12 May 2026

One of America’s tightest labor markets, with the weakest productivity growth.

Hawaiʻi has one of the tightest labor markets in the country, but its productivity growth has almost stalled.

Hawaiʻi’s unemployment rate fell to 2.34% in 2025, the second-lowest in the country and a full recovery to its pre-pandemic level. The latest monthly reading sits at 2.4% (March 2026), still second, a shade behind South Dakota’s 2.3%.

Productivity didn’t keep pace. The BLS labor productivity index measures private non-farm output per hour. Federal civilian and military work, roughly a tenth of Hawaiʻi’s economy, isn’t in it either. From 2018 to 2024, Hawaiʻi’s productivity rose 2.3% while the US median grew 10%. By 2024, Hawaiʻi fell from #7 to #46 on the index, and ranked dead last in growth over those six years.

Most of the gap opened in one stretch. From 2021 to 2023, Hawaiʻi’s index fell 5% while the US median kept rising. The tourism-heavy economy that came back after COVID was less productive, while the rest of the country leapt forward.

Maine is a useful comparison. In 2024, it had very low unemployment and nearly the same labor-force-participation as Hawaiʻi. In 2018, it had the same labor productivity as Hawaiʻi. However, Maine’s productivity grew by 19% from 2018 to 2024. By 2024, it ranked #3 on the productivity index, lifted by defense and aerospace manufacturing.

Hawaiʻi’s problem is structural, not behavioral. The assumption that a tight labor market lifts productivity is fighting the data.