NEWS RELEASE: DBEDT REDUCES HAWAI‘I ECONOMIC GROWTH RATE TO 1.7 PERCENT FOR 2025

STATE OF HAWAIʻI

KA MOKU ʻĀINA O HAWAIʻI

DEPARTMENT OF BUSINESS, ECONOMIC DEVELOPMENT AND TOURISM

KA ʻOIHANA HOʻOMOHALA PĀʻOIHANA, ʻIMI WAIWAI A HOʻOMĀKAʻIKAʻI

 

RESEARCH AND ECONOMIC ANALYSIS DIVISION

 

JOSH GREEN, M.D.
GOVERNOR

KE KIAʻĀINA

 

JAMES KUNANE TOKIOKA

DIRECTOR

KA LUNA HOʻOKELE

 

1. EUGENE TIAN

CHIEF STATE ECONOMIST

 

DBEDT REDUCES HAWAI‘I ECONOMIC GROWTH RATE TO 1.7 PERCENT FOR 2025

 

 

FOR IMMEDIATE RELEASE

March 5, 2025

 

 

The Department of Business, Economic Development and Tourism (DBEDT) released its first quarter 2025 Statistical and Economic Report today. In the report, DBEDT adjusted its economic growth projections for 2025 to 1.7 percent, lower than the 2.0 percent projected in the previous quarter. The downward adjustment was mainly due to the expected slowdown in tourism growth, higher projected consumer inflation and increasing policy uncertainty at the national and international levels. Economic growth is expected to reach 2.0 percent in 2026 and to continue steady growth to 1.8 percent in 2028. The labor market is expected to remain stable, with low unemployment.

 

The resilience of Hawaiʻi’s economic growth in the next few years will rely on the strong performance of construction, real estate, health care, professional services, and the continued recovery of tourism.

Economic Recovery Status

 

As measured by real gross domestic product (GDP), Hawai‘i’s economy rebounded to exceed pre-pandemic (first three quarters of 2019) levels by 1.5 percent during the first three quarters of 2024. Hawai‘i’s overall economy was fully recovered to pre-pandemic levels by the third quarter of 2023. By comparison, the U.S. economy has been fully recovered since the first quarter of 2021. Hawaiʻi was the second-slowest state in terms of economic recovery from the 2019 COVID recession. The U.S. economy was 12.6 percent higher than the 2019 level for the same indicator during the same period.

 

While tourism-related sectors (Accommodation, Transportation, Retail Trade, Recreation, and Food Services) have only recovered to 94.5 percent of pre-pandemic levels as of the third quarter of 2024, non-tourism sectors have shown firm growth. Compared to real GDP in the last quarter of 2019, the Information sector has grown by 35.1 percent; the Professional, Scientific, and Technical Services sector by 25.0 percent; the Agricultural sector by 14.9 percent, and the Health Care and Social Assistance sector by 12.9 percent. The Wholesale Trade, Utilities, Accommodation and Food Services, and Other Services sectors are still below real GDP levels for the first three quarters of 2019.

 

Compared to 2019, statewide non-agriculture annual average payroll jobs were still short by 20,900 jobs in 2024. However, Construction annual average payroll jobs were above 2019 levels by 4,000 jobs, Health Care and Social Assistance by 2,900, and Private Educational Services by 700. Job counts in all other sectors were still lower than the levels in 2019. Retail Trade lost the most jobs at 6,900, followed by Financial Activities at 3,200, and Accommodations at 3,000.

 

During 2024, total visitor arrivals recovered 93.3 percent from the levels of 2019. Visitors from the U.S. increased by 6.7 percent, while international visitor recovery was 64.9 percent. The recovery rate of Japanese visitors was 45.7 percent and for Canadian visitors, the recovery rate was 80.2 percent.

 

Visitor arrivals to the island of Maui during 2024 were 76.6 percent of the level in 2019. Arrivals to O‘ahu were at 94.5 percent and arrivals to Hawai‘i Island were at 98.0 percent of the same period 2019 levels. Visitor arrivals to Kaua‘i were flat between the two periods.

 

 

Construction Industry Continues Booming

 

Statistics in the construction industry were great in 2024 and will have positive impacts on activities in 2025 and beyond. DBEDT estimates that construction activity in 2025 will be stronger than previously expected for several reasons:

1. The value of all building permits approved in 2024 increased by 27.1 percent from 2023 and most of these projects will be under construction in 2025.
2. The number of residential housing units authorized in 2024 increased by 78.1 percent as compared with 2023, and it was the highest in the past 17 years.
3. Construction completed as measured by the state contracting tax base increased 20.3 percent during the first 10 months of 2024 from the same period in 2023. DBEDT estimated that total construction value in 2024 could be over $14 billion.
4. Based on preliminary estimates, construction industry payroll jobs increased 9.2 percent in 2024 as compared with 2023.
5. A significant number of government construction projects are either ongoing or in the pipeline to be started.
6. More than 1,000 hotel units are either under construction or will start construction, with plans to open in 2025 and 2026.

 

 

Home Sales and Prices Continue Increasing

 

After declining 26 percent in 2023, Hawai‘i home sales as recorded at the Bureau of Conveyances increased 15.1 percent during 2024. Sales of single-family homes increased 14.3 percent and sales of condominium homes increased 15.9 percent. The average sale price of single-family homes was $1,093,445 during 2024, representing an 8.1 percent increase compared to 2023. The average sale price for condominium homes was $797,674, representing an increase of 5.7 percent from the year before.

 

 

Tourism Industry Growth is Likely to Slow Down

 

According to the airline schedules, total air seats to the state will decrease by 1.1 percent during the first 10 months of 2025. The decrease is mainly due to the decrease in flights from international locations, especially from Japan. The number of air seats on international flights is expected to decrease by 5.5 percent during the first 10 months of 2025 as compared with the same period in 2024. Air seats will decrease 5.5 percent from Japan, decrease 5.1 percent from Canada, and decline 3.2 percent from the Other Asia market, but will increase 1.7 percent from the Oceania market (Australia and New Zealand).

 

The number of scheduled air seats from the continental U.S. is flat during the first 10 months of 2025, an increase of a mere of 0.1 percent. While air seats from the U.S. East will increase 2.7 percent, seats will decrease by 0.2 percent from the U.S. West market. Part of the decrease in the air seats from the U.S. West market is the result of flight consolidations between Alaska and Hawaiian Airlines after their merger.

 

 

Labor Market Remains Stable

 

In 2024, the unemployment rate decreased 0.1 percentage point from the previous year’s 3.0 percent, to reach 2.9 percent. According to the Bureau of Labor Statistics, Hawai‘i was among the 17 U.S. states without statistically significant unemployment rate changes from December 2023 to December 2024 (seasonally adjusted). Hawai‘i’s unemployment rate was the 10^th lowest in the U.S. during 2024.

 

In the fourth quarter of 2024, Hawai‘i’s non-agricultural wage and salary jobs averaged 645,800 jobs, an increase of 10,400 jobs or 1.6 percent from the same quarter of 2023.  In 2024, average non-agricultural wage and salary jobs increased 0.9 percent or 5,500 jobs from the previous year. The job increase in the fourth quarter of 2024 was due to job increases in both the private sector and the government sector. In that quarter, the private sector added about 8,600 non-agricultural jobs compared to the fourth quarter of 2023. The number of jobs increased the most in Construction, which added 3,400 jobs or 8.9%, followed by Health Care and Social Assistance, which added 2,100 jobs or 2.8 percent, Food Services and Drinking Places, which added 1,900 jobs or 2.9 percent, Professional and Business Services, which added 1,400 jobs or 2.0 percent, and Accommodations, which added 700 jobs or 1.8 percent in the quarter.

 

The average number of weekly initial unemployment claims was 1,090 during 2024, lower than the weekly average experienced in 2019 at 1,200. All counties have seen decreased and stable unemployment claims, but the average weekly unemployment claims for Maui County numbered 204 during 2024, 42 percent higher than the 2019 level of 144.

 

DBEDT expects that the labor market conditions will remain stable and that the unemployment rate will improve slightly in 2025.

 

 

Consumer Inflation Remains High

 

Honolulu consumer inflation, as measured by the Honolulu Consumer Price Index for Urban Consumers (CPI-U), was 4.4 percent in 2024, 1.4 percentage points higher than the state’s inflation rate in 2023. This measurement was 1.5 percentage points above the 2.9 percent U.S. inflation rate.

 

In 2024, Honolulu consumer inflation was mainly driven up by Housing which increased 7.1 percent compared to 2023, and Food and Beverages (3.8 percent). Housing normally accounts for 50 percent of Honolulu consumer inflation.

 

In January 2025, the Honolulu consumer inflation rate was at 4.1 percent, still higher than the U.S. consumer inflation at 3.0 percent. Honolulu consumer inflation in January 2025 was mainly in transportation (+6.8 percent), housing (+4.4 percent), and food and beverages (+4.4 percent).

 

 

National and International Economic Conditions

 

U.S. real GDP increased at an annual rate of 2.5 percent in the fourth quarter of 2024 compared to the fourth quarter a year ago, according to the latest estimate released by the U.S. Bureau of Economic Analysis. Real GDP increased 2.8 percent in 2024 from the 2023 annual level.

 

Policy uncertainty with respect to the imposition of tariffs and potential trade wars have negatively impacted the U.S. and global outlook for growth and inflation.

 

According to the most recent (February 2025) economic projections by the top 50 economic forecasting organizations published in Blue Chip Economic Indicators, U.S. economic growth is expected to be 2.2 percent in 2025 and 2.0 percent in 2026.

 

In February 2025, compared to January 2025, the Blue Chip International Consensus Forecasts for economic growth have been revised downward for 2025 in Canada and for the European countries. It was revised upward (0.1 percentage point) for Japan. The projected Japanese exchange rate was maintained at around 148.1 yen per dollar in 2025.

 

The Federal Reserve kept its fed funds rate (FFR) target unchanged at its January 28-29 FOMC meeting. The Federal Reserve cut its key interest rates twice last year, reducing the Federal Funds rate by 75 basis points to a range of 4.5 percent to 4.75 percent. The market expectations of the future number and magnitude of cuts by the Federal Reserve have been reduced in recent surveys. Inflation expectations have also been revised upward.

 

 

Forecasting Results

 

In the newly released report, DBEDT predicts that the economic growth rate for Hawai‘i, as measured by the year-over-year percentage change in real GDP, to slow down to 1.7 percent in 2025, reflecting policy uncertainty at the national and international levels. Economic growth is expected to reach 2.0 percent in 2026 and will show steady growth to around 1.8 percent in 2028.

 

Visitor arrivals are projected to increase by 1.0 percent in 2025 and will grow at a stable pace of around 2 percent each year between 2026 and 2028. Full recovery in arrivals will not happen until 2028 when 10.4 million visitors will come to the state. Visitor spending is projected to be $21.3 billion in 2025 and is expected to increase to $23.7 billion by 2028.

 

Non-agriculture payroll jobs are expected to grow by 1.2 percent in 2025, with growth of 1.1 percent, 1.0 percent and 0.9 percent in 2026, 2027, and 2028, respectively. A full recovery of non-agriculture payroll jobs is expected to occur in 2027, when the total will reach 658,800 jobs, surpassing the 2019 total of 658,600.

 

The state unemployment rate is expected to be 2.9 percent in 2025 and will improve to 2.7 percent in 2026, and 2.6 percent in 2027 and 2028. Personal income is expected to grow at 4.9 percent in 2025, 4.8 percent in 2026, 4.6 percent in 2027 and 4.5 percent in 2028.

 

As measured by the Honolulu Consumer Price Index for Urban Consumers, inflation is expected to be at 3.9 percent in 2025, which is higher than the projected U.S. consumer inflation rate of 2.7 percent for the same year. Hawai‘i consumer inflation is expected to decrease to 2.9 percent by 2028.

 

Hawai‘i’s population is expected to increase by 0.2 percent each year for 2025 and 2026 and at 0.3 percent each year for 2027 and 2028.

 

 

Statement of DBEDT Director James Kunane Tokioka

 

While the domestic and international economic outlook has become more uncertain, we expect Hawai‘i’s economy to demonstrate resiliency. In addition to firm performance in the construction industry, we will continue to see growth in other industries including professional services and healthcare. We expect that the tourism industry will continue to recover in the next few years, even if at a slower pace than previously anticipated.

 

With the income tax reform and the increase in the supply of affordable housing, we expect that living in our state will be more affordable and support our state’s workforce formation and retention.

 

The full report is available at dbedt.hawaii.gov/economic/qser/.

 

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Media Contacts:

 

Dr. Eugene Tian

Research and Economic Analysis Division

Department of Business, Economic Development and Tourism
Phone: 808-586-2470
Email: [email protected]

 

Laci Goshi

Department of Business, Economic Development and Tourism

Cell: 808-518-5480

Email: [email protected]