UHERO: Hawaiʻi Economy Slowly Recovering; Big Island Visitor Spending Falls 2.2%

The University of Hawaiʻi Economic Research Organization reports Hawaiʻi is moving beyond last year’s mild recession as payrolls edge upward, but the Big Island’s tourism revenue showed the steepest county-level decline at -2.2% "ending the year," UHERO figures show. Payroll gains follow job losses tied to a tourism downturn and federal civilian workforce cuts that weighed on local incomes and hotel demand.

UHERO released its first-quarter 2026 forecast on February 27, 2026, projecting "Real income will grow by about 1% annually" and that "Real GDP will expand by 1.6% this year before converging to a similarly slow long-run growth path." The forecast expects unemployment to remain near a low 2.2% even as payrolls slowly recover, reflecting modest hiring across sectors rather than a surge in full-time employment.

Tourism remains the key driver and the chief risk for Hawaiʻi island. UHERO reports the average daily visitor census dropped 1.3%, while "travel from Japan continued to grow despite the sharp drop in international travel from other countries." At the county level, Big Island real visitor spending "fell the most on Hawaiʻi island, ending the year down 2.2%," a figure that signals weaker hotel occupancy and lower per-visitor receipts compared with Oʻahu and Maui County. UHERO does not expect a substantial recovery in visitor headcounts until 2027, a timeline that will affect hospitality payrolls and ancillary services on the island.

Sectoral projections point to uneven gains: UHERO expects construction, healthcare, and food service to create more jobs, while losses in federal civilian employment will stunt overall growth. The report’s narrative notes that "after job losses tied to a tourism downturn and federal job cuts, payrolls have begun to edge upward," underlining that employment strength is concentrated in specific industries tied to local demand and public projects.

Policy and external risks shape the downside scenarios UHERO highlights. The forecast names trade policy uncertainty, potential additional federal workforce reductions, and ongoing weakness in international tourism as significant threats. UHERO Executive Director Carl Bonham cautioned on tariff-driven disruptions, saying, "So if we’re facing, say, roughly across the board 15% tariffs right now. We still, in principle, think that should end in 150 days." The organization also tempered enthusiasm about technology, writing that "While the adoption of artificial intelligence holds promise, Hawaiʻi’s road ahead still looks to be one with slower growth than we have seen in the past."

UHERO researchers discussed the forecast in the UHERO Focus episode titled "UHERO Focus: 2026 Q1 Forecast," where Steven Bond-Smith reiterated the tempered outlook: "Although we’ve returned to growth, that growth is not, is not particularly strong. There is some income growth, but not particularly strong job numbers growth," and added, "And so while we’re seeing a recovery from the declines that we saw last year, that recovery is still mild." UHERO is housed in UH Mānoa’s College of Social Sciences; readers and local officials seeking the county-level tables and timing for the -2.2% Hawaiʻi island figure should consult the full UHERO Q1 2026 forecast and the UHERO Focus video for charts and methodology.