In case you wondered how the islands are doing.
Lindybill@littlegrassshack.com
Surf's Up for the Economy in Hawaii
By JIM CARLTON
Staff Reporter of THE WALL STREET JOURNAL
June 13, 2005; Page A2
HONOLULU -- Hawaii is enjoying one of its biggest economic revivals since World War II. But unlike previous booms that eventually turned to bust, economists are hopeful that the good times will last longer this time around as economic growth spreads beyond the traditional mainstays of tourism and defense to nurture a bumper crop of new industries.
Hawaii's gross state product grew 6% last year compared with 4.4% for the U.S. as a whole. The unemployment rate in April, the latest figure available, dipped to 2.9%, the lowest of any state. Citing the robust economy, Moody's Investors Service in May boosted its rating on the Aloha State's bonds.
"We are feeling good about ourselves again," said Gov. Linda Lingle. State general-fund revenues, driven mainly by sales and income taxes, surged 17.3% in the first 11 months of the fiscal year ending June 30 from the same period last year.
[Sunnier Outlook]
This is a significant turnaround. In the 1980s, tourism and real-estate construction was driven by stock-rich Japanese investors. But after the Japanese stock bubble burst in 1990, the Japanese reduced their visits and investment in Hawaii. Making matters worse, the Defense Department cut back in the state. Between 1992 and 1996, Hawaii lost 14,000 jobs, while the rest of the nation was growing. Unemployment was stubbornly high and young people were fleeing the island looking for work.
But while Japan's economy remains weak, Hawaii is now thriving. Japanese visitors constituted two million, or about one third, of the 6.6 million visitors to Hawaii in 1995. But last year, Japanese constituted 1.5 million, or about a fifth of the estimated 6.9 million visitors, according to state tourism statistics.
Visits by Americans, many seeking exotic locations closer to home, jumped 14.2% over the five-year period ending in 2004, compared with a 17.7% drop in foreign visitors over the same time. "The basic reason is that the U.S. economy is stronger than Japan, plus there is a small proportion of Japanese travelers who stopped coming here after [the Sept. 11, 2001, terrorism attacks] because of the geopolitical uncertainty," said Paul Brewbaker, chief economist at Bank of Hawaii.
Americans from the mainland wanting their slice of paradise are also propelling a surge in real estate, particularly for second homes. Sales of single-family homes in Hawaii have nearly doubled since 2000. The median price of a single-family home in Honolulu rose 26% to $529,100 in the first quarter, according to the National Association of Realtors. That makes it the nation's fourth most-expensive region, behind San Francisco; Orange County, Calif.; and San Diego.
Hawaii, home to a Pacific military command center, is also benefiting from increased defense spending. Direct Pentagon outlays rose 13%, to $4.5 billion, in the fiscal year ended June 2004.
Of course, tourism and defense could fall by the wayside again, as has happened so many times in the past, leading to an inevitable bust. But this time, state officials and economists are cheered by emerging signs of a "third pillar" of the economy: a smorgasbord of small industries that are creating thousands of new jobs.
Crop-seed breeders, for example, have taken advantage of Hawaii's year-round growing season to build an industry valued at about $50 million annually with more than 1,000 workers. The industry, now dominated by corn, serves as a research-and-development lab for mainland U.S. agriculture. Crop-seed breeders grow different varieties of a plant, for example, to see which one has the highest quality. "Here, we can grow three crops of corn, but on the mainland we can grow only one," said Paul Stuart, who manages a 365-acre corn-breeding farm on Oahu that is owned by agricultural titan Syngenta AG. Corn seeds now rank as Hawaii's third most-valuable crop, behind pineapple and sugar.
The medical-research industry also is expanding. A group called the Hawaii Life Sciences Council hopes to make the state a center for medical research, particularly for infectious diseases such as severe acute respiratory syndrome. The University of Hawaii recently opened a new medical-center campus in Honolulu that is attracting small companies such as Hawaii Biotech Inc., a vaccine-research start-up, to locate nearby. During the past three years, about 1,400 new jobs have been created around medical research, said Lisa Gibson, president of the Life Sciences Council.
The development of these industries could help stem a longtime problem here, a "brain drain" of talented young people to the mainland because of a dearth of high-paying jobs, said Chatt Wright, president of Hawaii Pacific University.
There are still clouds, of course, including a potential downturn in the housing market. But some economists think Hawaii may be sheltered from the worst effects.
"Dude," the Bank of Hawaii's Mr. Brewbaker said, "your downside is you have to live in Maui." |
