Musings: Boom and Bust

A band of deep blue stretched along the eastern horizon, which was dotted with towering cumulus just barely visible in the dim light, when Koko and I went walking this morning. The moon, headed toward full on Friday, had either set or was smothered in the west, while Venus glowed murkily through a swath of black clouds that soon delivered a shower.

We heard it coming and took refuge on a bench under an awning where the old Filipino uncles would soon be gathering, as they do each morning, for coffee, pastries, cigarettes and conversation, and from that vantage point we watched it fall.

So has the economy stopped its free-fall? Though federal Reserve Chairman Ben Bernanke recently declared that the nation stands on the brink of recovery, at least one key player in the financial sector, billioniare hedge fund manager Paul Tudor Jones, has a different idea.

According to an article at Bloomberg.com, he thinks record government spending may be forestalling another slowdown and market selloff.

”If we have a recovery at all, it isn’t sustainable,” Kevin Harrington, managing director at [Jones investment company] Clarium, said in an interview at the firm’s New York offices. “This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.”

Here on Kauai, things are already pretty tight. The unemployment rate is at 10 percent — up from just 3 percent a year ago. And First Hawaiian Bank’s Leroy Laney is predicting that Kauai will see its largest contraction in jobs since Hurricane Iniki hit in 1992.

As we recovered from Iniki, we put all our eggs in the tourism and high-end home construction baskets. Both boosted us in the short-term, but failed us in the long run.

During the first half of the recession, Laney said that Kauai experienced the biggest drop in visitor arrivals of any island. Work at Kauai Lagoons and the Ritz Carlton Residences ceased as a result of the financial turmoil, and much of the construction in the Poipu area either halted or slowed markedly, he said. Only seven out of 25 lots at Poipu Beach Estates, near Sheraton Kauai Resort, have been sold, and construction has not started, he said. Likewise, prices are down at Koloa Landing, a 323-unit luxury condominium project.

Meanwhile, home sales are down 30 percent and condo sales have dropped 40 percent, and real estate prices have fallen across the board. Folks in the housing sector can’t quite agree on whether Hawaii’s real estate market has bottomed out, or when it might recover, although none are predicting any time too soon.

So how is all that affecting those at the lower end of the economic spectrum? I learned the other day that Kauai’s waiting list for HUD rental assistance has grown to an astounding 1,500 — it usually hovers at around 300 to 400 — and no new federal funding is expected for the remainder of this fiscal year, which ends in June 2010.

What that means is the possibility of a lot more homeless, or a lot more doubling and tripling up in homes, because the folks on that waiting list can’t afford market rents.

Rental housing isn’t the only area where folks are hurting.

The economic situation, and its impact on the freelance market, recently prompted me to take a part-time job providing services to some of Kauai’s low-income residents. One of my duties includes managing a food pantry, and even as we’re seeing more folks come in, we’re seeing less food available from the Food Bank.

USDA, which distributes the canned goods, protein and rice that provide the mainstay of our offerings, is cutting back its allocations, for reasons that are still unclear to me.

Meanwhile, most of the people coming in for emergency food aren’t the homeless or chronically poor, but middle class citizens — folks in all sorts of different occupations who have seen their hours cut, or jobs eliminated, and now are struggling to pay their mortgages and car payments and other bills.

Others are taking the low road, with The Garden Island reporting that crime is up on the visitor-intensive southside.

An electrician friend recently installed security lights at the home of a longtime Poipu resident worried about the rash of break-ins at adjacent vacation rentals — some of them done while people are sleeping in the unit. Many of them are hit repeatedly, because the perps know that a fresh batch of victims will be arriving each week.

[Kaua‘i Police Department Lt. Dan] Abadilla and others also concurred that today’s thieves are organized, work in groups, case out likely targets, identify specific rental cars going in and out of a target, and know the neighborhoods very well.

Needless to say, this has the visitor industry worried:

Sue Kanoho, executive director of the Kaua‘i Visitors Bureau, echoed the sentiments of many of the 40 attendees at the Tuesday [Kaua‘i Chamber of Commerce] meeting when she said it is only a matter of time before a burglar enters an occupied vacation rental, is confronted by occupants, and commits a more serious crime, like murder, assault or sexual assault.

“A majority has been visitors, unfortunately,” she said of burglary victims, including one family that was hit twice in the same unit during their one-month stay recently.

What’s the antidote? According to Laney:

"Recovery will be gradual and will depend critically on the return of healthy tourism, especially for an economy like Kauai's," Laney said. "And that in turn will depend on the return of better times to the mainland economy, especially the West Coast."

Federal stimulus money also could help fund government construction, and the Pacific Missile Range Facility has continued to supply high-salary jobs, he said.

"When the economy struggles, activities not related to the economic cycle such as the Pacific Missile Range Facility are appreciated more than ever," Laney said.

So that’s what we can look forward to? More boom and bust tourism cycles and a growing military presence?