Hawaii’s red-hot construction industry represents the only bright spot in an otherwise somber economic outlook heading toward the end of the year, with even more bad employment and economic expectations to come next year, according to the latest forecast from the University of Hawaii’s Economic Research Organization.
“It’s a little bit of a bleak outlook—not a lot to be optimistic about, ” said UHERO Executive Director Carl Bonham.
UHERO’s third-quarter economic forecast outlines a long list of forces—many driven by Trump administration policies—that are expected to lead to more job losses, rising costs and a “mild recession ” for Hawaii that will affect everyone.
But Trump administration changes to Medicaid and reductions in SNAP benefits will hit low-income Hawaii residents disproportionately, according to UHERO.
“This remains an outlook that will inflict significant pain on some Hawaii residents, with the greatest costs to the lowest income households, including workers in tourism-related areas, ” according to UHERO. “Laid off federal government workers will of course also suffer severe losses.”
Coming out of an expected Hawaii recession, UHERO expects a “gradual recovery ” to follow in late 2026.
In between, according to UHERO, Hawaii should see “higher prices and tepid growth (that ) will impose ongoing costs on Hawaii households.”
If the U.S. Supreme Court allows President Donald Trump’s tariffs to go through, the effect could drag down the importation of steel and lumber that also could cool construction in Hawaii.
And, according to UHERO, “Inevitably, U.S. and Hawaii residents will be unable to avoid paying higher prices for many of the goods they consume.”
A typical, median-income family in Hawaii will see a “permanent annual ” price increase of $1, 400 annually because of tariffs, according to UHERO.
The Trump administration already has eliminated 1, 200 federal jobs across the islands this year, with more to come on Tuesday when temporary work extensions for targeted federal workers expire.
“Many sectors are now contracting, led by federal job losses and tourism sector declines, ” UHERO wrote. “The drop in federal jobs—down more than 1, 200 already—will deepen as deferred resignations take effect at the end of this month.”
The result means “Hawaii’s economic prospects remain poor, ” according to UHERO. “In Hawaii, visitor numbers are down, job growth has stalled, and housing activity remains weak. Inflation will rise over the next year as tariffs feed through to consumer prices. Construction remains the only major source of strength, supported by large federal contracts and other public projects. We will see a mild recession in the Islands over the next year, with the weakening U.S. economy threatening a potentially deeper downturn.”