Economic Development of Hawaii

Hawaii, with an area of 28,313 sq. km (10,932 sq. mi.), is the
43rd largest state in the U.S.; 6.9% of the land is owned by the
federal government. It consists mainly of the Hawaiian Islands, eight
main islands and 124 islets, reefs, and shoals. The major islands in
order of size are Hawaii, Maui, Oahu, Kauai, Molokai, Lanai, Nihau,
and Kahoolawe. Population growth has increased by 80,000 persons over
the past five years. Demographics show a large number of Hispanic
origin: Asian Hispanics are the most populated with white Hispanic
and Asian non-Hispanic following. Hawaii's economy has been long
dominated by plantation agriculture and military spending. As
agriculture has declined in importance, the economy has diversified to
encompass a large tourist business and a growing manufacturing
industry.

Hawaii's economy has changed drastically since statehood. In
1958, defense, sugar, and pineapple were the primary economic
activities, accounting for 40% of Gross State Product (GSP). In
contrast, visitor-related expenditures stood at just over 4% of
Hawaii's GSP prior to statehood. Today the positions are reversed;
sugar and pineapple constitute about 1% of GSP, defense accounts for
just under 11%, while visitor-related spending comes close to 24% of
Hawaii's GSP.

The movement toward a service- and trade-based economy becomes
even more apparent when considering the distribution of Hawaii's jobs
across sectors. The share of the economy's jobs accounted for by
manufacturing and agriculture have declined steadily since 1959 and
each currently makes up less than 4% of total jobs in the economy. At
the same time, the shares of jobs in wholesale and retail trade and in
services have risen, ezding at about 23% and 28%, respectively.
Since 1991, Hawaii's economy has suffered from rising rates of
unemployment. This ezds in marked contrast to the period 1980 to
1993, when the state enjoyed very low unemployment rates relative to
the nation as a whole. But by 1994 the recession had raised Hawaii's
unemployment rate to the national average (6.1%) for the first time in
15 years. In 1995, the state's unemployment rate improved slightly in
the first eleven months of the year to 5.4 percent, a 0.6 percentage
point decline from the first eleven months of 1994. Despite the lower
unemployment rate, the total number of wage and salary jobs declined
by 0.6 percent during the first eleven months of 1995. This was due in
part to a fall in part-time jobs which are often held by persons who
also have primary jobs elsewhere in the economy. The number of
construction jobs declined by more than 7 percent in the same period.
Other industries--namely, manufacturing, agriculture, transportation,
communications/utilities, and finance, insurance, and real
estateexperienced declines in the number of jobs as well. Jobs in
retail trade and services, however, increased 2.2 percent and 0.5
percent, respectively, reflecting an increase in visitor spending
since 1994. Following a dismal first quarter due to the Kobe
earthquake, there was steady growth in the tourism sector in 1995 with
increases in the number of visitor arrivals and hotel room rates. The
number of visitor arrivals to the State increased 3.2 percent during
the first eleven months of 1995. The increase in the value of the
Japanese yen vis-a-vis the U.S. dollar during this period contributed
to a rise in eastbound visitors in the second and third quarter of
1995 by 11.8 percent and 15.4 percent, respectively. However, in the
first eleven months of 1995, the number of westbound visitors remained
flat. This year is the 11th year in a row that the U.S. has
experienced reduced spending on national defense. The continued
reduction is due to the decline in superpower tensions and the
political disintegration of the Soviet and East European-block during
this decade which have prompted the Congress and Administration to
initiate significant cuts in the level of defense expenditures in
recent years. However, because of the strategic location of Hawaii in
the Pacific this changing military posture has not significantly
affected Hawaii's $3.7 billion Federal defense sector.

The construction industry continued its decline in the first
eleven months of 1995. This loss was mainly due to decreasing demand
exacerbated by higher interest rates during the first half of 1995,
following a 12.4 percent drop in 1994. Another reason is that
construction costs rose by 15 percent from 1992 to 1995, which is much
higher than the consumer