Honolulu Advertiser Second Opinion column by Cliff Slater
Janurary 6, 2003
Let Chinatown do forecasting
It seems as though everyone in Hawaii is intent on being positive, moving forward and upbeat—when they should not be.
Headlines about real estate sales discuss the wonderful increase in sales of homes. You have to read the fine print to see that they are discussing unit sales being up—not necessarily prices.
Another story says that 2003 will be “another dynamic year” in commercial real estate. Meanwhile, the fine print notes that retail rents are down seven percent, the office market is worse off with 14 percent vacancies, and empty retail space is likely to increase by 25 percent.
An HVCB report on the state’s official economic forecast headlines that 2003 will show a return to “record levels” of tourist spending—that of $11 billion in 1995. But that does not allow for inflation. The dollar in 2003 will not be what it was in 1995—it will be worth nine percent less.
Now some may think me a trifle curmudgeonly in pointing all this out. However, I am concerned that the kind of wishful thinking that glosses over our problems has carried over into rosy economic forecasts. And what leads to greater damage to our economy, government spending based on optimistic forecasts, or realistic ones?
And, until a clear trend emerges, we should consider forecasting our tourism to be flat—forever. If that seems harshly negative, then consider this: Think back to 1989 and ask yourself what you would have thought if someone had forecast Hawaii having fewer tourists in 2003 than we were getting in 1989. Would you have believed it? Of course not, no one would have; it would have seemed impossible. But that is what has happened.
We do have certain positive glimmers today: Westbound tourism arrivals are up but that is because room rates are down. Residential construction is up but that is because interest rates are very low. Unemployment has been fairly low, but that is because working-age people have been leaving town.
If we do get an increase in tourism, room rates will go up and slow any tourism increase. And if interest rates go back up to historic levels, residential construction will slow. And this outlook is without any consideration of the effects of future terrorist acts or an Iraqi war.
As for diversifying our economy, the state has been promising to do that for at least the last thirty years with the result that we are less diversified than ever. While diversified agriculture is up to one percent of our jobs (up from ¾ of one percent twenty years ago) this has been more than offset by losses in sugar and pineapple. And manufacturing has crashed even more during this time.
And if by “high-tech” we mean companies exporting their products primarily out-of-state, rather than merely servicing non-tech local companies, then we may well have seen a decline in high-tech jobs. One is hard put to think of prominent high tech companies the size of Intelect Inc, Verifone, or Cheap Tickets—all once prominent local companies founded here that subsequently moved elsewhere.
Is the outlook that bleak? Maybe not. But we have to face up to reality; that would be positive start. Maybe we could require the State Auditor to analyze all state-funded forecasts. Even better would be to require that these forecasts have on their covers, in bold lettering, the odds being offered in Chinatown of achieving them.
Cliff Slater is a regular columnist whose footnoted columns are at www.lava.net/cslater