A forecast being released today shows Hawai'i is tipping into a recession as job losses and a decline in personal income shrink the state's economy.

The report, by the University of Hawai'i Economic Research Organization, shows there will be a decline in jobs this year and next, while personal income on an inflation-adjusted basis will turn negative in the fourth quarter and continue that way during the first half of 2009.

"Hawai'i's economy is not growing at all. It's shrinking," said Carl Bonham, the research organization's executive director. "That's a recession."

The organization updates its economic projections quarterly, with the current report lowering projections of visitor arrivals. The group's economists almost doubled the projections they made in June — now forecasting a 9.1 percent decline in visitor arrivals, the biggest decline in arrivals since 2001 as vacationers from the Mainland and Japan diminish.

Tourism has been hit hard by a number of factors, with the nation's credit crunch and rising fuel prices hastening the demise of Aloha and ATA airlines earlier this year and resulting in higher airline ticket prices. Mainland travelers also have cut back on vacations because of the cost and a slowing of the economy.

In July, the number of visitors to Hawai'i was off 13.7 percent compared with a year earlier, while hotel occupancy was at a 10-year low of 74.2 percent.

"The third-quarter numbers are going to be very, very weak because the world economy is slowing and because of what's happening with housing and financial markets," Bonham said.

"Not a lot of people are going to be jumping on planes coming to Hawai'i."

The report doesn't mention a recession, but many of its projections show the economy at lower levels than 2007, including employment, unemployment, and personal income growth on an inflation-adjusted basis.

IT'S NOT UNANIMOUS

Definitions of what constitutes a recession vary, and at least one economist disagreed yesterday about a recession taking place in the state. In general, a recession refers to a contracting of the economy. Still others say a debate over whether a recession exists or not is merely an academic question. What matters more, those economists say, is that the state's economy isn't growing at even a modest pace.

Sam Slom, a state senator who also is a consulting economist and heads the Small Business Hawai'i trade association, said he doesn't believe the state is in a recession.

"I wouldn't use the R word," Slom said. "Technically, I don't think it is."

But times are tough for Island employers, he said.

"It's extremely tough, and we don't see the light at the end of the tunnel. In fact, we don't see the tunnel," said Slom, talking about his 1,500 members and businesses he talks with statewide.

"I don't think there's any businesses that have not reduced their workforce, number of hours worked or contemplated it."

Slom said companies are facing higher costs for energy, rent and health insurance.

"Businesses tell me they are scratching day by day, week by week to meet their payroll."

The economic research organization report also lowered forecasts for next year, with it now projecting a decline in visitor arrivals versus its previously forecasted 1.2 percent increase.

It also predicted a 1.1 percent decline in employment during 2009 compared with this year. Unemployment is expected to average 4.4 percent during 2009.

RECOVERY TO BE MODEST

The research organization projected that the economy will improve in 2010 as visitor arrivals stage a modest recovery and job growth returns. Among other positive factors it forecasts is a decline in inflation through 2010.

Bonham said the improved economy will come as the U.S. and world economies cast off sluggish growth in coming years. He said the forecasts are subject to change, especially if the financial-sector crisis worsens, or on the flip side, if visitor arrivals jump because of larger than expected increases in airline and hotel discounting later this year.

Slom said Hawai'i businesses have in the past reinvented themselves and found ways around problems, and that improved leadership at the state and county levels would help. Among the opportunities, he said, are increasing Hawai'i's high-technology sector.

"I think we still have our best days ahead," he said.