Univ Hawaii: Still Projecting Mild Recession for the State

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The latest quarterly economic outlook from the University of Hawaii’s Economic Research Organization (UHERO) is similar to its fall forecast, although the tourism projections aren’t as gloomy. Its current forecast calls the state’s outlook “challenging” and projects a “mild recession” and “weak recovery” for the state. UHERO still projects flat state real GDP and personal income next year, after both increased an estimated 2% in 20205. Similarly, employment is projected to decline 0.3% in 2026 thanks to reductions in the government and hospitality sectors. Construction is expected to remain a bright spot for employment. The forecast calls for state payrolls to slowly improve in the second half of 2026. The tourism numbers are not as bad as previously predicted, but the UHERO is still projecting a drop in international tourism, particularly from Japan and Canada. Overall, both air passenger traffic and tourism spend are projected to be down in 2026. 


We note that the state government’s forecast is a little more optimistic than UHERO’s. The Department of Business, Economic Development and Tourism is projecting a 1.5% increase in the state’s real GDP next year and a 1.6% gain in real personal income. The Department’s forecast also calls for a 0.9% increase in nonfarm payrolls and, while acknowledging the current weakness in tourism, slight increases in total visitors and tourist spending next year. 


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