Post on 11-Dec-2021
transcript
Copyright 2020
Paul H. Brewbaker, Ph.D., CBE
Photo courtesy NASA (https://www.nasa.gov/content/station-view-of-hawaiian-islands/)
Hawaii’s Economy meets COVID-19Presentation prepared for
Hawaii Information Serviceon behalf of the
Hawai'i Island REALTORS®
West Hawaii Association of REALTORS®
Kauai Board of REALTORS®
by Paul H. Brewbaker, Ph.D., CBE
TZ Economics, Kailua, Hawaii
April 9, 2020
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The Way We Were: overview of local housing markets one month ago
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This section: calm before the storm
▪ Use single-family home prices as regional market barometer (sorry, condos)
▪ Distinguish four “islands:” Kauai, Hilo Side, Kona Side, and People’s Republic of K′au
▪ No offense K′au: “Onan Masuokoa Line of Demarcation” maxes signal-to-noise ratio;
consider this—I do the same amount of work for you guys as the other three “islands”
(Segregating Big Isle TMKs 1-4, 5-8, and 9 cleans signal from the “data-generating process”)
▪ Variety of distinctions in the 2019 data:
1. Hilo side of Big Island has lowest median prices, bested only by Ka′u
2. Kauai is like Hilo in terms of sales; Kauai is like Kona in terms of median prices
3. Underlying economic fundamentals in data solid up to (and through?) March 2020
4. Housing was momentum play vulnerable to incipient recession or Black Swans
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Thousand dollars, s.a. (log scale)
800
400
320
240
160
120
80
401990 1995 2000 2005 2010 2015 2020 2025
Big Island median single-family existing home prices had been
reaccelerating prior to the coronavirus event—fundamentally solid
Ka′u
Hilo side
Kona side
Hawai′i Becalmed (Grandy (2002))*
Kilauea
East Rift
U.S. recessions shaded
Sub-Prime Bubble
Source: Hawaii Information Service, special tabulation; calculation of seasonally-adjusted quarterly moments by TZE, quarterly data through March 2020.
*Christopher Grandy (2002), Hawai′i Becalmed: Economic Lessons of the 1990s, University of Hawaii Press
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Thousand dollars, s.a. (log scale)
500
400
300
250
200
150
100
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Big Island median single-family existing home prices had been
reaccelerating prior to the coronavirus event—fundamentals OK
Ka′u
Hilo side
Kona side
Kilauea
East RiftThe Great Recession
615682
307 289
305 265
82
341
162
Source: Hawaii Information Service, special tabulation; calculation of seasonally-adjusted quarterly moments by TZE, quarterly data through March 2020.
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Thousand dollars, s.a. (log scale)
500
400
300
250
200
150
100
2004 2006 2008 2010 2012 2014 2016 2018 2020
As with stock market valuations, after coronavirus herd immunity or
vaccination, will Big Island housing valuations revert to prior trends?
Ka′u
Hilo side
Kona side
Kilauea
East RiftThe Great Recession
800k
314k
+2𝜎7.7%−2𝜎
+2𝜎5.4%−2𝜎
Source: Hawaii Information Service, special tabulation; calculation of seasonally-adjusted quarterly moments, trend regressions by TZE, quarterly data through March 2020.
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Recessions don’t uniquely determine Big Island home sales trends but
expect a sharp break this quarter, at least, before resuming growth
50
40
30
25
20
15
10
500
400
300
250
200
150
100
50 1995 2000 2005 2010 2015 2020
Ka′u (left scale)
Hilo side (right scale)
Kona side (right scale)
U.S. dot.com
recession
U.S. Great
Recession
Kilauea
East Rift
Existing home sales, s.a. (log scales)
Source: Hawaii Information Service, special tabulation; calculation of seasonally-adjusted totals by TZE, quarterly data through March 2020.
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Kauai single-family existing home sales volumes exhibit a similar
restoration of longer term growth after the bubble: note shocks
Quarterly closings, s.a. (log scale)
200
160
120
80
60
40
1995 2000 2005 2010 2015 2020
U.S. recessions shaded gray
9/11
Lehman
Brothers
Equity
market
meltdown
Source: Hawaii Information Service, special tabulation; calculation of seasonally-adjusted quarterly volumes by TZE, quarterly data through March 2020.
COVID-19
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Kauai single-family existing home sales prices exhibit another
investor-driven characteristic: surging prices in “tail” of distribution
0
20
40
Thou.$
800
600
500
400
300
200
100 1995 2000 2005 2010 2015 2020
Kilauea
East RiftThe Great
Recession
Kurtosis (left scale)
dot.com
Recession
9/11
Median SF prices (right scale (logs))
Source: Hawaii Information Service, special tabulation; calculation of seasonally-adjusted quarterly moments, trend regressions by TZE (excludes one transaction in November 2018), quarterly data through March 2020.
717
441 445
744
259Iniki
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As with Big Island housing valuations, Kauai single-family median
existing home prices had been on a stable trajectory through 2020Q1
0
20
40
Thou.$
800
600
400
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
+2𝜎
5.5%
−2𝜎
Kilauea
East Rift
The Great Recession
Kurtosis (left scale)
Median SF prices (right scale (logs))
Source: Hawaii Information Service, special tabulation; calculation of seasonally-adjusted quarterly moments, trend regressions by TZE (excludes one transaction in November 2018), quarterly data through March 2020.
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0.00000
0.00025
0.00050
0.00075
0.00100
0.00125
0.00150
0 500 1000 1500 2000 Thous.$0.00000
0.00025
0.00050
0.00075
0.00100
0 500 1000 1500 2000 Thous.$
0.0000
0.0005
0.0010
0.0015
0.0020
0.0025
0.0030
0 500 1000 1500 2000 Thous.$0.00000
0.00025
0.00050
0.00075
0.00100
0 500 1000 1500 2000 Thous.$
Empirical gamma distribution estimates, all closing prices (less 5 Kona)*
show distinctions: Hilo most affordable; Kauai like Hilo sales, Kona prices
Hawaii County 2019
4,181 closings
$380k median price
58.99 kurtosis
Hilo side 2019
1,254 closings
$269k median price
6.84 kurtosis
Kona side 2019
989 closings
$630k median price
37.60 kurtosis
Kauai 2019
1,239 closings
$649k median price
33.93 kurtosis
Source: Hawaii Information Service, special tabulation; calculation moments, empirical gamma distribution approximations calculated by TZE
*Excludes five transaction values in Kona ranging from $12.7 million through $25.0 million
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Murphy’s Law meets a novel coronavirus and produces COVID-19
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0
200
400
600
800
Hawaii cumulative daily COVID-19 cases
March 2020 April 2020 May 2020
Assuming all existing mitigation (social distancing, shelter-in-place)
continues, Hawaii’s path should stabilize this month: what are odds?
435
551
Sources: Hawaii Department of Health (https://health.hawaii.gov/coronavirusdisease2019/); GARCH regression by TZ Economics, actual data through noon April 8, 2020
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On Monday, it had been two weeks since Hawaii broke exponential
growth of COVID-19 cases, doubling down on social distancing
0
100
200
300
400
Cumulative Hawaii COVID-19 confirmed cases
3/9 3/16 3/23 3/30 4/6
388
Log-linear (exponentiating) trend through March 24
Actual
Sources: Hawaii Department of Health (https://health.hawaii.gov/coronavirusdisease2019/); GARCH regression by TZ Economics on data through March 24, 2020; actual data through noon April 6, 2020
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0
10
20
30
40
March 2020 April 2020 May 2020
Hawaii daily incremental COVID-19 cases
Daily Hawaii confirmed COVID-19 cases; one model of “the curve”:
if social distancing succeeds in mitigation, what comes next?
Source: Hawaii Department of Health (https://health.hawaii.gov/coronavirusdisease2019/); actual and second-order polynomial GARCH estimates of the natural logarithm of Hawaii daily confirmed COVID-19 cases and two
standard-error bandwidth through noon, April 8, 2020.
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0
5
10
15
20
25
Taiwan daily incremental COVID-19 cases
January 2020 February 2020 March 2020 April 2020 May 2020
Challenge of successful containment: one crack in the edifice and
you’re on to mitigation; Taiwan daily COVID-19 cases
Sources: Taiwan Ministry of Health and Welfare (https://topics.mohw.gov.tw/COVID19/cp-4707-52357-205.html), World Health Organization (https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-
reports)
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0
100
200
300
400
500
Cumulative COVID-19 case counts
January 2020 February 2020 March 2020 April 2020 May 2020
Taiwan with 24 million persons beats Hawaii with 1.4 million persons
in cumulative COVID-19 case count—learn from Crazy Rich Asians
Sources: Taiwan Ministry of Health and Welfare (https://topics.mohw.gov.tw/COVID19/cp-4707-52357-205.html), World Health Organization (https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-
reports); Hawaii Department of Health (https://health.hawaii.gov/coronavirusdisease2019/), data through April 9 (Taiwan) and noon, April 8 (Hawaii).
Taiwan
Hawaii
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Both Korea and Taiwan managed containment for one month before
shifting to mitigation as COVID-19 cases came from abroad
0
20
40
60
80
0
200
400
600
800
Korea daily new COVID-19 cases
January 2020 February 2020 March 2020 April 2020
Taiwan, Hawaii daily new COVID-19 cases
South Korea
Hawaii
Taiwan
Source: Hawaii Department of Health (https://health.hawaii.gov/coronavirusdisease2019/); World Health Organization (https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports)
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0.0
0.2
0.4
0.6
0.8
1.0
Cumulative COVID-19 cases per thousand persons
January 2020 February 2020 March 2020 April 2020
By successfully mitigating coronavirus spread through aggressive
testing, tracking, tracing, South Korea continues to manage
South Korea
Hawaii
U.S.
1.013
0.269
0.201
Source: Hawaii Department of Health (https://health.hawaii.gov/coronavirusdisease2019/); World Health Organization (https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports)
Source: Covid Tracking Project, Business Insider, The Atlantic, Taiwan CDC (ttps://www.vox.com/policy-and-politics/2020/3/13/21178289/confirmed-coronavirus-cases-us-countries-
italy-iran-singapore-hong-kong)
A snapshot of early
Covid-19 testing
per million persons
(as of March 11, 2020)
Epic n00bular FAIL
(technical economics concept)
Oh snap, BiBimBap
World Health Organization
Situation Report April 7, 2020
Epidemic curve of confirmed
COVID-19, by date of report
and WHO region
80k
60
40
20
0
China
Europe
Americas
Source: WHO (https://www.who.int/docs/default-
source/coronaviruse/situation-reports/20200407-sitrep-78-covid-
19.pdf?sfvrsn=bc43e1b_2)
January February March April
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0
2,000
4,000
6,000
8,000
10,000
Daily tests
January 2020 February 2020 March 2020
Daily specimens tested for SARS CoV-2 by CDC labs (n = 4,255),
and by U.S. public health laboratories (n = 218,538)†
†Non-respiratory specimens were excluded. For state public health labs, the date represents the date of sample collection, if available, or the date tested. For CDC labs, the date
represents the date specimen was received at CDC. Results reported as of 4:00 pm ET on April 6 were included less seven days because of the lag in time between when
specimens are accessioned, testing is performed, and results are report. All data are preliminary and may change as more reports are received.
Source: U.S. Centers for Disease Control (https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/testing-in-us.html)
CDCPublic health labs
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Confirmed cases of COVID-19 by age group and
hospitalization status, Hawaii 2020
Cumulative number of persons with reported
COVID-19 laboratory tests, Hawaii 2020
Negative
Positive
Hospitalized
Not
Cases
140
120
100
80
60
40
20
Tests
14k
12k
10k
8k
6k
4k
2k
(n = 435)(n = 15,744)
3/7 3/11 3/15 3/19 3/23 3/27 3/31 4/4 4/80-19 yrs 20-39 yrs 40-59yrs 60+ yrs
Sources: Hawaii Department of Health (https://health.hawaii.gov/coronavirusdisease2019/what-you-should-know/current-situation-in-hawaii/) visualizations may be downloaded but the State of Hawaii inexplicably does not
publish this data at this web page, to my knowledge, but instead offers a link to a vendor (https://www.tableau.com/products?ref=https://public.tableau.com/views/LabTests/Dashboard1)
On April 8 (noon), of confirmed Hawaii COVID-19 cases, “80% were
residents returning from other areas;” known once testing ramped up
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Adjusted age-specific case fatality ratio during COVID-19 epidemic
Hubei, China, January and February 2020 (pre-publication data)
0
5
10
15
20
0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80+
Percent of each age cohort
Source: Julien Riou, Anthony Hauser, Michel J Counotte, Christian L Althaus (March 4, 2020) “Adjusted age-specific case fatality ratio during the Covid-19 epidemic in Hubei, China, January and February 2020,” medRXiv
(https://www.medrxiv.org/content/10.1101/2020.03.04.20031104v1). Preprint, not peer-reviewed, reporting new medical research yet to be evaluated. Not be used to guide clinical practice.
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Some current economic impacts of the COVID-19 pandemic
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Weekly new residential listings, Hawaii Island and Kauai combined:
everything was good to go until one month ago, then Sudden Stop
Source: Hawaii Information Service (special tabulation; weeks ending Sunday); regression estimate from January through week of March 2, 2020.
140
120
100
80
60
40January 2020 February 2020 March 2020 April 2020
Weekly new listings (log scale)
+𝜎
−𝜎
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Relationship between Big Island + Kauai listings and Hawaii COVID-19
cases: if we bend the curve do listings revive (low interest rates)?
Listings, weekly (log scale)
140
120
100
80
60
40 0
10
20
30
40
Weekly average of daily COVID-19 cases
Jan. 2020 February 2020 March 2020 April 2020
Source: Hawaii Information Service (special tabulation; weeks ending Sunday); Hawaii Department of Health (https://health.hawaii.gov/coronavirusdisease2019/); weekly aggregations of actual and second-
order polynomial estimates of the natural logarithm of Hawaii daily confirmed COVID-19 cases and two standard-error bandwidth through noon, April 6, 2020.
Big Isle + Kauai listings (left scale)
Cases (right)
Model
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What’s known as Sudden Stop: with COVID-19 Hawaii weekly claims
for unemployment insurance jumped as shelter-in-place took hold
Sources:Hawaii DBEDT (http://files.hawaii.gov/dbedt/economic/data_reports/unemployment/Weekly_UI_Claims.xls), UHERO Analytics (https://uheroanalytics.shinyapps.io/highfrequency/)
0
10
20
30
40
Weekly claims for unemployment insurance
Nov 19 Dec 19 Jan 20 Feb 20 Mar 20 Apr 20
Neighbor
Islands
Oahu
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Out of the Blue, Into the Black: now you know what Neal Young meant;
Hawaii daily passenger arrivals (smoothed) through April 6, 2020
Daily passengers deplaned (7-day smoothing)
0
10
20
30
40
Sep Oct Nov Dec Jan Feb Mar Apr
Christmas
Prince
Jared’s
Father-in-
Law Day
Spring
Break
Hail To
The Chief
2019
2020
Thanks!
Thanks
again!
Old dudes
returning
from Vegas
MLK
Sources: Hawaii DBEDT (http://dbedt.hawaii.gov/visitor/daily-passenger-counts/); University of Hawaii Economic Research Organization (https://uheroanalytics.shinyapps.io/highfrequency/)
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0
100
200
300
400
500
600
Monthly, in thousands, s.a.
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Visitor arrivals estimates from daily passengers through April 7, 2020:
when people say “like nothing that has ever happened” they mean it
Sources: Hawaii Tourism Authority (https://www.hawaiitourismauthority.org/research/), Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/): monthly data estimated through April 2020 based on daily passenger counts
through April 7, 2020; seasonal adjustment by TZ Economics
COVID-19
H1N1-A
Domestic
International
Aloha
SARS
9/11
Gulf
UAL
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3,200
2,800
2,400
2,000
2016 2017 2018 2019 2020
Index, 1941-43 = 10 (log scale)
+2𝜎
−2𝜎
Daily S&P 500 Index closing values through April 8, 2020:
displaced by Trump’s Trade War, now by a novel coronavirus
Sources: S&P Dow Jones Indices LLC, S&P 500 [SP500], from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/SP500), daily closing values through April 8, 2020; trend regression on natural
logarithm of daily closing values, April 1, 2016 – November 25, 2017, and two standard-error bandwidth by TZ Economics, projected forward through 2020 as if bad trade policy never happened after the tax cut.
Tax
Cut
Bubble
The China
SyndromeBurst
Trump
Jump
95%
Powell
Put
Tariff
Man 2
Tariff
Man 1
Tariff
Man 3
Hilary
Fade
Post-
Shanghai
Bubble
COVID-19
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Nationwide contractors reported widespread impacts of coronavirus:
55% owner 26% government delay or cancel; survey March 30-April 2
5
38
11
9
17
21%*
0 10 20 30 40 Percent
Other delay or disruption (or rounding)
Supplier notification of late deliveries or cancellations
Potentially infected person visited job site
Shortage of government workers (e.g. inspections)
Shortages of essential craftworkers (incl. subcontractors)
Shortages of materials, equipment (incl. PPE), parts
Source: Ken Simonson, Ph.D., Chief Economist, Associated General Contractors (April 6.2020), survey sample size 1,296 respondents
(https://agca.informz.net/informzdataservice/onlineversion/ind/bWFpbGluZ2luc3RhbmNlaWQ9OTI1MDUxNSZzdWJzY3JpYmVyaWQ9MTE0MDAxMzg2NA==)
*Chart shows proportions who reported specific reasons for delays or cancellations
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Economists’ expectations for next recession better only six weeks
ago; Q: “When will the U.S. economy enter the next recession?”
13%
37% 37%
13%
0
10
20
30
40
2020 2021 2022 2023
February 2019 August 2019 February 2020Percent of respondents
Source: National Association for Business Economics (February 24, 2020) (https://files.constantcontact.com/668faa28001/4343463d-1a6b-4fa7-8c4a-8a80fd8d4123.pdf)
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Fed’s actions: fed funds rate to zero, restore quantitative easing—at
the zero bound for nominal interest rates, buy assets, create liquidity
0
1
2
3
4
5
Percent
2008 2010 2012 2014 2016 2018 2020 2022
10y
30y
O/N
Source: Federal Reserve Board (https://www.federalreserve.gov/releases/h15/; https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15)
3y
2y
U.S. recession shaded
Lehman
Brothers
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0
1
2
3
4
5
6
7
Percent
2008 2010 2012 2014 2016 2018 2020
U.S. average 30-year fixed rate mortgage rates (+0.7 fees/points)
up only slightly from record low 3.29% (week ending April 2)
Sources: Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States (http://www.freddiemac.com/pmms/) and FRED, Federal Reserve Bank of St. Louis; (https://fred.stlouisfed.org/series/MORTGAGE30US).
3.33%
The Great Recession
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Same as it ever was? Life after the 1918-19 Spanish Flu pandemic, etc.
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A variety of industrial indicators a century ago illustrate the evolution
of economic activity at the time of the Spanish Flu pandemic
130
120
110
100
90
801915 1916 1917 1918 1919 1920 1921 1922
120
110
100
90
80
701915 1916 1917 1918 1919 1920 1921 1922
American Business Activity
(percent of trend)
6.5
6.0
5.5
5.0
4.5
4.0
3.51915 1916 1917 1918 1919 1920 1921 1922
140
130
120
110
100
901915 1916 1917 1918 1919 1920 1921 1922
Industrial Production
(2012 =100)
Industrial Production and Trade
(Normal =100)
Sources: National Bureau of Economic Research, from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/M1204BUSM363SNBR, https://fred.stlouisfed.org/series/INDPRO,
https://fred.stlouisfed.org/series/M12003USM516NNBR, https://fred.stlouisfed.org/series/M08067USM325NNBR); retrieved April 6, 2020.
Real per capita manufacturing earnings
(1914 =100)
Spanish Flu
Recession
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Monthly, thousands (staying 2 days or longer), s.a. (log scale)
2.0
1.6
1.21.0
0.8
0.6
0.4
0.21922 1924 1926 1928 1930 1932 1934 1936 1938
Monthly Hawaii visitor arrivals in the 1920-30s—excluding passengers on
ships in transit—exhibited business cycle, Black Swans, just as today
U.S. recessions shaded The Great Depression
Stock
Market
Crash
Maritime
Strikes
Oct. 1936 to
Feb. 1937
Sources: George T. Armitage, Hawaii Tourist Bureau, “Hawaii’s Tourist Business,” Hawaii Territorial Planning Board An Historic Inventory of the Physical, Social and Economic and Industrial Resources of the Territory of
Hawaii (February 8, 1939), p. 317; U.S. Bureau of Labor Statistics "The Maritime Strikes of 1936-37." Monthly Labor Review 44, no. 4 (1937): 813-27. Accessed January 29, 2020 (www.jstor.org/stable/41815101)
Pan-Am Hawaii Clipper
The Roaring Twenties
West Coast
Waterfront
Strike
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Domestic arrivals 6-months before and 6-months after the 9/11 event
(“month 7”), and after that: “is it L-shaped, U-shaped, or V-shaped?”
Thousands, s.a. (log scale)
300
290
280
270
260
250
240
230
220
210
200
190
180
170
160
150
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Oahu domesticNeighbor Isle domestic
Sources: Hawaii Tourism Authority, Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/), seasonal adjustment using Census X-13 ARIMA filter; seasonally-adjusted data may be downloadable from UHERO and the
DBEDT Data Warehouse. Simply translating month six values to a base period (divide all other months by its values) will index proportionate impacts to that starting point.
Oahu (right scale)
Neighbor Isles
(left scale)
Months
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Thousands, s.a. (log scale)
180
160
140
120
100
80
100
90
80
70
60
50
40
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Oahu internationalNeighbor Isle international
International arrivals 6-months before and 6-months after the 9/11 event
(“month 7”), and after that: “is it L-shaped, U-shaped, or V-shaped?”
Sources: Hawaii Tourism Authority, Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/), seasonal adjustment using Census X-13 ARIMA filter; seasonally-adjusted data may be downloadable from UHERO and the
DBEDT Data Warehouse. Simply translating month six values to a base period (divide all other months by its values) will index proportionate impacts to that starting point.
Oahu (right scale)
Neighbor Isles
(left scale)
Months
The SARS math (the bottom line):
Foregone visitor days, March-July 2003: 1.0411 mil.
Avg. daily intl. visitor expenditure (2003): $228.22
Foregone intl. tourism receipts (2003$): $237.60 mil.
Ratio of Urban Hawaii CPI-U 2019/2003:
(281.585/184.5) = 1.526 (inflation factor)
Foregone intl. tourism receipts (2019$): $362.58 mil.
Assumption: zero Iraqnaphobia impacts, international
impacts only to Japan, Asia, and Canada (half-weight)
Hawaii international visitor days (millions, s.a., log scale)
-.12
-.08
-.04
.00
.04
.08
.12
1.4
1.3
1.2
1.1
1.0
0.9
0.8
2002 2003 2004 2005
Residual
Actual
Fitted
Dependent Variable: Hawaii international visitor days (millions, s.a.)Method: Least SquaresDate: 02/05/20 Time: 15:02Sample: 2002M06 2005M12Included observations: 43
Variable Coefficient Std. Error t-Statistic Prob.
C 71.04634 30.08115 2.361823 0.0233@TREND -0.092303 0.039725 -2.323561 0.0255
@TREND^4 2.25E-11 9.64E-12 2.330655 0.0250DUMMYSARS -0.208211 0.026497 -7.857914 0.0000
R-squared 0.678778 Mean dependent var 1.201553Adjusted R-squared 0.654069 S.D. dependent var 0.089668S.E. of regression 0.052739 Akaike info criterion -2.958507Sum squared resid 0.108475 Schwarz criterion -2.794675Log likelihood 67.60791 Hannan-Quinn criter. -2.898091F-statistic 27.47049 Durbin-Watson stat 2.236366Prob(F-statistic) 0.000000
1.4
1.3
1.2
1.1
1.0
0.9
0.8
2002 2003 2004 2005
Int. visitor days, s.a. (model)± 2 standard errors
Forecast (model): Intl. visitor days
Actual: International visitor days
Forecast sample: 2002M06 2005M12
Included observations: 43
Root Mean Squared Error 0.050226
Mean Absolute Error 0.039894
Mean Abs. Percent Error 3.389676
Theil Inequality Coefficient 0.020853
Bias Proportion 0.000000
Variance Proportion 0.096563
Covariance Proportion 0.903437
Theil U2 Coefficient 0.569519
Symmetric MAPE 3.376099
Sources: Hawaii DBEDT Monthly Economic Indicators (http://dbedt.hawaii.gov/economic/mei/) and State of Hawaii Data Book
(2004) (http://dbedt.hawaii.gov/economic/databook/db2004/), U.S. BLS (https://data.bls.gov/cgi-bin/surveymost?r9) Slide copyright 2020
Post-9/11 recovery
SARS
SARS episode, March
through July 2003
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International visitor days before and after two famous Black Swans;
SARS associated with $360 million foregone tourism receipts (2019$)
Sources: Monthly data from Hawaii Tourism Authority and Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei), Federal Reserve Bank of St. Louis, OECD-based Recession Indicators for Japan from the Peak through the
Period preceding the Trough [JPNRECP] (https://fred.stlouisfed.org/series/JPNRECP); seasonal adjustment by and polynomial regression estimates by TZE
Monthly, million days, s.a. (log scale)
1.6
1.4
1.2
1.0
0.81997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
SARS
9/11
Japan recessions shaded
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Hawaii real General Fund revenues, seasonally adjusted, indexed to
“Quarter 2 = 100 (in parentheses)” and six episodes of “compression”
Sources: Quarterly data from Hawaii Department of Taxation and Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei), U.S. Bureau of Labor Statistics (https://data.bls.gov/cgi-bin/surveymost?r9); seasonal adjustment,
deflation, and regression estimate on the stationary component of real General Fund revenues by TZE
80
85
90
95
100
105
110
1 2 3 4 5 6 7 8 9 10
Abercrombie (2012Q3)
80
85
90
95
100
105
110
1 2 3 4 5 6 7 8 9 10
Dot.com recession (2001Q1)
80
85
90
95
100
105
110
1 2 3 4 5 6 7 8 9 10
Double-Dip recession (first; 1980Q1)
80
85
90
95
100
105
110
1 2 3 4 5 6 7 8 9 10
Gulf War (1991Q1)
80
85
90
95
100
105
110
1 2 3 4 5 6 7 8 9 10
SARS + Iraqnaphobia (2002Q4)
80
85
90
95
100
105
110
1 2 3 4 5 6 8 9 10
Great Recession (2008Q1)
Desert
Storm
9/11
SARS Lehman
Brothers
Reagan
tax cut
Lingle
trick
Ige Primary
80.1
H1N1-A
95.993.4
89.3 89.091.9
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Black Swans: improbable, high-loss event—you know (probability = 1)
that there’s going to be one, just not when, by how much, for how long
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Conditional annualized daily volatility of the S&P 500 Index—so, you
know it’s going to happen again, right? Just not why, when, how hard
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1980 1985 1990 1995 2000 2005 2010 2015 2020
1987 Crash
Lehman
Brothers
Tea
Party
COVID-19
WorldCom
EnronDot.com Bubble
Desert
Storm
Shanghai
Bubble Tax
Cut
China
Syndrome
Sources: S&P Dow Jones Indices LLC, retrieved from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/SP500), April 8, 2020; Threshold Autoregressive Conditional Heteroskedasticity (TARCH)
estimates of annualized standard deviations of log changes in the daily S&P 500 index calculated by TZE.
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Conditional annualized monthly volatility of Hawaii visitor arrivals,
let me guess: geophysical, geopolitical, or biological event?
0.0
0.5
1.0
1.5
2.0
1970 1980 1990 2000 2010 2020
9/11
SARS
H1N1-A
H7N9
COVID-19
Desert
StormUAL
ILWUFall of
Saigon
Packers win
First Super
Bowl ya know
(kidding)(or?)
Sources: HTA (https://www.hawaiitourismauthority.org/research/monthly-visitor-statistics/), Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/); Threshold Autoregressive Conditional Heteroskedasticity (TARCH)
estimates of annualized standard deviations of log changes in monthly Hawaii visitor arrivals, seasonally-adjusted, with passenger-based estimates for March and early-April 2020 calculated by TZE.
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Educate yourself: help build a bridge until vaccination, herd immunity
▪ Journalist Jon Cohen on COVID-19 research: https://www.youtube.com/watch?v=MPVG_n3w_vM
▪ Author Parag Khanna on Singapore lessons: https://www.youtube.com/watch?v=pGg9T8QLArg
▪ Johns Hopkins on Crazy Rich Asians: https://www.youtube.com/watch?v=7Rt4odDNDNw
▪ UHERO on rebooting Hawaii economy: https://uhero.hawaii.edu/how-to-control-hawaiis-coronavirus-epidemic-
and-bring-back-the-economy-the-next-steps/
▪ UHERO on test and trace: https://uhero.hawaii.edu/herd-immunity-or-containment-through-test-and-trace/
▪ The Atlantic on contact tracing: https://www.theatlantic.com/ideas/archive/2020/04/contact-tracing-could-free-
america-from-its-quarantine-nightmare/609577/
▪ China https://www.businessinsider.com/coronavirus-china-health-software-color-coded-how-it-works-2020-4
▪ Germany https://www.scmp.com/tech/apps-social/article/3079035/germany-turns-fitness-tracking-app-help-
monitor-coronavirus
▪ France https://www.reuters.com/article/us-health-coronavirus-france-apps/france-working-on-stopcovid-
contact-tracing-app-ministers-say-idUSKBN21Q1D3
Just like the good old days
Joseph Strong Honolulu Harbor 1836 (1866) [excerpt] Hawaii State Archives Slide copyright 2020
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Appendix 1: Hawaii was set up like bowling pin for coronavirus
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Because Hawaii hit idiosyncratic headwinds, real GDP growth lagged
U.S. average twice during 2010s, reaccelerated just before COVID-19
-4
-2
0
2
4
Quarterly annual percent changes (y-o-y)
2006 2008 2010 2012 2014 2016 2018 2020
Yen depreciation
Kilauea
East Rift
eruption
Tohoku
Seismic
Event
H1N1-A
The Great Recession
Aloha/ATA
shutdowns
Sources: Bureau of Economic Analysis, U.S. Department of Commerce (https://www.bea.gov/data/gdp/gross-domestic-product, https://www.bea.gov/data/gdp/gdp-state); quarterly data through 2019Q4, including
revisions, year-over-year growth rate calculations by TZE
U.S.
Hawaii
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-8
-4
0
4
8
12
Percent change
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Estimated Hawaii annual real GDP growth rates: as elsewhere islands’
growth has decelerated, with diminished volatility, settling to 1% (2019)
Sources: Robert C. Schmitt, Table 6.1 (1976) Historical Statistics of Hawaii, based on UH Economic Research Center work by Harry Oshima, Mitsuo Ono, Bank of Hawaii (unpublished), Yung Shang, William Albrecht,
Glenn Ifuku, Hawaii DPED (1988) Hawaii’s Income and Expenditure Accounts, U.S. BEA (https://www.bea.gov/data/economic-accounts/regional), interval growth rates and 2 standard deviation bandwidths based
on log changes of real GDP (or GSP, pre-1977) re-mapped to constant, 2018 dollars from NAICS data 1997-2018, SIC data 1977-1997, and prior estimates
*Mahalo, Tom Coffman†Mahalo, Chris Grandy (note that “smooth pasting” issues complicate interpretation of data around 1997)
Sub-
Prime
Bubble
4.9% ± 319 basis points (1954-83)
2.2% ± 290 basis points (1983-2010)
1.8% ± 95 b.p.
U.S. recession dates shaded
Hawaii Becalmed†
Catch-A-Wave*
Japan Bubble
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Appendix 2: undocumented vacation rentals—the future?
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Little bit of pile-up in Oahu condominium resale market: months of
inventory remaining at current absorption broke link after Clampdown
Source: Honolulu Board of Realtors, monthly data through January 2020 (https://members.hicentral.com/images/Documents/msr/MSR_Jan2020.pdf), seasonal adjustment by TZ Economics
0
1
2
3
4
Months remaining, seasonally-adjusted
2013 2014 2015 2016 2017 2018 2019 2020
Vacation
Rental
Clampdown
Condominium
Single-family
Correlation January 2013 – July 2019: 0.891118
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Monthly, thousands, s.a. (log scale)
80
70
60
50
40
30
202015 2016 2017 2018 2019 2020
Source: Hawaii Tourism Authority (https://www.hawaiitourismauthority.org/research/monthly-visitor-statistics/); monthly data through December 2019, seasonal adjustment using, nonlinear trend regression through July 2019
by TZE [ ln(VREVOVR3_D11) = −34.2837734267 + 0.0508333271106*t − 1.20633926677e-14*t5 ]; trend growth rate through July 2019 was 20.2 percent p.a. (2.2 percent p.a. for hotel-condo-timeshare visitors)
Through January 2020: monthly Oahu visitor arrivals (staying in a
rental house, private room, or shared room in a private house)
16k
+2𝜎
−2𝜎
28k
Vacation
Rental
Clampdown
August-December 2019 estimates:
Foregone vacation rental visitors −57,731
evaluated at 10 days LOS, $180 pppd: $103.97 million
August 2019 – July 2020 estimates:
Foregone vacation rental visitors −196,118
evaluated at 10 days LOS, $180 pppd: $353.01 million
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Monthly, thousands, s.a. (log scale)
560
540
520
500
480
460
440
420
4002015 2016 2017 2018 2019 2020
Oahu total visitor arrivals, on good run, were gifted Southwest
Airlines entry, lump of coal by Honolulu City Council, then COVID-19
VR
clamp-
down
COVID-19*
Southwest
Airlines
Sources: Hawaii Tourism Authority (https://www.hawaiitourismauthority.org/research/), Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/): monthly data estimated through March 2020; seasonal adjustment and
regression by TZ Economics
* Estimate based for Oahu visitor arrivals based on statewide total passenger arrivals through March 18, 2020 and likely a
gross underestimate of the COVID-19 decline to date
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0
10
20
30
40
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Apt/Hotel, B&B, Condo Hotel,
Hostels, Hotel, Timeshare, Other
≈4X capacity increase / 20 years
Thousand lodging units
Source: Hawaii DBEDT annual Visitor Plant Inventory reports (http://dbedt.hawaii.gov/visitor/visitor-plant/), disaggregation by TZ Economics
Haw
aii V
isito
rs B
ure
au
did
no
t su
rve
y
Oahu traditional lodging capacity growth ended 34 years ago; capacity
growth since was in vacation rentals, subverting exclusionary zoning
Vacation Rental39.010
39.240
35.4193.821
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41.314
36.238
31.580
0
10
20
30
40
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Haw
aii V
isito
rs B
ure
au
did
no
t su
rve
y
≈13X capacity increase / 27 years
Neighbor Isle traditional lodging capacity growth ended 28 years ago;
one-quarter now vacation rentals contesting global brands’ oligopoly
Vacation Rental 9.734
Thousand lodging units
Apt/Hotel, B&B, Condo Hotel,
Hostels, Hotel, Timeshare, Other
Source: Hawaii DBEDT annual Visitor Plant Inventory reports (http://dbedt.hawaii.gov/visitor/visitor-plant/), disaggregation by TZ Economics
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Appendix 3: population and demographic trends, muted 21st century
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Thousands (log scale)
70
60
50
40
30
20
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Post-Vietnam Era military personnel and dependent counts in Hawaii:
post-Cold War downsizing (1990s); post-Iraq, Afghanistan (2010s)
Berlin
Wall
Iraqnaphobia
Military personnel
Military dependents
58.5
36.6
49.8
48.9
34.4
69.9
58.1
Source: Hawaii DBEDT (http://dbedt.hawaii.gov/economic/databook/2017-individual/_10/)
64.5
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Estimates of the components of population change for Hawaii:
2010-2019 (Julys); net domestic outmigration swamping others
-30
-20
-10
0
10
20
30
2011 2012 2013 2014 2015 2016 2017 2018 2019
Net intl.
Births
Deaths
Net
domestic
migration
Thousand persons
14.506 14.449 15.266 9.672 8.610 2.363 −1.145 −3.712 −4.721
Sources: U.S. Bureau of the Census, Hawaii DBEDT (http://census.hawaii.gov/home/population-estimate/, http://files.hawaii.gov/dbedt/census/popestimate/2019_state_pop_hi/nst-est2019-05.xlsx)
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−30
−20
−10
0
10
20
2011 2012 2013 2014 2015 2016 2017 2018
−4
0
4
8
Components of 2010s population change: declining natural increase
and international in-migration, growing net domestic out-migration
Int. migr.
Births
Dom. migr.
Deaths
Sources: Hawaii DBEDT (http://census.hawaii.gov/home/population-estimate/, http://files.hawaii.gov/dbedt/census/popestimate/2018_state_pop_hi/nst-est2018-01.xlsx and
http://files.hawaii.gov/dbedt/census/popestimate/2018_state_pop_hi/nst-est2018-popchg2010_2018.xlsx)
Int. migr.
Births
Deaths
Domestic
migration
Thousand persons
Oahu
Neighbor Isles
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1,000
700
500
300
200
100
70
50
30
20
101825 1850 1875 1900 1925 1950 1975 2000 2025
Thousand residents
Neighbor Island population only grew in modern era since 1960s—for
more than three decades, people moved to Oahu; now they’re leaving
Jimi Hendrix: Rainbow Bridge
https://www.youtube.com/watch?v=PD5QEhQms5A
Guns, Germs, and Steel
Plantation
mechanization
Sources: Robert C. Schmitt (1976), Historical Statistics of Hawaii UH Press; Hawaii DBEDT (http://dbedt.hawaii.gov/economic/datawarehouse/)
Oahu
Oahu
Neighbor Isles
Neighbor Isles
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Sources: Hawaii DBEDT, U.S. Bureau of the Census (decennial enumerations compiled by TZ Economics)
20th century mortality reduction, fertility reduction, increased longevity
population aging—what happens to houses if Boomers die after 2030s?
100 200100 200
0-15
15-24
25-34
35-44
45-54
55-64
65+
100 200 100 200 100 200 100 200 100 200 100 200 100 200 100 200 100 200
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Hawaii population by age cohort—decennial census data
Thousands
36.5 29.1 25.4 17.9 13.7 11.4 9.6 7.5 5.4 4.5 4.2
Persons
ages 20-64
for each
aged 65+
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Pau