Hawaii's economic outlook for 2026 points toward slower growth, though forecasts suggest a more stable trajectory compared to earlier projections. This is critical information for Hawaii's entrepreneurs and investors, who must strategize in a changing economic landscape. While the state anticipates a moderation in its economic expansion, the long-term stability is a key factor for businesses planning for the future.
Recent reports from the University of Hawaiʻi System News indicate potential challenges ahead, including a possible contraction in employment, particularly within the public and visitor-related sectors. The UHERO forecast anticipates a nearly 1% contraction in employment for 2026, with the biggest losses in public sector and visitor-related jobs. Furthermore, federal spending cuts may reduce Hawaii’s federal workforce by 2,300 civilian positions. However, the Department of Business, Economic Development & Tourism (DBEDT) has offered a more optimistic view. While DBEDT reduced Hawaii's economic growth projection for 2025, the longer-term forecast suggests a steadier path.
One area of concern highlighted in the UHERO Forecast is the rise in inflation, partially driven by tariffs. The Honolulu CPI is forecast to exceed 4% in both 2025 and 2026. This could affect operating costs for businesses and impact consumer spending. Despite these challenges, construction remains strong, buoyed by public infrastructure and the Maui rebuilding efforts; though, tariffs on imported materials and labor constraints could weigh on future activity.
The overall impact of state and federal policies, coupled with global economic trends, will shape the business environment. As DBEDT reports, a robust job market with Hawaii’s unemployment rate consistently among the lowest in the U.S. can provide a buffer. Furthermore, the private sector has been adding jobs, indicating resilience in the local economy. Entrepreneurs should focus on adapting to these evolving conditions, exploring innovative business models, and closely monitoring policy changes for strategic business development.
