Terror and Recovery
description
Transcript of Terror and Recovery
Hawai‘i Outlook: Fallout from Sept. 11 and Recovery Prospects
Presentation for Credit Rating Agencies
Honolulu Convention CenterWednesday, January 23, 2002
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Terror and Recovery
• September 11 caused wide-spread damage to an already-slowing global economy
• Hawaii effects large because of reliance on air travel and tourism
• Relative strength prior to attacks provides support• Many unknowns make forecasting difficult• I’ll talk about a preliminary UHERO assessment
and forecasts for the next two years• These results are in part excerpted from a
November report to DBEDT.
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
U.S. Cooling Before 9-11
200120001999
10
8
6
4
2
0
-2
Percent
US Real GDP Growth
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Japan Was Falling Fast
NOVSEPJULMAYMARJANNOVSEPJULMAYMARJAN20012000
110
105
100
95
90
Industrial Production
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
and Japanese Unemployment was at post-war record levels
NOVSEPJULMAYMARJAN2001
5.60
5.40
5.20
5.00
4.80
4.60
Percent
Unemployment Rate
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
But Hawaii Was in Pretty Good Shape
2001199919971995199319911989
6
4
2
0
-2
-4
Percent
Real Income Real Gross State Product
2001 figures are pre-9/11 forecasts
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Then the World Changed
13 6302316 9 2251811 4282114 7302316 9JANDECNOVOCTSEP
40
20
0
-20
-40
-60
-80
-100
-120
Percent
Domestic Flights International Flights
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Outlook Worsened Across the Board
• US Enters Recession* Disruptions pushed economy over edge to recession* Consumer confidence takes a hit, but spending holds up* Quick Fed and some Federal gov’t action
• Japan’s prospects turn even worse* Hoped-for export-led recovery down the tubes* Government unable or unwilling to do much
• Hawaii tourism hammered* Passenger counts, ocup. rates fell well below 2000* Spillovers to broader economy limited
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Hawaii Jobs Destroyed Fast
Initial Unemployment Claims attributableto Sept. 11 Attacks,Weeks ending Sept 22 through Oct. 16Hotels and related enterprises 5,359
Transportation 1,431
Eating and DrinkingEstablishments
945
Other Retail 1,340
Other 2,308
Total 11,383Source: UHERO estimates from DBEDT data.
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Job Market Situation At Year End
Jan-SepAverage
Oct-DecAverage
Total Non-Ag. Jobs 1.7% -1.5%
Trade 2.2 -2.7
Services 2.5 -2.3
Construction 0.5 -0.3 Finance, Insur, Real Estate
0.7 -0.1
Percent Change in Jobs over 2000
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
• Prospects for US, Japanese recoveries will play
key role* Econometric modeling captures HI response to external
developments
• But worst risks aren’t economic * Prospects for War on Terrorism* Evolving attitudes toward vacations and air travel
• Policy uncertainties* How much more from Feds?* Chances of significant State Legislative action
• Spillovers and unrelated bad luck* Dengue fever scare over?
Assessing the Forecasting Environment
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Macro Effects Explain Only Part of Visitor Decline
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
The Gulf War As Guide?
91: 791: 190: 790: 1
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
Iraq Invades Kuait Aug 2, 1990
Gulf War
Eastbound Westbound Total
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
External Assumptions
• US economy will resume growth this quarter* Accelerates toward 3+% rates by year end as monetary
(and some fiscal) stimulus kick in* Interest rate environment will continue to support
spending• Japan growth will not resume until late in the year
* Will not touch 2% growth until 2003* Yen will remain about 120 for next several years
• Further improvement in security environment supports continued tourism recovery
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
UHERO Forecast Highlights
• Visitor arrivals fell 8-9% last year* Japan travel weakness means only 2% growth in 2002* Mainland drives 7.4% growth in 2003
• Job losses for state will top 14,000* More than 6,000 in hotels* Only slow job recovery
• Unemployment will rise to 5.6%• Hawaii has entered a moderate recession
* Real income will fall 1.5% before beginning recovery next year
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Westbound Arrival Recovery Continues
20032002200120001999
1250
1200
1150
1100
1050
1000
15
10
5
0
-5
-10
-15
000's Percent
Westbound Arrivals Growth Rate
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Eastbound Visitors Will Take Much Longer
20032002200120001999
650
600
550
500
450
400
350
300
60
40
20
0
-20
-40
-60
000's Percent
Eastbound Arrivals Growth Rate
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Tourism Job Losses Will Persist
20032002200120001999
40
38
36
34
32
15
10
5
0
-5
-10
-15
-20
000's Percent
Hotel Employment Growth Rate
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Overall Job Losses Will Be Less Severe
20032002200120001999
590
580
570
560
550
540
530
520
4
3
2
1
0
-1
-2
-3
000's Percent
Pre911 BaseBase Growth Rate
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
A Moderate Recession in Real Income
20032002200120001999
36500
36000
35500
35000
34500
34000
33500
33000
5
4
3
2
1
0
-1
-2
Mil $ Percent
Real Personal Income Growth Rate
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Unemployment Rate will Rise
20032002200120001999
6.5
6.0
5.5
5.0
4.5
4.0
3.5
Percent
Unemployment Rate
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Inflation Will Cool
20032002200120001999
2.0
1.5
1.0
0.5
0.0
Percent
Inflation Rate
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Risks and Mitigating Factors
• Risks of Further Fallout* Bankruptcy risks for Japanese-dependent retail firms* Slower pickup in global economy
• Factors supporting growth* Federal and state tax cuts * Income creation from home refinancing and sales * Renovation tax incentives
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
The Numbers
2000 2001 2002 2003 Real Personal Income (%) 2.3 1.5 0.8 3.5 Non Agriculture Jobs (%) 3.1 0.7 -0.9 1.8 Unemployment Rate (%) 4.3 4.6 5.5 5.4 Inflation Rate, Honolulu (%) 1.8 1.5 0.9 1.5 TOURISM DETAILS (000's) Total Visitors 6976.0 6435.3 6562.1 7046.3 % Change 3.5 -7.8 2.0 7.4 Eastbound Visitors 2345.8 1993.0 1997.2 2230.1 % Change 1.5 -15.0 0.2 11.7 Westbound Visitors 4630.7 4452.2 4564.9 4816.1 % Change 4.5 -3.9 2.5 5.5
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
High-Low Scenarios
20032002200120001999
1250
1200
1150
1100
1050
1000
950
HawaiiWestbound Visitors (000s)
Base High Low
20032002200120001999
650
600
550
500
450
400
350
300
250
HawaiiEastbound Visitors (000s)
Base High Low
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
High-Low Scenarios
20032002200120001999
6.5
6.0
5.5
5.0
4.5
4.0
HawaiiUnemployment Rate (%)
Base High Low
Rating Agencies, January 23, 2002 http://www2.hawaii.edu/~UHERO
High-Low Scenarios
20032002200120001999
37000
36000
35000
34000
33000
HawaiiReal Personal Income (Mil $)
Base High Low