 Okay, we're back for a live at the five o'clock clock today on a given Tuesday after Labor Day, I guess. And we have Eugene Tien. He is the state economist at the state of Hawaii. And we want to talk to him about what the future looks like in the economy. The State Debate recently published a report about this. We want to ask him about the report and his forecasting, especially now, especially when there is such uncertainty, and we want to know how that uncertainty is going to affect the economy, going forward. Eugene, thank you so much for appearing. You're welcome. So, I guess the first thing is what is the state economist to make economic analysis you look at all these factors and variables and whatnot. And then you give you give the debate I guess a handle on where it's all going. But where does that go from there. Go to the legislature to go to governor to go to the public. Where does it go and who does what with it. Hey, Jay, a good question. Thank you for inviting me. And it's a good question. What do we do. We have our government economists in my office and my office we have four branches, and we have one branch is called economic research branch. We do economic studies in terms of we have a whole bunch of reports on our website, including the legislature money to the studies, for example, the film tax credit. And we have studies on the real property taxes. And we have studies on the research activity tax credit. What is the impact of those. So, there's many. And you heard about the labor statistics. Every month we have the primary how many jobs, how many people employed how many people employed that's one group in my division. We have a division called tourism research. So that division, that branch published data on a monthly basis. How many visitors come to Hawaii and how much they stand where they came from, which island they visited those kind of thing. And we have another branch is compiling the state of Hawaii data book. We also work with the US Census Bureau on population data. Actually, our office is the only state office partnered with the US Census Bureau on population. If we want to know anything about publishing how many Japanese how many Vietnamese, where do they live. What is their income how many male female. That's our office. So that is a general. So what is your relationship with the council on revenues, because we know the legislature looks very carefully at them at the decide how much money they can spend you. Do you inform the council or is the council inform your office. Okay, they are independent entity, and they do forecast their revenue forecast for the state, and the state has to, and namely, but in finance office, they have to use the console forecast to budget state this money. They actually just completed meeting today. And I think they started there too and concluded at four o'clock. So they do forecast the state general fund revenue based on the economy and of course this big uncertainty due to the delta variant is also in the play for the protection. One more thing is, I would imagine that the money committees committees that determine how much money the legislature is going to spend on a given bill or a given, you know, subject would would actually call you on the telephone and say Eugene, we have a question. And that you help them, and they use that information in order to make decisions about how much money we have and we're going to spend am I right about that. You're correct. Yes, they do, you might need for briefing at least every year at the beginning of the year, usually in the first few days in January. They asked me to give presentation to the money, the two committees about what is happening in the economy and also in the presentation, they usually invite the chair of council revenue. They also invite a hero, Dr. Carl Bonham to speak on behalf of the heroes protection. And during the legislation or during a normal time, they do contact me about my view about the economy of about tax revenue and the economic impact. I'm also a member of the House Select Committee on COVID-19. That puts you in a very important spot. You know, when I went to college they always told me that economics was an art more than a science. Do you agree with that and do you guys you economists here in Hawaii. Do you always agree on things. I think you're right because the people who get the degree from economics and they are actually a part of art rather than part of economics and the definition of economics economics is a choice of science. So we make choices on the daily basis government or individual you make your choice because you have limited resources in terms of time in terms of money for natural resources. But there are many things you want to do, but then you are constrained by a limited resource, then you need to make a choice. But what kind of choice is to make. Once you make a choice you give up something. So you want to make the best choice to your benefit. That's why it is called economics is a science of choice. So you're in these meetings other economists around other people who have studied economists, you know, economics, you agree with them do they agree with you do you ever find yourself in a situation where you're at opposite ends of an argument. We do have sometimes have argument on the, we have different views on the economy because even in the economic field that we have different branches. And there is a many three economists talking about the money consoles the interest rate. And there is a new classical or classical economies. The view is that the government should not intervene economy let the economy adjust themselves and there's economies. interested in the government government intervention, and the economy cannot reach a point government need to guide to reach to a certain point. So there are so many different branches and we do have some sometimes we have differences and we have arguments. But I think that will help. If you look at the same issue from this different angle. I think it's always a good thing. Yeah, sure. Um, you know, one thing is that when you look at this from a college level. It is definitely an art and it wasn't hard. When I went to college and took economics but you know since then mathematics has caught up with us mathematics has developed, you know with the help of, you know, electronic calculations. It developed predict prediction analysis. I went to a program at you age a couple of years ago that kind of blew my mind about how you could predict bloody anything using predictive analysis. I wonder, you know whether you know when you go from taking a bachelor's in economics to a PhD that that whole mathematical modeling is what you learn in the graduate degrees and what you Eugene are looking at when you're trying to do predictions are you doing predictive mathematics. And the tool we use is called econometrics econometrics is the mathematical myster and in a lot of people, the, the term they called called regression analysis, but there are so many different models, even using regression. There are so many different models. We do all. We are all trained and everybody in my office use some kind of econometric model to project what it will be happening in the future. And because most of them are based on the past 10, even the past 20 years, or past 30 years, and depends on what the variable then we look into the future. See what the trend I think as we talk at the beginning, the, we use the past and a lot of times, their projection is stable. And if you don't get in into consideration is the daily changes. And, for example, current, the delta variant, the code cases is increasing has been increasing since August. And because of that, there are so many things, for example, starting next week, there will be restrictions for a whole residence if they go to restaurant. And because of the governor's decision on table. And I think we caution that the governor caution that it is not a good timing for now to visit Hawaii because of the COVID cases. The airlines, they have been adjusting their flies schedule on the daily basis. So that's why I look at the data I look at it. I read it. I look at it. What is the booking for hotels and the airline schedule for the flies. I look at what happened in the job count. And we have the weekly unemployment claims. And we also have the daily passengers and daily visitors coming to the state and look at it daily, the data and see what will happen. I don't know how you do that these days. I mean, back in the day, the data would not change every day or every hour. Now, you get new data every day, every hour. And you have to factor that in because professionally, you have to include all the data, you can get your hands on. And so, you know, if you're looking for uncertainty, you can find uncertainty. Finally, and this is this seems to me to be getting clearer and clearer. A lot of this data is like it reflects sociological changes. It reflects changes in the way people think they're, you know, there's sentiments. You can learn this from surveys, I suppose. You can learn it from social media social changes if you will. So you look at the data and then you say, hmm, the data really depends on the social social and sentiment changes. I have to look at that too. And before you know it, you're swimming in in a sea of change every day. How do you sleep at night Eugene. Because I think it's the technology because the technology changes is the the broadband internet. And we have this program called the safe travel program started October 15, 2020. And everybody coming to Hawaii, they have to register online. So every day we get the who are coming if they are returning residents, if they are in transit, or they are visitors for a vacation, or they are getting married. So we have those data on daily basis. That's why I get those numbers on every day to see what is the change. And we do see a decrease since the beginning of August. And we do the main tool for us to get the data. You're right. It is sorry. We do a lot of service on the daily basis. We do sorry for labor, you know we find how many people are employed employed. And we do service on visitors. And we know where they, they visit. Are you happy or they are not happy. We also ask the residents, we do surveys on residents, are you happy with the tourism. And those kind of thing we also do surveys. That's why we find how many businesses were closed in April, 60% of the business were closed. How many businesses were open in March this year 2021. That's why we found out is about 92% of our businesses opened as of March 2021. That's pretty interesting. You know what one thing is as a state economist you may have a different orientation than, for example, the business economist I can remember a time when both of the big banks had economists on their staff and the big bank was Bank of Hawaii. And he always took the position that don't, don't talk to me about economic diversification. It isn't going to happen. He always said that, and I always disagreed with him about it. And I guess I'm not sure that that's that's kind of the pessimistic view of things, but the government would not necessarily want to be pessimistic because what you say is actually a factor in the way business reacts to the economy. You or the Fed, for example, makes a statement that's negative. Then you know the market goes down because you carry a big stick. So the question is, how do you cope with that in your heart. Are you pessimistic or you optimistic. And as part of the government what what are your leanings to be sure that you're not creating a factor that will have an effect that you don't want to have. Yeah, I think we as economists, we try to be as objective as possible. And we use, we tell stories about the fact, rather than tidying anything beyond the fact. But I think for myself, I think we look at the data we see many things are encouraging. For example, during the first seven months up to July, the economy, economic recovery was great. For example, as of July, the tourism recovery is 88.4% compared with the same month, 2019. So it's 88.9%, 88.4%. In terms of job counts, the payroll job account recovery is exactly the same, 88.4%. Coming to August, it will be a pause. It doesn't mean that it will be, it will have a negative, but it's just a slow, because as of today, we see, we still have a lot of visitors, we have about 20,000 visitors a day coming to Hawaii. So we have, it's not, I think the demand is still there. You know, after September, October, those two months, I think we expect it will be slowing down. But at the demand, and the recovery will be fast, starting in November and December. Okay, God, I hope so. You know, so often it's just a question of timing. You know that something's going to happen. You just don't know exactly when it's going to happen. I mean, I can tell you at some point in the future, the market will go up. And then we can disagree as to when, or I can tell you that at some point in the future, the market will go down. And it will, we can just disagree about when. Well, we're looking at uncertainty today and I want to look at the report that you issued. And this part is called major factors of concerns, including these. And I wanted to, I want to read them to you actually Eugene and ask you, you know, how these factors play, okay, in determining the future of the Hawaii economy. Great cases surged since late July. The average seven day daily new infections were 49.2 cases per 100,000 and ranked the 17th highest among all the states, the US seven day daily new cases were 43.1 per 100,000. That's forward before the entire duration of the pandemic March 7 last year through August 21 this year, why he continues to have have had the lowest infection rate and the lowest death rate in the nation. So how does that that data affect your view of the uncertainty going forward, and the, you know, forecast going forward. The, we did a forecast in May. So our forecast without this, the search in the cases, actually this search started in late July, our forecast for the economic growth was 3.5% for 2021. In our new forecast late August we projected 2.7% is a reduction by 0.8 percentage point. So the main factor is the uncertain cost by the Delta variant. I think by the time of the release or writing was how he was around the 17th place. But if we look at the data today, how is getting worse. We ranked today we ranked 11th highest in the nation with 51.5 cases per 100,000 population, while the US cases were 38.4 cases per 100,000 population so we're getting worse. But the projection actually took into account that the situation will last for two months for September and October, but I do hope that the case in this situation will go over quickly. Hopefully it's not going to last until the end of October. And for example, I do watch the hotel bookings on a daily basis I do like watch the airline schedule. For example, the Air Canada, they just suspended flights to Hawaii from this month until this week, and on September yesterday until for months until October 7th. So they will resume October 7th. So from the airline point of view, they think this situation may be over in the months. If we look at the airline schedules, we do have a flat in September. We have a small, we have a decrease in October about 2% in terms of air seat, but then we have about 13.5% increase in November. So that is consistent with our forecast that we will be slow in September and October, we will be coming back in November. Yeah, so I mean it's perfectly, you know, useful to see these business organizations make their predictions. And then you can look at that as one of the factors that you would consider. Because they know more perhaps about their industry than anyone else does. I also wanted to mention that this thing was in the newspaper today about how the median home price in Hawaii had now exceeded a million dollars. And that's an optimistic point, I guess, and that tells you people are willing to spend more money on homes in Hawaii. So what does it mean to you as an economist, looking at the picture, and, you know, and cranking the whole real estate market into your analysis. So two, three things are connected. One is the real estate market is booming is a worldwide phenomenon is not only for the US for Hawaii and for the world as well. The reason is there is a limited supply. So the listing the multiple listing has a smaller number compared with the previous years, and the demand is strong, although we have the code, but our income actually increase. So the personal income increase in 2020 is actually increased by 16.4% for the first quarter. Our household do have money is because of the federal government. So far as of today, the federal government has allocated 19 or 19 billion dollars to the state. You think about the comparison comparing with the visitor expenditure. The visitor expenditure for the whole year is less than 18 billion is about 17.8 billion. And the final government allocated about 19.2 million already so that a lot of them came to the household as I'm from I'm from insurance. As the, you know, we all receive a check from the Donald, President Donald Trump on the $1,200 per person those kind of government assistance. People have money that the money is high for real estate. And also the supply is low. I think there's some reason that the sellers is holding up. They may have some some hard time to get out of their renters because of the protection. And because of the real estate, we see the construction industry is moving. And we see the construction industry for the first half year increased by about 45%. You know, one, one thing they also told us in college economics Eugene was that at the end of the day was all about public confidence. And you had to find a way to ascertain public confidence because because that would ultimately affect markets. How can we do that at a time when public confidence is not high. Where people worry about whether the government is going to do the infrastructure bills, you know that that could mean, you know, as much as 4.5, I get this right 4.5 trillion dollars some of which would come to Hawaii, or not, but it wouldn't do anything so that's hanging in the balance and the impact is huge on both possibilities of that dilemma. So public confidence may may suffer or maybe benefited by what happens in Washington, and actually you don't know from day to day, what's going to happen. Can you talk about public confidence, and what affects public confidence, and how that affects the economy. Yeah, I think you can tell from the demand for housing is one. So you see the stock market performance. Then you also see the visitor coming. Actually, we do see from the TIC data. We do see the total traveling travelers nationwide is actually a little decrease in the beginning of August. But for the nation is backing up is stable is is increasing in since last week, but Hawaii is continue to decrease. And but now the trouble if we compare with the beginning of the year US Hawaii, in terms of the growth is about the same. So from those three things, you look at the housing demand, you look at the visitors coming, and that's the demand you look at the construction. People do feel confident. And those are current cases. It does making a lot of people feel pessimistic. But I think the majority of people, majority of the people feel that the future is good. I think they have a lot of hope. And the government, I think one thing they may rely on government assistance because the 4.5 trading, there will be 2.8 billion coming to Hawaii. So those money will have Hawaii's economy hiring people, especially in the field of construction investment. So that will help the economy. I think the pandemic actually put the government, the federal government has put in a lot of money to the state and as I said, the household. Do see increase in household income. What do you say to the people who say in Congress that, you know, we're giving too much money to people who, as soon as you get the money to stay home, they don't want to take a job. And as a matter of fact, there are more jobs than there are people applying for jobs. And the whole thing is skewed when you give away too much money. So we shouldn't give as much money away. What do you say to them from an economic point of view. That is possible, you know, because of the government assistance, but I think that the main main thing for Hawaii is the kind of job. Because Hawaii, if you look at the job opening in the last eight months, the opening is actually in the professional services and business administration. But we lost job in the tourism sector. So the tourism sector, in terms of jobs recovery, although the statewide total recovery is 80.4%. But for the tourism, the recovery is only about 70%. So we have a lot of jobs in the tourism industry, but they are not the people employed. They don't fit the professional services job because those jobs need a special training and special degree. So there is a mismatch. Yeah, that's another phenomenon, you know, we talked about uncertainty and pessimism or optimism, what have you, but seems to me there's another factor in play I wonder if you're cranking that in. And this is the factor of, you know, we are at a turning point. My life is at a turning point. I don't want to go back to a minimum wage job, for example, in a restaurant. I want to do something better. So I'm going to, I'm going to wait it out until something better comes along for me. And, you know, I've heard it said that a lot of people feel that way. They're, they're waiting for something better. They are not going to go back to the way it was. We are in a transitional moment as far as the labor force is concerned, you agree. I do agree with you. I think that's why I think this dynamic may change the people's way of working. And that's why I said that we do the main tool we use is survey. We currently is doing a survey on the remote work. We survey both employers and employees and I want to see their willingness and their practice and their pros and cons of working from home. So the survey is currently ongoing. So that is a way I think at least for the remote work. It is one of the ways is going to is going to stay or develop in the future. I think this remote work is also impact the real estate, because I think the demand for a single families. And this, you know, far from the urban center, it may, because people, they can work from home anywhere, it doesn't need to be in the urban center. So that's why we see the demand for a single family. I think you see the one who average lunch on the market is about nine days. It's very short. Wow, that's never been like that as long as I'm not lately anyway. You know what the one thing that all suggests to me Eugene is that our economy to go further our society is being remade by these forces by these considerations even as we speak. And when we come out the other side, it's hard to say when that would be but when we come out the other side, see the light in the tunnel and we emerge hope that soon. We're going to find that our world from an economic social societal point of view is different. Do you agree with that. I think there's a lot of things will be changed. I think after this, when the pandemic is over. And actually, we are the Hawaii Economic Association is holding a annual conference on October 7 and the eighth. So there we are going to talk about I think one subject you may like is we are talking about how are we going to have a trade off between tourism and other sectors, and namely is diversification. And how do we develop other sectors and what are the views of visitors. And what are the views of our residents. What are the changes during this pandemic. What will be the future look like. Oh that's very juicy, especially in you know in the observation that I've made over the years. But let me ask you this. Of course it's a long way several months to the legislature. Well it's not several months to what the governor could do what you know what what would be the first step the kind of steps we should take to improve our economic picture based on what you know today. But what are the most important things to do by him by the governor by the legislature by the agencies, if you will, to enhance the possibilities is diversification one of them how important is that. That's a very good question but this question is actually a very good question to the administration, and I'm an economist working under the administration. As I said, I only talk based on the fact, I see, but I don't make any policy calls. I think that what the government is going to do, and based on the current situation to have the economy to develop the economy. I don't think I'm in a position to speak for that. But I do feel that there will be. I do feel confident about the economy, and I do feel the pentups, the money is very strong, both from local and as well as from the visitors, and you can see the booking the whole type of booking. Actually has been increasing if you look at the going into forward as March 2022 is booking are still very strong. So, but I do believe that we are protection for, for example, we do believe by the end of this year December, the visitor arrivals will be 100% recovered from the December 2019. And we will see how the COVID cases develop. And currently we don't see a rapid declining. It's hard to predict it to because at the end of the day it's, it's a social experience as the anti vaxxers is people being willing to wear masks and all that so you, you know, you don't know how which way that's going to swing. One thing you mentioned you know the October 7 economic association and the discussion of diversification. That is really an important meeting I think, because when we come out the other side that could make a big difference. And assuming as I will, that a lot of people would like to see tourism, you know be constrained going forward and diversification takes an important role not only for tourism itself but for the workforce who would like a better, a better job. So that would be a very interesting conference I think. Let me go to one last question and I don't want to, I don't want to short shrift your charts and graphs, because I know Eugene that economists live on charts and graphs that's, that's your product right there. So can we look at your forecast charts, both in the numbers and in the, in the lines, and just have you describe them quickly and show how they support an optimistic view. Yes, our forecast that you can see from the, the table on the screen actually to go from the lower part of the table, it shows a percentage, I think that may be easier to understand. We do hope that in terms of population are from the 2020 census, we do have 1.46 million resident population, that including military present in the state. We do see hope that it will be very small increase of 0.1% increase in the, this year and next year is small increase into the future for population. And the visitor arrivals we expect it will be 6.8 million visitors for this year. And currently we already have a 3.6 million already as of July. So there will be, we still have another five months to go. And this forecast does indicate that we expect September and October will be slow for months will be about 50% of the 2019 level. But if it lasts longer than October, the number will be smaller. But this is our projection of a 6.8 million visitors. You, if you look at the second line actually, the visitor industry is not going to recover completely until 2025. So the number up to 2024, you see we have one 10.2 million visitors, that is still lower than the 2019 level of 10.4 million. So it takes five, six years for the tourism industry to recover. And that expenditure, because of the inflation, the visitor spending in terms of nominal dollars will be 18 billion in 2024 is higher than 2019. But if you deflate with the inflation, it will be smaller as well. So if you look at the GDP, the last line for the upper table, you look at 2019, the total GDP is 82.5 billion, 82.5 billion. So if you look at the forecast into the future, we will recover by 2024. The economy is not going to be recovered until 2024. So you take a few years. So this means that we are not going to be fully recovered until 2024 in terms of the size of the economy we call the real cross domestic product. We need to be patient and the economy will take a few years to recover. And if you look at the job count, you look at the non agricultural wage and salary jobs. In 2019, we have about 658,500. So if you look at the jobs by 2024, we are still lower. So in terms of tourism, in terms of jobs, we are not going to recover completely by 2025, which is beyond our forecasting period. So that is basically our forecast. That's really great. Thank you so much for coming on. But I think you and I can agree that nothing is carved in stone here. And you're going to be looking at this in every few weeks or every month and you may find factors and variables that change. So, you know, forecast here that we've just described that could change. And when that changes Eugene, I hope you'll come back on think tech, and we can talk about the changes and how the forecast changes now. Yes, we do forecast every quarter. So next one will be in November. Okay. I'm making a note. I'm making TN Hawaii State Economist. It's been so nice to talk with you and get a handle on these things. Really appreciate, you know, the examination evaluation you make the analysis you make it. I think it helps us all understand where we are where we're going. Thank you so much Eugene. You're welcome. My pleasure.