UHERO economic forecast for the first quarter of 2022 optimistic

The University of Hawaii’s Economic Research Organization is optimistic about the state’s economic recovery from the COVID-19 pandemic, with improving labor market conditions and the expected return of international visitors. (Photo courtesy of University of Hawaii)

A University of Hawaii organization is optimistic about the state’s economic recovery from the COVID-19 pandemic, predicting a broader recovery in the early months of 2022 in its March report.

The University of Hawaii’s Economic Research Organization in a press release provided a relatively optimistic economic forecast for the first quarter of 2022 following the end of the Omicron variant push, with improving market conditions for the work and the expected return of international visitors.

“The way forward seems clearer, but there are still big risks,” according to UHERO.

The expected transition of the virus into an endemic disease paves the way for the easing of travel restrictions and the long-awaited return of international visitors, according to UHERO. However, considerable risks remain, including COVID-related surprises, Federal Reserve tightening and the economic fallout from the Russian invasion of Ukraine.

The Omicron wave of the COVID pandemic has dealt a blow to global growth. The rapid receding of this wave and its likely evolution to endemic status is welcome news, the press release said. Still, the ongoing struggles with the virus, the weight of the budget squeeze, and continued supply and price pressures have dampened the outlook for 2022.

THE ARTICLE CONTINUES UNDER THE AD

Russia’s invasion of Ukraine and resulting international sanctions add further uncertainty to the US and global outlook.

THE ARTICLE CONTINUES UNDER THE AD

The recovery of the Hawaii visitor industry was interrupted by the Delta variant wave of the pandemic in the summer of 2021, and the Omicron variant caused another setback at the end of the year. According to UHERO’s press release, bookings from US visitors have returned to pre-pandemic pace, although bookings from Asian visitors remain essentially zero.

Although the recent outbreak of COVID-19 in some Asian countries is causing concern, UHERO expects travel restrictions to ease in the coming months, allowing a significant return of international visitors. After a weak start to the year, UHERO expects arrivals to surpass last summer’s peak by the second quarter of 2022 and reach 90% of their pre-pandemic level by the end of the year. The number of visitors is expected to reach 9.5 million in 2023.

The pandemic has had unusual effects on labor markets, including record rates of business creation and increased worker absences. Hawaiʻi’s employment recovery, which was proceeding at a healthy pace, came to a halt after the hit of the Delta wave. UHERO expects job gains to resume this year, although a reduced workforce and lagging tourism will delay a full recovery.

THE ARTICLE CONTINUES UNDER THE AD

Home prices in Hawaii also jumped 18% last year, roughly in line with the United States as a whole. Rising prices and rising mortgage rates will further reduce housing affordability across the islands, according to the economic research body. Initiatives to improve affordability are underway at national and local levels.

Robust construction activity continues. Federal spending on Hawaii’s share of a massive $8 billion Navy contract and the Infrastructure Investment and Jobs Act will sustain the industry for years to come. The possibility of a moratorium on new water meters due to the Red Hill water crisis is, however, a concern for new residential developments on O’ahu.

The state payroll will also see increasing gains as the year progresses and will rise 4.5% for the year as a whole. By 2023, job growth will have absorbed most of the labor market slowdown, bringing the unemployment rate down to 3.3%.

Income growth in Hawaiʻi, which has been supported by extensive federal stimulus, will sadly be hit this year with the end of direct support to families. Real personal income is expected to fall 4.7%; however, UHERO said job and wage gains will allow the start of the revenue recovery as the year progresses.

Despite the gains, COVID-19 still has the capacity to be highly disruptive, the press release said. Federal Reserve interest rate hikes could cause a bigger-than-desired slowdown, and Russia’s invasion of Ukraine could lead to higher energy costs and slower global growth, which would have a impact on Hawaiian tourism and local inflation.

Read more of the report on the UHERO website.