Hawaii
Hawaii exhibits island biogeography: isolation amplifies shocks as the 2023 wildfires displaced 7,000 workers while 34,000 federal employees drove the 2025 mild recession.
Hawaii reveals the fragility of island biogeography applied to economics: extreme isolation creates unique conditions but heightened vulnerability to external shocks. The 2023 Maui wildfires killed 115 people, destroyed 2,000 homes, and displaced 7,000 workers from 800 businesses—yet Maui's tourism recovery has paradoxically outperformed other islands. With 1.5 million visitors in the first seven months of 2025 (up 9.2% year-over-year but still 16.2% below pre-fire levels), people returning to see the rebuilding have cushioned the island while O'ahu suffers a "sharp slowdown."
The economy now edges into mild recession, but UHERO economists identify the cause clearly: "the vast majority of what's driving our forecast of a mild recession is coming out of Washington," not local dynamics. Federal policy decisions—from shutdowns affecting 34,000 federal employees to cuts impacting 18,000 SNAP recipients—propagate through the islands faster than mainland states because alternatives don't exist. Construction provides the sole resilience: an $8 billion Navy contract, Aloha Stadium redevelopment, and Maui rebuilding will sustain 40,000 construction jobs through the decade.
This military-tourism dependence defines Hawaii's economic niche. International visitors remain weak—Canadian arrivals down sharply, Japanese still below pre-pandemic levels—while domestic tourism softens. The islands function as an obligate mutualist with the mainland: entirely dependent on external visitors and federal spending, yet offering strategic military positioning and natural beauty that can't be replicated elsewhere. When those flows strengthen, Hawaii thrives; when they weaken, the islands have nowhere else to turn.