Hawaii’s job recovery is lagging behind the rest of the country as economists eye the possibility of a recession.
The state’s unemployment rate has dropped to 4.1% in the wake of the pandemic, said Carl Bonham, executive director for the University of Hawaii Economic Research Organization, during a livestreamed interview Wednesday. However, he said many businesses are still unable to fill job openings.
“If you look at the data, in Hawaii there are 1.5 job openings for every unemployed person,” Bonham said. “That’s not even as high as it was in 2018 and 2019. … Nationally, there’s two job openings for every unemployed person. So, while Hawaii’s labor market has recovered quite markedly, we’re still lagging the U.S. pretty substantially. They’ve recovered all their lost jobs, and their unemployment rate is 3.5%.”
Bonham said Hawaii’s labor force has shrunk since the pandemic, with people moving out of state or retiring, and there are not enough new residents to replace them. And even among the state’s remaining workforce, he said nearly 100,000 people are dealing with long-term effects of COVID-19, or “long COVID.”
While Bonham acknowledged that recovering after the extensive disruptions caused by COVID was always going to take time, and that all of the impacts of the pandemic won’t be fully understood for years, he added that lingering effects are being compounded by rising inflation, which he said is about equivalent to an additional 10% tax on Hawaii residents’ incomes.
Hawaii Island Chamber of Commerce Executive Officer Miles Yoshioka said businesses seeking employees may have to weigh their options — with the cost of doing business rising, some businesses might not be able to afford to fill empty positions, even if there are people available to fill them.
“I will say that, even for businesses that have cut back on their hours for lack of staffing, I’ve seen they still have full service for those hours that they’re open,” Yoshioka said. “But businesses are going to be challenged more and more.”
Even worse, Yoshioka said, businesses will be strained further when Oct. 1 rolls around, when the first mandated statewide minimum wage increase takes effect.
On that day, businesses will be required to pay workers a minimum hourly wage of $12, up from the minimum of $10.10 currently required.
Yoshioka said he was “at a loss for words” considering the cumulative effects of the minimum wage hike, inflation, supply chain issues and pandemic aftereffects.
“Unfortunately, we don’t think inflation is over,” Bonham said. “We think it’s peaked … but this is coming on top of a pullback of federal support.”
A series of federal child tax credits and earned income tax credits that would have been assured under the Build Back Better Plan are no longer available, which Bonham said removes about $500 million from Hawaii’s economy.
Bonham said UHERO will release an economic forecast for the state within a week. While he didn’t say whether the forecast will prognosticate a recession in the near future, he said that if a recession is on the horizon, it will only be a “moderate or modest” one.
“Because (Hawaii) is still in recovery … there’s a chance we’ll get through this with just a modest slowdown where we continue to grow, but the unemployment rate goes up a little bit, jobs get a little harder to find, and inflation comes down,” he said.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.
