\n![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/09\/Hale-Pilina-construction-1-May-2026-1024x768.jpg\")
Hale Pilina affordable rental housing construction (May 2025). The construction industry remains a bright spot in Hawai\u2018i\u2019s economy, the Department of Business, Economic Development and Tourism reported this week. PC: Catholic Charities Hawai\u2018i<\/p>\n
Hawai\u02bbi\u2019s economy is on track to grow just 1.3% this year, a slowdown from 2.5% growth in 2025, according to the state\u2019s latest quarterly economic forecast released Thursday.<\/p>\n
The Department of Business, Economic Development and Tourism\u2019s third-quarter 2026 report pulled back its outlook from the 1.6% growth projected just three months ago, citing persistent inflation, fewer visitor days and modest job growth. Construction, health care and steady visitor spending are helping cushion the slowdown, the department said.<\/p>\n
Growth is expected to pick back up gradually, reaching 1.6% in 2027 and 1.8% in both 2028 and 2029.<\/p>\n
Job market tight, but stable<\/p>\n
Hawai\u02bbi employers listed 642,700 seasonally adjusted nonagricultural jobs in July, just 0.2% more than a year earlier. The unemployment rate climbed to 2.7% in July, up half a percentage point from July 2025, which the department attributed to a slightly larger workforce rather than job losses.<\/p>\n
Construction and health care continued to drive hiring. Construction added 1,300 jobs (up 3.3%) and health care and social assistance added 2,100 jobs (up 2.8%) during the first seven months of 2026 compared to the same period last year. Accommodation employment gained 700 jobs and food service and drinking establishments added 600.<\/p>\n
Private-sector hiring\u2014up 3,200 jobs over that span of seven months\u2014 helped offset a 2,200-job decline in government employment. The federal government workforce in Hawai\u02bbi shrank by 3,000 jobs, or 8.5%, over the same period, with most of the cuts concentrated on O\u02bbahu.<\/p>\n
The department projects statewide job growth will remain modest through the forecast period, averaging 0.5% annual growth from 2027 through 2029, with unemployment easing slightly to 2.3% by 2029.<\/p>\n
Inflation still elevated, but cooling<\/p>\n
Prices remain a bigger concern than jobs for many residents. The Urban Hawai\u02bbi Consumer Price Index was up 5.6% in July compared to a year earlier, with core inflation\u2014excluding food and energy\u2014at 4.8%. Amid the war with Iran and disruption of shipping through the Strait of Hormuz, energy prices spiked 22.5% year-over-year, though they fell 5.1% between May and July, a sign the worst of the energy-driven inflation may be easing.<\/p>\n
The department projects annual inflation will average 4.4% for 2026 before dropping to 3.1% in 2027 and continuing to ease toward 2.5% by 2029.<\/p>\n
Visitors spending more, staying less<\/p>\n
Tourism remains a mixed bag: visitors are spending more per day but staying for shorter trips. Statewide, arrivals rose 2.5% to 5 million during the first half of 2026 compared to a year earlier, and visitor spending rose 6.3% to $11.6 billion\u2014even as total visitor days fell 3.8% to 41.4 million.<\/p>\n
The trend was even more pronounced in July, when the average length of stay dropped 14.1% to 7.6 days. But a 17.1% jump in average daily spending, to roughly $296 per visitor, kept total visitor expenditures 1.7% above July 2025 levels.<\/p>\n
Mainland markets continued to prop up the industry. Arrivals from the US East Coast jumped 13.4% in the first half of the year, with spending up 15%; U.S. West arrivals were up a more modest 1%, with spending up 7.6%. But international travel is pulling back heading into fall: scheduled nonstop air seats for September through November show steep capacity cuts from Japan (down 12.9%), Canada (down 12.7%), Korea (down 21.8%) and Oceania (down 21.3%), even as U.S. West and East capacity continues to grow.<\/p>\n
For the full year, DBEDT projects 9.7 million visitor arrivals (up 0.9%) and $22.4 billion in visitor spending (up 2.3%), even as total visitor days decline 4.5%.<\/p>\n
Income growth slows after wildfire settlement bump<\/p>\n
Real personal income growth is projected to slow sharply, from 3.9% in 2025 to just 0.6% in 2026\u2014a drop the department largely attributes to the fading effect of one-time Maui wildfire settlement payments that inflated 2025 income figures, rather than any pullback in regular wages. Nominal personal income is still expected to grow 4% this year, to about $114.1 billion, with real income growth improving to 1.3% in 2027.<\/p>\n
Nominal GDP is projected to grow 5.2% in 2026, to roughly $131.1 billion, while real GDP\u2014adjusted for inflation\u2014is expected to reach about $95.4 billion.<\/p>\n
A cautious outlook<\/p>\n
Department of Business, Economic Development and Tourism Director James Kunane Tokioka struck a measured tone in a statement accompanying the report, noting that 2026 so far \u201chas brought economic challenges for our state, including inflation and several severe weather events.\u201d He thanked emergency responders and community partners involved in ongoing recovery efforts.<\/p>\n
\u201cDBEDT remains committed to providing information that helps businesses, policymakers and communities plan for the weeks and years ahead,\u201d Tokioka said.<\/p>\n