is down by 1,200 jobs. Total Hawaii employment is still down 15,000 jobs from pre-Covid levels.
And while inflation was improving earlier this year, new tariffs are expected to push prices higher again.
UHERO predicts by 2026, the cost of living for a typical Hawaii household will rise by $1,400 a year.
“Overwhelming uncertainty that is clearly impacting businesses, everything from farmers to manufacturers to retailers who either they can’t sell their product because of trade wars, like the farmers, or they can’t get product, or they don’t have a clue what the price will be for any of the inputs,“ Bonham said.
Adding to the uncertainty, delays to federal workers’ pay and government services, should Congress fail to pass a spending bill before Sept. 30.
“It feels like we’re closer to a government shutdown than we have been since the last government shutdown,” Bonham said.
Construction remains a bright spot for Hawaii, thanks to military contracts and public projects.
“Essentially we’re looking at a construction sector that remains elevated through most of this decade,” Bonham added.
Unless national trends change, expect them to play out here.
“We’re really dependent on what happens in the U.S. But when the U.S. goes badly, that’s what pulls Hawaii into recession, even if the U.S. doesn’t necessarily enter recession,” said Steven Bond-Smith, UHERO Assistant Professor.
To view the UHERO report, click here.
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