Optimism on the economy depends on the future we make: A Hawaii just for the rich?

Beth-Ann Kozlovich

with Beth-Ann Kozlovich

HONOLULU—Small business, we are told, is the backbone of America—and Hawaii, too. According to the Small Business Administration, there are 120,000 small businesses in Hawaii.

Over the last three years of recession and sloggy recovery, small businesses have done whatever necessary to stay afloat, and the survivors’ optimism shows in the latest Business Optimism Sentiment Survey (BOSS), conducted semi-annually by Hawaii Business Magazine and now in the June issue.

Optimism is about all it shows in terms of the degree of forward motion felt by the 400 weighted and cross-sectioned large-to-very small manufacturing, retail, wholesale, service-based, and miscellaneous businesses companies polled by Q-Mark Research in April. At 48 percent, service industry businesses comprise the majority of those who participated.

In short, some of us are leading our own recovery and not waiting for anyone to give the all clear sign to come out into the economic sunshine. The 400 separate stories show trends among different sized businesses, but it’s not something set in stone. Evidence of that is the comparison of the April 2011 data with figures gleaned last fall. Six months ago, the BOSS showed good reasons for believing 2011 would be a turnaround year. The Optimism Index showed a 9-point jump, bringing it on par with the 2007 level.

200,000 more residents will be added to Honolulu in the next 25 years.

Even the editor of Hawaii Business Magazine, Steve Petranik then publicly said: “The number of good stories is rising, and the bad stories are falling. It’s an economy on the rebound. If you’re optimistic, it can be a self-fulfilling prophecy.”

Despite last fall’s positive numbers, Barbara Ankersmit refused to call the upswing in economic activity a recovery.

“We’re not near the peak years of 2004 or 2006,” Ankersmit said. 

There seemed to be nowhere to go but up; people saw a trend that things were getting better, but admittedly, those businesses surveyed in fall of 2010 were those which have survived to that point—and they were looking for reasons to look forward to the future.

There were some: Tourism was leading the recovery. Tourism numbers were much better than they were for all companies. If only the 103 tourism companies’ numbers were considered as indicators of recovery performance, they were much better on average than all the companies in the economy. But as the expression goes, that was then ... and this is nowhere near where Petranik thought we’d be.

With almost half of 2011 behind us, the current survey conducted in April shows a cross section of businesses still looking for the happy days intimated in the late 2010 survey. Petranik now believes Hawaii businesses have hit a plateau. He doesn’t foresee a double dip recession and says from the latest numbers things haven’t gotten any worse—but he admits they are grim.

“We look at three particular measures very intensely: companies’ revenue, profits, and hiring,” Petranik said. “On all three of those key measures, there are still more companies where those measures are going down.”

Constructive criticism

A small bit of balm is the overall performance index. It’s at 104, up 5 points from the October, 2010 survey and well ahead from where it was at the bottom of the recession at 88. But perhaps the most enthusiastic endorsement for any sort of recovery is the optimism measured in the hardest hit industry—construction. Hawaii folks must indeed be an indefatigable lot.

John White is the Executive Director of the Pacific Resource Partnership, the organization that serves as the bridge between Hawaii’s leading contractors and the 6,700-member Hawaii Carpenters Union. White is directly responsible for developing and managing programs that support unionized construction, fostering strategic relationships within the design and construction community, and identifying new markets for growth.

It depends on whether we’re going to create the kind of Hawaii that allows all people to live here regardless of income or where they fall on the social strata.

White says his industry has seen 50 percent of its workers on the bench, but, he says, “the decline in construction spending has bottomed out and we’re slowly starting to emerge.”

To illustrate the change, White says in 2009, $2.5 billion was spent on construction projects. In comparison, $2.8 billion was spent last year. With a generous 2.3 billion in Capital Improvement Projects budget recently approved by Gov. Neil Abercrombie, the public sector and private market is in the process of getting approvals to build housing—and most notably, the potential of rail. White says there is grounds for the industry’s optimism.

Yet in the current BOSS, 66 percent of those companies felt the Oahu rail project had nothing to do with them. White says there is a logical explanation: There will be one group to build rail, but the real ticket is the transit oriented development (TOD) to create affordable housing, walking communities, and hubs around rail stations.

“That represents tens of billions of dollars of work that will span over decades,” White says.

This is the line we’ve heard for a very long time and equal to the criticism that Oahu does not currently have the infrastructure to support such growth, nor the City and county budget to create it. It may be easy to say we have to strike a balance. And White says this, too, noting that the projections for Oahu on which he relies, shows 200,000 more residents will be added to Honolulu in the next 25 years. Today alone, there is a current need for 19,000 affordable houses, which according to Petranik means houses at a price point of at least $500,000.

This comes back to the question of for whom Hawaii will be home in the next few decades, and if affordable is really, well affordable.

White says it depends on whether we’re going to create the kind of Hawaii that allows all people to live here regardless of income or where they fall on the social strata. “Or if we are going to shut the door and say no more development? That’s the choice we’re struck with,” White says.

Meanwhile, the choices the tourism industry continues to make assert loudly the point that the Hawaii economy rises and falls as does tourism—perhaps more so than other sectors would rather acknowledge or more than they would wish otherwise.

Petranik gives one reason for Hawaii’s optimism: “It’s because tourists are coming back.”

Well, duh.

The complete interview with Steve Petranik and John White is on the Town Square archive at www.hawaiipublicradio.org.