Hawaiʻi is sliding toward a mild recession, with a weak recovery expected in 2026, according to the University of Hawaiʻi Economic Research Organization’s latest quarterly outlook. The catalyst is a tourism downturn paired with anticipated job losses, with UHERO warning that trade policy uncertainty and federal actions are key risks to the local economy (fourth quarter forecast).
Maui illustrates how uneven that slowdown looks across the islands. From January to October 2025, Maui recorded 2.07 million visitor arrivals, up 7.6% from 2024, helped by discounting and the ongoing post-wildfire return of visitors. Maui’s average daily visitor census rose to 52,389, but it remains well below 64,634 in the same period of 2022, suggesting activity is improving but not normalized (2.07 million visitors).
What’s driving the forecast. Economists pointed to external headwinds that hit spending and travel, including a record 43-day federal government shutdown that reduced demand and disrupted flights. Meanwhile, cost pressures are building. The statewide minimum wage rises from $14 to $16 in 2026, which should lift incomes for lower-wage workers but can tighten margins for tourism-linked employers already facing softer demand (43-day shutdown).
Construction is the cushion. UHERO flags construction as consistently strong, supported by housing, infrastructure needs, and major federally funded projects. On Maui, the rebuild pipeline is tangible, with 300 homes under construction in burn zones and permit values on pace to challenge the prior $450 million peak, helping offset some of the tourism drag (300 homes).
If you’re allocating capital or planning staffing in Hawaiʻi, treat 2026 as a demand-constrained year. Favor contractors and rebuild-linked businesses, and stress-test tourism exposure for both pricing power and labor costs.
