HAGÅTÑA (The Guam Daily Post) — The overall mood was positive as attendees of the Guam Chamber of Commerce meeting Thursday morning were given a potential preview of the island’s near-term economic journey.
Gary Hiles, chief economist at the Guam Department of Labor, was among the subject matter experts who expressed optimism with a 2023 economic forecast, as some sectors are showing growth, including inflows of federal funds, tourism getting back on its feet, and revenue from construction activity. Inflation, however, will continue to be a major factor in each sector, he said.
Federal spending peaked in 2021 in response to the Covid-19 pandemic, but continued through to calendar year 2022 and outpaced all prior years, and the pace of federal spending is likely to continue in the short term, according to Hiles.
Earlier in the pandemic, the unemployment trend was upward of 19%, but since then it has started to come down every quarter.
The September 2022 unemployment rate of 4.4% is about 15 percentage points below the peak rate, which spiked as businesses were shuttered during the most stringent periods of pandemic restrictions.
Private sector employment was up by 1,330 in the latest quarter and 2,630 over the year. The total number of jobs increased by 2,070 in the latest quarter and 2,780 over September 2021, according to the Current Employment Report issued by the Department of Labor in September 2022 preliminary statistics.
Employment numbers varied by industry: construction gained 1,690 jobs; hotels added 620 jobs; and transportation and public utilities increased by 200 jobs.
“Employment in the private sector is still down from pre-pandemic, however, construction is up 67% showing the numbers through March, and we’ve just put out the market numbers through December, which are stronger,” Hiles said during the meeting. “Total employment is still down a little, but wage earnings are up. Private sector’s earnings are up because earnings are based on not only the average of hourly earnings, but the number of hours worked.”
Steadily increasing numbers
During his overview, Hiles noted that one of the first things that happened during the pandemic was the loss of workers’ hours.
“The number of hours were cut quite a bit, but the number of hours since then have been steadily increasing. As have the average of weekly earnings and the number of employees since that time,” Hiles said.
In comparison to the previous year, in September 2021, private nonsupervisory average hourly earnings increased from $16.26 to $16.89, average weekly hours increased from 35.1 to 36.8 and average weekly earnings increased from $571.17 to $621.98, according to the report.
Looking at the recent numbers from the Guam Visitors Bureau, Korean arrivals have continued to rise on a monthly basis. As of Dec. 31, 2022, they are at 50% recovery in the tourism market.
“Japan is also seeing a similar trend, but it started later and the recovery is slower, but Japan arrivals are also increasing,” Hiles said. “The start of the recovery is due to the reduction in the restrictions on travel, which allows visitors to travel to Guam and return to Korea and Japan without restriction.”
Military-related construction activity has continued through the pandemic, but the number of building permits approved outside the fence has also gone up significantly.
“They are at record levels of nearly $700 million in calendar year 2022, so (the Department of Public Works) has been very good at getting out the statistics that have been made up through Dec. 31, 2022. The building permits for a variety of projects, government infrastructure, residential buildings and commercial buildings have gone up dramatically,” Hiles said.
Department of Defense contracts also have reached record levels.
“It is approaching nearly $800 million and, if you add the two together, the permits and contracts issued in calendar year 2022 were north of $1.4 billion — that’s a record level for the history of Guam,” Hiles said.
This shows that building permits are a lead indicator for what is to come, he said, and the economic impact will last for years.
“Construction goes through a series of phases, where the buildings are planned, financed, appropriated, and then when the building permit is issued within a period of time, after that construction starts. Some of it is short-term, like a year for the construction projects, but a lot of the large projects are multiyear, so this will carry over for several years into the future,” Hiles said.
Foreign workers are known to be commonly utilized to supplement the construction workforce, for both military and civilian projects.
“There are more on the way. Certified applications numbered 3,800 and up, so there is projection of in the next year or two of over 6,500. If you look at the construction workforce per capita in 2020, Guam ranked third in the nation, just below Wyoming and North Dakota,” Hiles said.
‘Overall economy is likely to do well’
Residents should expect to weather continued inflation, as the Guam consumer price index follows that of the U.S., though it is slightly lower for Guam, Hiles said.
Challenges remain for businesses, particularly those in the visitor industry, but with the rising tourism numbers, Hiles said, he feels the industry will expand fast enough.
“The challenges vary widely based on the industry. … The overall economy is likely to do well,” Hiles stated.
Panel members applaud during the 2023 Guam Economic Forecast meeting held Thursday, Jan. 12, 2023, at the Westin Resort Guam in Tumon. From left are David John, chief executive officer, ASC Trust; Gary Hiles, chief economist, Guam Department of Labor; Claret Ruane, economist; Gerry Perez, vice president, Guam Visitors Bureau; Siska Hutapea, president, Cornerstone Valuation Guam Inc.; and Artemio “Ricky” Hernandez, deputy executive manager, Guam International Airport Authority.
