According to the latest economic assessment by the Hawaii Department of Business Economic Development and Tourism (DBEDT), Hawaii’s economy was beginning to feel some economic recovery by the first quarter of 2010, after two years of decline. 1 The most encouraging signs that a recovery was underway occurred in tourism. Visitor arrivals increased 4.5 percent in the first quarter from a year before and total visitor expenditures were up 5.0 percent. during the first quarter of 2010, although jobs and new construction authorizations were still showing declines.

General excise tax (GET) revenues, an indicator of economic activity in the state, increased 4.6 percent in the first quarter of 2010 as compared with the same period in 2009. This was the first year over year increase in five calendar quarters. Another area of solid gain in tax collections for the first quarter of 2010 was the transient accommodations tax, which increased 12.3 percent, or $6.4 million. This was partly due to an increase in the tax rate in mid 2009.

Shown in Table 1, the latest economic outlook for Hawaii by DBEDT expects continued gradual recovery through 2010 and into 2011 and beyond. Hawaii’s economy depends significantly on conditions in the U.S. economy and key international economies, especially Japan. For the U.S. economy continued positive economic data in recent months has resulted in gradual optimism being reflected in national economic forecasts. Forecasts also continue to improve for Hawaii’s most important foreign market, Japan.

Based on the updated U.S. and International outlook as well as new data on the Hawaii economy, the revised forecast for Hawaii shows slightly more encouraging expectations, although the basic projection of a slow and gradual recovery has not changed.
Overall, Hawaii's economy measured by real GDP is projected to show a 1.1 percent increase in 2010. That growth is expected to increase modestly to 1.4 percent in 2011. Tourism arrivals are expected to increase 2.6 percent in 2010, and increase to 4.1 percent in 2011.

Despite the increase in the visitor forecast, wage and salary jobs will likely show a 0.9 percent decline in 2010. It is likely that current excess capacity in the visitor industry will accommodate more visitors without an immediate increase in the workforce. However, modest growth in jobs is expected to occur in the second half of 2010. In 2011, jobs are projected to increase 0.8 percent. Personal income should show a 1.9 percent increase in 2010. In 2011, current dollar personal income is forecast to increase 3.0 percent, of which 0.8 percent will be real growth after inflation.

Beyond 2011 the gradual recovery is expected to continue with modest job growth of around 1.0 percent for 2012. Visitor arrivals should show a 4.5 percent increase in 2012. Hawaii’s real GDP growth in 2012 is expected to reach 2.0 percent. The gradual recovery should continue into 2013, assuming national and international economic conditions continue to improve.