When I look at Hawaii, I see a place that faces real economic challenges. The high cost of living, dependence on tourism, and lack of affordable housing make it hard for many people to thrive.
Hawaii ranks near the bottom for state economies in the U.S. This shows how tough things are for local families and businesses (Hawaiʻi ranks 3rd worst economy).
Hawaii’s leaders and residents search for ways to build a strong, stable economy. They worry about slow growth, job opportunities, and how events like world pandemics or national changes can make things even harder for everyone (Outlook for the Economy).
I want to share the biggest challenges Hawaii faces today and why they matter to all of us.
Overview of Hawaii’s Economic Landscape
Hawaii’s economy relies on a few big industries. Both public and private sector efforts shape the economy.
Changes in tourism, local businesses, and public policies affect economic growth and challenges across the islands.
Key Industries and Economic Drivers
Tourism drives Hawaii’s economy and makes up a large percentage of the state’s real GDP. When people visit the islands, they spend money on hotels, recreation, transportation, and retail.
This spending strengthens local businesses and creates jobs. Other important sectors include government, the military, real estate, healthcare, and education.
The Department of Business, Economic Development and Tourism (DBEDT) tracks that while tourism leads, the public sector and real estate remain two of Hawaii’s most stable anchors. Agriculture and technology are smaller but growing.
Here’s a list of top industries by share of Hawaii’s real GDP:
- Tourism (including accommodation and food services)
- Government and military
- Real estate and construction
- Healthcare and social assistance
- Retail trade
These industries show Hawaii’s economy is more concentrated than in other states. For more details, see the data on Hawaii’s economic landscape.
Role of the Public and Private Sectors
Both public and private sectors shape Hawaii’s economic development. The state government funds large projects, supports local businesses, and encourages innovation to keep the economy stable after downturns.
DBEDT gathers economic data, reports trends, and helps shape statewide policies. They work with groups like the University of Hawaii Economic Research Organization (UHERO) to study issues such as job growth, housing, and cost of living.
At the same time, private companies, from large hotels to small businesses, provide most direct jobs. Collaboration between public agencies and private companies affects labor laws and investment in technology parks.
This partnership helps Hawaii respond quickly to external challenges, like natural disasters or drops in tourism.
Recent Economic Growth Trends
Hawaii’s real GDP dropped sharply during the COVID-19 pandemic. Since then, the economy has started to recover.
By late 2024, GDP rebounded about 1.9% above the pre-pandemic level from the end of 2019. Tourism-related sectors—such as accommodation, recreation, and food services—remain about 6% below their pre-pandemic size.
Unemployment rates in Hawaii are higher than the national average. The state’s overall economic ranking is low, coming in at 49th out of all states in a 2025 report.
Economic diversification is slow, and Hawaii’s reliance on tourism leaves the islands vulnerable when tourism declines.
Impact of Tourism Dependency
Tourism shapes job opportunities and state revenue in Hawaii. This heavy reliance puts Hawaii at risk during global uncertainty, shifting travel trends, or economic downturns.
Trends in Visitor Arrivals
The number of visitors to Hawaii changes from year to year. Peaks happen during holidays and summer, when families and international travelers arrive.
Drops occur during natural disasters or when international flight options are limited. For example, the COVID-19 pandemic led to a sharp decline in arrivals, which hurt local businesses.
The reliance on steady and high visitor numbers means that even slight dips in arrivals are felt throughout the islands.
In 2025, over 792,000 visitors came in January alone. High visitor numbers help hotels, restaurants, and activity companies.
However, they also put pressure on local resources, including beaches, roads, and housing.
Visitor Expenditures and Spending Patterns
Tourists spend most of their money on hotels, food, shopping, and local activities. Spending patterns have changed, with more visitors choosing budget travel, cheaper rentals, or shorter stays.
This shift affects the income the tourism sector brings to Hawaii. The largest share of tourist spending goes to lodging and food.
Retail shops and tours also benefit, but when tourists cut costs or visit fewer attractions, small businesses feel a direct impact.
When the visitor industry thrives, restaurants, stores, and tour operators hire more staff. If visitors spend less, businesses may cut jobs or close.
This cycle shows how tourism income links directly to local job stability and community services.
Effects on the Local Labor Market
Many people work in hotels, restaurants, or as tour guides. The tourism sector is the biggest employer in many areas of Hawaii, especially on Oahu and Maui.
Most jobs in this field require long hours. Many are seasonal or part-time.
Key Employment Sectors in Tourism:
| Sector | Example Jobs |
|---|---|
| Accommodation | Hotel front desk, housekeeping |
| Food Services | Servers, cooks |
| Transportation | Taxi drivers, bus operators |
| Recreation | Tour guides, surf instructors |
If visitor arrivals drop sharply, many jobs disappear. Recovery after events like recessions or travel restrictions can be slow, leaving many workers without steady income for months.
Vulnerability to International Markets
Hawaii welcomes both domestic and international tourists, especially from Japan, Canada, and Australia. Changes in flight routes, global political tensions, and health policies can all cause swings in international arrivals.
In recent years, worries about travel safety and shifts in currency value have led to fewer international visitors from some countries. For example, Japanese visitor numbers dropped due to economic factors and international news coverage about U.S. border policies.
When international markets slow down, the visitor industry loses hotel bookings, shopping, and tours aimed at overseas guests. International markets have a big influence on Hawaii’s economic health and job stability in tourism.
High Cost of Living and Housing Affordability
Living in Hawaii means paying higher prices for almost everything, from houses to groceries. High housing costs, fast rising consumer prices, and changing population trends affect residents’ daily lives and the state’s future.
Rising Housing Costs and Affordability Issues
Housing in Hawaii is some of the most expensive in the United States. Reports show that home prices and rents have climbed so high that many people spend half their income just to keep a roof over their heads.
Mortgage rates have gone up, making it even harder to buy a home. There are not enough affordable housing options.
The demand for residential units is much higher than what is available, especially for workers and families. The lack of supply pushes prices up even more.
Working families experience the highest housing costs in the nation, which puts real strain on daily living.
Consumer Inflation and Cost of Goods
Everyday items in Hawaii cost much more than on the mainland because of shipping fees and supply limits. The consumer price index, which tracks inflation, keeps rising here.
Grocery bills, gas, utilities, and basic necessities often cost 30-50% more in Hawaii compared to other states. Prices are high for food, fuel, clothing, and healthcare.
As inflation drives up the cost of goods, many residents struggle to make ends meet. The cost of living has become one of the top concerns for households and small businesses.
Impacts on Migration and Population Trends
Because of high costs, more people leave Hawaii than move in. Many local families move to the mainland, where housing and living expenses are lower.
The state now faces a decline in population, especially among younger adults and working families who find it hard to afford homes and basic needs. Population shifts affect the local workforce and economy.
As more people leave, Hawaii risks losing skilled workers and community members. This pattern impacts everything from school enrollments to home sales and even the demand for goods and services.
The housing crisis and high cost of living directly shape migration and population trends in the islands.
Labor Market Challenges
Hawaii’s labor market has changed a lot in recent years. Job growth, labor shortages, and workforce trends have created both hurdles and opportunities for people who live and work here.
Unemployment Rate and Job Growth
The unemployment rate in Hawaii has dropped as the state’s economy recovers from recent disasters, like the August 2023 Maui wildfires. In early 2025, more people are finding work and more jobs are reopening.
Even with this progress, job growth is slow in some areas. Job growth outside of tourism and hospitality is not keeping pace with other major industries.
Many new jobs are still tied to visitor-related businesses, making things unstable when visitor numbers drop. Some businesses remain cautious about hiring because of uncertain economic conditions.
Job recovery rates differ between islands. For instance, Maui is struggling more than Oahu, partly because of the impacts from the wildfires and its strong reliance on tourism.
Smaller islands often have fewer new positions available.
Labor Force Participation and Shortages
Labor force participation in Hawaii has become a key concern, especially on Maui. The island’s labor force has shrunk by about 4,200 workers, mostly because people moved away or sought work elsewhere after the wildfires.
This drop has left some businesses short on staff. Restaurants and hotels now find it harder to serve customers.
Across the state, many employers struggle to fill open positions. Some workers choose jobs on the mainland or switch industries, leaving gaps in local services.
Industries like healthcare, education, and construction face labor shortages. This affects the level of service people can expect.
When businesses can’t find enough workers, wait times get longer. Some businesses have to limit their hours.
Locals and visitors both face challenges as a result.
Job Opportunities and Payroll Jobs
Payroll job numbers are increasing, but the growth remains slow. Most new jobs are in sectors that serve tourists, such as hotels, restaurants, and retail shops.
Leeward Oahu and central Maui have seen modest payroll job growth in the last year. Job opportunities in specialized fields like healthcare, IT, and skilled trades are limited compared to other states.
Young adults and recent graduates often need to be flexible about the jobs they take or consider moving away for better opportunities.
A simple table below shows key job sectors and their challenges in Hawaii:
| Sector | Main Challenge | Job Growth Trend |
|---|---|---|
| Tourism | Seasonal demand | Moderate |
| Healthcare | Skilled worker shortage | Slow |
| Retail | Staffing shortages | Slight increase |
| Construction | Labor shortage, high costs | Flat |
Steady, year-round job opportunities remain limited, especially for workers without specialized skills.
Economic Uncertainty and Risk of Recession
Hawaii faces ongoing challenges from rising inflation and unpredictable federal policies. The state’s economic outlook depends heavily on national trends, making it sensitive to recession risks and sudden policy changes.
Inflation Rate and Economic Resilience
Inflation is a major concern for people living in Hawaii. Prices for groceries, housing, and utilities have gone up, making it harder for many families to get by.
In recent years, inflation in Hawaii has stayed higher than the national average. This puts extra pressure on local businesses and workers.
Many businesses have tried to cut costs or raise prices to adapt. This can mean fewer job opportunities if businesses hire less.
Some families have reduced their spending, which slows down economic growth. Hawaii’s small size and dependence on imports make it more vulnerable to inflation shocks.
The state is looking for ways to build resilience, such as supporting local agriculture and renewable energy projects.
Hawaii’s Connection to U.S. Economic Growth
Hawaii’s economy is closely tied to the broader U.S. economy. When the mainland grows, Hawaii often grows too.
Recent forecasts show growth might slow because of federal disruptions. Events like government spending cuts, tariff changes, and mass deportations could reduce economic activity in the state.
A recent forecast warns that even limited policy changes could slow economic expansion. Experts say that more than 2,000 jobs may be lost due to federal cuts, raising the risk of recession.
Hawaii’s economic health is at risk when there are large changes in federal policies or major shifts in the U.S. economy.
Response to Economic Downturns
When the economy shrinks or stalls, Hawaii must act quickly to limit the damage. State leaders work to support affected workers by offering job retraining and small business support.
Economic downturns often cause drops in tourism, which is a big part of Hawaii’s income. This makes recovery slower and harder compared to states with more diverse economies.
Groups like UHERO track these risks to help state leaders plan a stronger response to future downturns.
Population Changes and Demographic Challenges
Shifts in Hawaii’s population size and age are shaping jobs, public services, and the economy. Changes in who lives here and their ages affect demands on schools, healthcare, and business growth.
Aging Population and Workforce Implications
Hawaii’s population is getting older every year. By 2035, about 1 in 4 people will be 65 or older, according to reports from the University of Hawaii Economic Research Organization.
This puts a strain on the state’s workers, since fewer people will be in the labor force to support a growing number of retirees. With more seniors, demand for healthcare and retirement services will rise.
Fewer working-age adults could make it harder for local businesses to fill jobs, especially in tourism and healthcare. The government may need more resources for programs that help older adults.
Migration and Its Effects on the Economy
Many people, especially younger adults, are leaving Hawaii for the mainland. This trend of outmigration has caused a small population decline, with the state seeing a 0.3% drop since 2022.
High living costs, expensive housing, and limited work options drive this change. Losing young families and skilled workers means fewer people pay taxes and grow local businesses.
When residents leave, schools might see fewer students, and some employers may struggle to find qualified staff. These migration patterns can slow economic growth and make it tougher to support the island’s aging population.
Educational Attainment and Economic Development
Education shapes Hawaii’s economy in important ways. The level of educational attainment influences job opportunities and wages.
When people gain skills through schools like the College of Social Sciences, they are better prepared for higher-paying jobs and positions that help local industries grow. If fewer residents pursue college or vocational training, it becomes harder to attract new businesses and support existing ones.
Higher education rates are linked to stronger economic growth. Investment in education is key for the state’s future workforce.
Government Policy and Fiscal Issues
Government actions shape Hawaii’s economic future. Decisions on taxes and federal budgets can help the economy grow or make it more fragile.
Recent changes have had a noticeable impact on jobs, business activity, and household costs.
State and Local Tax Cuts
Hawaii’s government leaders have pushed for reductions in state and local taxes. Some officials believe that cutting taxes helps families and small businesses by leaving them with more disposable income.
These cuts can offer short-term relief, but they may also reduce funding for important services. Schools, public safety, and health programs often depend on tax revenues.
With less money coming in, these services might face cutbacks or delays. Sometimes, tax cuts also mean local governments have fewer resources to fix roads or support tourism.
Because so much of the economy relies on public infrastructure, even small gaps in funding can create bigger problems for both residents and visitors.
Federal Programs and Disruptions
Federal spending is very important to Hawaii. Military bases and federal projects create thousands of jobs.
If there are federal layoffs or slowdowns, the effects spread quickly across the islands. Recent shifts in Washington have led to fewer federal contracts, hiring freezes, and uncertainty for key services.
Sharp increases in federal layoffs and more unpredictable immigration policy have made families worry about their future income and health care security. These disruptions make it harder for businesses to plan and invest.
If mass deportations happen, the workforce could shrink sharply, hurting sectors like agriculture and tourism. These changes can make it harder for everyone to find stable work and affordable housing.
Effects of Tariffs and International Trade
Trade policies have changed a lot over the past year. Hawaii imports most of its goods, including food and building supplies.
When new tariffs raise the cost of imports, those higher prices are passed on to local families. Store prices go up when shipping costs and import taxes spike.
This squeezes household budgets. For many small businesses, it becomes harder to compete with mainland companies.
Increases in US import tariffs and other international trade barriers may lead to even higher inflation on essential goods. If trade partners respond with their own tariffs, Hawaii’s exports—like agriculture, coffee, and specialty goods—may also face new challenges outside the islands.
Natural Disasters and Unexpected Economic Shocks
Hawaii faces serious economic threats from both natural disasters and global events. These challenges can disrupt jobs, tourism, and daily life.
Impact of Wildfires and Recent Crises
Wildfires have become a bigger problem for Hawaii in recent years. When wildfires strike, they destroy homes and businesses and force people to evacuate their communities.
Wildfires hurt tourism, farming, and public health. Tourist spots might close, crops can be ruined, and the air can become unsafe to breathe.
After these disasters, local governments work to rebuild, but many families and businesses struggle to recover their income. Wildfires can cut off roadways and power lines, making it tougher for people to work and for businesses to reopen.
These events leave a lasting impact that can take a long time to fix.
COVID-19 Pandemic Effects on the Economy
When the COVID-19 pandemic hit Hawaii in 2020, travel restrictions and business closures followed quickly. Tourism, which is a major part of Hawaii’s economy, dropped sharply almost overnight.
Hotels, restaurants, and shops lost most of their customers. Many people lost their jobs, and families struggled to pay for rent, food, and other basic needs.
Government programs tried to help by giving out extra unemployment benefits and small business loans. Even after visitors began to return, the economy took time to recover.
The effects were felt across the islands, making the pandemic one of the biggest economic shocks in recent history.
Real Estate and Construction Activity
Real estate and construction in Hawaii shape the state’s economy, cost of living, and quality of life. Price changes, shifting demand, and rising building costs make the market both dynamic and challenging for buyers and builders.
Trends in Construction and Residential Development
Construction costs on the islands have increased. Builders now face higher expenses because of tariff changes and rising material prices.
The steady pace of new construction continues, but higher costs slow some projects. Finished homes become more expensive as a result.
Builders now focus more on smaller projects and renovations instead of large new developments. Labor shortages and expensive land limit how many new units they can add and how quickly they can build.
Most new homes target higher-income buyers. This trend does not help people searching for affordable housing.
The local housing supply stays tight, and prices keep rising.
Home Sales and Mortgage Landscape
Home sales in Hawaii show strong interest from both local and mainland buyers. Median home prices have topped $1 million on the main islands in recent years.
Homeownership has become a real challenge for many residents. Mortgage rates have also climbed, making monthly payments larger and pushing some buyers out of the market.
Sellers often hold firm on prices because demand stays strong. Many investors buy homes for vacation and short-term rentals, leaving fewer options for local buyers and renters.
This keeps available residential units low and competition high. For more on these housing trends, see this look at Hawaii’s real estate prices and sales.
Personal Income and Economic Well-Being
Rising living costs and slow wage growth make it tough for many people in Hawaii to make ends meet. These factors shape family budgets and affect daily spending.
Trends in Personal Income Growth
Personal income in Hawaii has struggled to keep up with the high cost of living. Wages have stayed flat for many jobs, while prices for food and housing climb each year.
Families earning low or middle incomes feel this pressure the most. Many households need two or even three jobs to pay bills.
Recent studies show about two-thirds of residents face financial struggles, making it harder to cover rent, groceries, and utilities. These money challenges are even bigger compared to most mainland states because expenses in Hawaii are higher than average.
More information about local wage trends is available in reports that highlight low wages and living costs.
Impacts on Local Consumption and Quality of Life
When my paycheck does not stretch as far, I have to make tough choices. Many families in Hawaii cut back on dining out, travel, and even healthcare.
Growing expenses force people to skip things that are not completely necessary. These limits shape people’s lives.
Children might miss out on school field trips or fresh foods. Some families delay doctor visits or struggle to pay for medicine.
These issues hurt our well-being and can make communities less healthy and happy. A recent statewide survey found that many residents feel ongoing stress from financial pressures.
These pressures affect daily life, as shown in Hawaii’s Quality of Life Dashboard.
