Economies that rely on just a few primary sectors comprised of, largely, low-wage jobs have a hard time weathering shocks, and it’s the workers who suffer most.


From December 2007 through June 2009, the world experienced the most significant economic recession in recent history. The “Great Recession” had a severe impact on Hawai‘i’s workers, economy and state revenues and spending. The biggest effects were:

  • One million fewer visitors arrived in 2009 than in 2007, and the visitors that did come spent nine million fewer days in the state;
  • Visitor spending reductions caused a loss of $3 billion to Hawai‘i’s economy;
  • The state average unemployment rate rose from 2.7 percent to 7 percent, with higher rates outside Honolulu County;
  • The plummeting economy caused a loss of 43,850 jobs;
  • Half of all jobs lost were in the tourism, transportation, retail and service industries;
  • More than one in four construction jobs across the state were cut;
  • Wages declined and, due to changing labor market dynamics, low-wage jobs now pay less than before the recession; and
  • The median sales prices for O‘ahu single family homes and condominiums started to drop in 2008, a trend that accelerated in 2009; and
  • Enrollment in the University of Hawaiʻi (UH) increased by 18 percent at four-year campuses and 28 percent at community colleges, even while appropriations of general funds for UH dropped by 26 percent per student.

When the economy is strong, jobs are plentiful, investments grow, many people prosper. The opposite happens in a recession. The people hurt most by economic hard times are those who can barely make ends meet. In Hawai‘i, this means nearly half of all families.

Speculation over another economic decline occurring in the near future is increasing, as unsettling trends in employment, bankruptcies, and visitor growth continue. Nationally, construction is faltering, the stock market is more volatile, and the yield curve (an inversion of short-term over long-term interest rates) on U.S. Treasury bonds shows investors growing skittishness. In Hawai‘i, the unemployment rate has been edging upward for more than a year. In March, 2019, bankruptcies reached a four-year high. Hotel occupancy rates are decreasing, and economists at the University of Hawai‘i Economic Research Organization (UHERO) have predicted limited growth for 2019–2020.

In 2007 (Pre-Recession):

  • Hawai‘i’s unemployment rate was 2.7 percent (currently about the same).
  • An average of 6,600 people filed for weekly unemployment benefits.
  • The number of civilian jobs in the state was estimated to be 624,000.

During the Recession:

  • The unemployment rate hit its peak in 2009 when it rose to 6.9 percent.
  • The largest number of people applying for unemployment benefits was also in 2009, when the weekly average number of filers was 20,500 (triple the number of 2007 filers).
  • Between 2007 and 2010, 6 percent of all jobs disappeared. The low in job numbers in 2010 was 593,200, or 38,000 less than 2007’s high of 631,350.

Why Is Our Economy Vulnerable to Shocks?

Currently, Hawai’i’s economy is largely unvaried, relying on the government, hospitality and retail sectors for more than half of all employment. On top of this, more than half of all jobs pay low wages. Hawai‘i remains, according to some critics, one of the least diversified and most recession-vulnerable states in the country.

During economic bad times, low-wage workers are typically the hardest hit by unemployment and reduced wages. Earnings of low-wage workers in Hawai‘i dropped by as much as 10 percent during the last recession, and many of these workers have yet to recover. The recession increased the gap between people with few resources and those with more secure incomes. Unfortunately, even as our economy has been in a growth cycle for years, half of the state’s residents struggle to make ends meet.

As described in the Aloha United Way A.L.I.C.E. (Asset-Limited, Income-Constrained, Employed) report, between 2007 and 2015—at the same time low-income wages were dropping—the minimum “survival budget” for a family of four increased by 20 percent. This not only hurts the families involved, but also the well-being of our state.

When jobs in Hawai‘i pay less than the cost of living, workers cannot pay for decent housing, nutritious food, quality childcare, training and education, and a better future. They may have to work more than one job, leaving little time for family and community. These circumstances have the greatest effect on the economic prospects for Hawai‘i.

It goes without saying that tourism is important to Hawai‘i’s economy. Between 2007 and the recession low-point, in 2009, Hawai‘i experienced a 14 percent drop in tourism and a 22 percent decline in visitor spending.

The decrease in visitors contributed to, and was worsened by, Aloha Airlines’ bankruptcy and closure in March 2008, followed shortly thereafter by that of American Trans Air (ATA). Additionally, two of three Norwegian Cruise Line ships were pulled from the Hawai‘i market in early 2008.

In 2010, visitor arrivals began to pick up, though total visitors did not exceed the 2007 tally until 2012. While the average length of stay between 2007 and 2009 increased slightly from 9 to 9.38 days, spending continued to decline. Spending per visitor dropped to $1,847 in 2009, compared to $2,136 in 2007 (adjusted for inflation). Per visitor spending has continued to decline, amounting to just $1,742 for the first three quarters of 2018.

If another recession in the near future were to cause the same percentage of decline, based on 2017 figures, Hawaiʻi would see 1.4 million fewer arrivals, 11 million fewer visitor days, and $3.7 billion less in visitor expenditures.

Which Sectors Are Vulnerable?

Hawai‘i’s unemployment rate increased from 2.7 percent to 7 percent by 2010. Prior to the recession, Hawai‘i had an estimated 631,350 jobs. During the recession, 44,000 jobs were cut. Four out of five jobs lost came from just five sectors:

  • Construction (– 10,200);
  • Leisure and Hospitality (– 9,850);
  • Transportation, Warehousing, and Utilities (– 6,700);
  • Professional and Business Services (– 4,650);
  • Retail (– 4,600).

However, some sectors grew, underscoring the uneven effects on the economy. The biggest gain was in federal government jobs (3,150) and those in health and human services (2,250).

Unemployment rates varied across counties, as shown in Figure 1. While the state’s highest unemployment rate was 7 percent, the City and County of Honolulu never exceeded 6 percent and Hawai‘i County’s was nearly 10 percent from 2009 through 2011.

Bankruptcy filings in the state reached a peak in 2010, with a level four times that of 2006. During and immediately after the recession, 12,540 bankruptcies were filed. Noted above were the business-ending bankruptcies of Aloha Airlines and ATA, which resulted in the loss of thousands of jobs. Other high-profile businesses that filed for bankruptcy during the recession were Hilo Hattie and Hawaiian Telcom. While more than 500 businesses failed, 96 percent of the filings were for non-business bankruptcies.

During the economic recession, most business sectors shed jobs. If these sectors lost the same percentage of jobs now, the number of jobs disappearing would be 45,400. A few sectors gained jobs at a rate of 5.6 percent. If their performance were the same, they would add 6,900 jobs, despite a recession.

The state’s largest job market, within the City and County of Honolulu, kept its unemployment rate below 6 percent. But the state’s other three counties, and particularly Hawai‘i County, were hit harder. The unemployment rate has been creeping upward since late 2017, with Hawai‘i County once again seeing the largest rise in unemployment.

Effects on Workers

Average annual wages for all civilian jobs, as adjusted for inflation, declined by 4 percent during the last recession and have barely regained their pre-recession value. The average wage, as reported for 2017, is less than 1 percent higher than that earned in 2007. And that’s the average: Between 2000 and 2015, earned income declined for workers with incomes at and below the 50th percentile, while it increased for those above the line. This divergence reflects not just recession-related lost ground, but also the increasing pay gap between skilled and unskilled jobs.

Hawai‘i is the only state in the nation with an employer mandate to provide health insurance. With job losses, the number of working-age adults without health insurance grew by nearly 21,000, an increase from 8.3 to 10.7 percent between 2007 and 2010. With the rise in unemployment, the number of people covered by employer-sponsored health insurance dropped.

The Medicaid program expanded to avert a crisis for many families. Medicaid (Med-QUEST) enrollment expanded to accommodate many unemployed adults and their children, adding 53,900 people to the program during the same period. Gaining Medicaid coverage may have averted some medical cost-related bankruptcies and certainly alleviated for many the stress of being uninsured.

The increase in federal dollars that funded the larger Medicaid program contributed to the economy by paying for care and supporting jobs in the health care industry.

The wage gap between skilled and unskilled labor will continue to widen, and those in unskilled jobs will be hit hardest by an economic recession. Hawai‘i should work toward a more diversified economy to increase opportunities and reduce risks. Growth should emphasize sectors that pay higher wages, such as knowledge-based jobs that depend on higher education, technology and specialized skills. Among other things, this will require a significant investment in quality public education from pre-Kindergarten through graduate school, and targeted technical training for other workers.

Download our complete report on the Great Recession, with recommendations for the state to better prepare for the next downturn.