State economists tell House Finance Hawaii—s recovery is uneven: construction strong, tourism slower to fully recover

Hawaii—s economy entered 2025 with mixed signals, state economists told the House Committee on Finance on Jan. 8: construction activity is at historic highs while visitor-driven sectors remain below pre-pandemic levels and the labor force continues to decline.

At an informational briefing, Dr. Tian, presenting data through November 2024, said construction employment averaged about 41,500 workers monthly and that the contracting tax base rose sharply. "Construction ... is in historical high ... at over 40,000 workers on a monthly basis," Dr. Tian said, noting building-permit volumes and contracting-tax receipts had increased and that real-estate sales volume rose about 18 percent for the first nine months of 2024 compared with 2023.

The data-driven overview highlighted why the story matters: tourism remains the economy—s largest vulnerability and population and labor-force trends are structural headwinds to growth. Committee members were told that tourism-related industries—transportation, hotels, food services and recreation—had recovered only to about 94.5 percent of 2019 levels as of the third quarter of 2024, slowing aggregate growth.

Key findings and evidence

- Construction: Presenters reported a near-record increase in construction payrolls and contracting-tax receipts; the contracting tax base was estimated up roughly 19.6 percent through the first nine months of 2024 and building-permit value rose about 18.9 percent for the same period. Dr. Tian and other presenters flagged Honolulu and Hawaii counties as the focus of most of the activity.

- Labor market: The state unemployment rate held near 2.9 percent for several months, below the U.S. rate, but the state has a smaller labor force than in 2019. Dr. Tian reported an estimated net loss of about 15,000 people from the labor force compared with Q3 2019 and an estimated statewide jobs shortfall of roughly 21,300 jobs compared with pre-pandemic levels.

- Inflation and prices: Presenters said Hawaii—s 2024 inflation averaged about 4.4 percent, about 1.4 percentage points above the U.S. average, and that higher rents and service prices drove much of the increase.

- Tourism and international visitors: The briefing noted continued strength in U.S. visitor spending but much slower recovery from key overseas markets. Presenters said Japanese visitor arrivals remained near 40—5 percent of pre-pandemic levels and Canadian recovery was below 80 percent. Cruise calls were up compared with 2019 but international air seats were flat into early 2025.

- Population: New Census revisions reported small population increases in 2023 and 2024, but speakers emphasized demographic headwinds: Hawaii ranks among the oldest states by share of residents age 65+, natural population change has turned negative on some islands, and future population growth will depend on migration.

What presenters said about the near term and risks

Yohiro (speaker identified in the briefing as an executive director) and other economists said 2025 should be better than 2024 overall, helped by construction, some sectoral growth (health care, professional services) and rebuilding after the Maui wildfire. They warned, however, that policy and global risks could raise inflation and interest rates and slow growth later in the decade. The presenters pointed to uncertainty around U.S. federal policy, tariffs, immigration, and agricultural shocks (including avian influenza) as upside inflation risks that would push borrowing costs higher and constrain housing affordability.

Committee reaction and next steps

Members used the presentation to question the makeup of manufacturing in the state, the outlook for rents and housing supply, and how revenue forecasts should reflect uncertain federal policy. Presenters said construction and federally funded rebuilding on Maui were short-term growth supports while long-term growth would require more diversified, higher-paying jobs and more affordable housing to retain and attract residents.

The presentation and the question-and-answer session closed with presenters telling the committee their forecasts will be updated as new national and state data arrive and as federal policy becomes clearer.

Ending

The committee did not take formal action during the briefing. Members said they will use the economic data in upcoming budget deliberations and follow up with the presenting economists for updated forecasts and more county-level detail.