Despite not living up to expectations during the past several years, Hawaii’s construction sector is finally showing signs of stronger growth, reaching double-digit percentage growth in completed activity in 2015, according to Jack Suyderhoud, economic advisor for First Hawaiian Bank.
“For five years, we have been anticipating that construction would start to contribute to overall growth, [but] 2014 was another year of waiting, [although] 2015 shows more promise,” said Suyderhoud, a featured speaker at First Hawaiian Bank’s Oahu business outlook forum held Thursday at the Neal S. Blaisdell Concert Hall in Honolulu. “Over 12,000 construction jobs were lost after 2007. As of August, about 6,700 of those jobs had been recovered.”
The professor of business economics at the University of Hawaii Manoa Shidler College of Business noted that, given the visible signs of construction activity and anecdotal evidence from industry insiders, stronger growth was expected to be reflected in the data.
“This has not proved to be the case and it is leading to some questioning of the reliability of construction jobs and permit data,” Suyderhoud said. “One example of this is the construction tax based that actually declined for five consecutive quarters starting in July 2013. The second quarter [of] 2015 finally showed the strong growth we have been hoping for.”
The reasons for optimism include private construction permits and government contracts awarded both accelerating through the first half of this year, which confirms what has been seen on the ground and leads to optimism for 2016.
“State studies show a demand for 65,000 housing units across the Islands from 2015-2015,” Suyderhoud said. “In addition, a healthier fiscal position for the state and county governments means that deferred maintenance and infrastructure renewal spending will continue to contribute to construction’s growth. All of this should help bring back some of the 6,000 construction jobs that we have yet to recover since the Great Recession.”
In general, the state’s economy should see a decent year in 2016, according to Suyderhoud, who pointed out that there will be a recession at some point, although he doesn’t know when that will take place.
“I think every year we have like 2015 and 2016 makes us closer to the downturn,” he said. “There’s going to be construction activity through 2016, and the combination of that with tourism will keep our economy strong.”