Hawaii’s worker shortage goes NUTS

0:01NPR.

0:12Waylon, I hate to tell you, but we have a new competitor. Don't tell me there's another short-form nerdy business podcast out there. Even more concerning. You know how we do a show every time the Federal Reserve publishes the document known as the Beige Book, where we highlight the best stories? Well, now the Fed is cutting out the middleman and becoming their own influencers. Oh, no! Yeah, the Minneapolis District of the Fed is now doing a hip video version of their Beige Book entry. Listen to this. Our surveys for the latest Beige Book show higher in demand this week. and more firms are seeing their headcount shrink than grow.

0:48They even have that jaunty piano music like the Serial Podcast. Are we toast? We're toast. We are going to have to up our game. We no longer have a monopoly on the Beige Book coverage. We'll have to do today's episode with extra prizes and glitz and glamour. It's the Beige Awards. Our eight times a year salute to the art and science of telling stories about the economy. I'm Robert Smith. And I'm Waylon Wong. And how's this for glamorous? Today on the show, we are taking our listeners on an all-expenses-paid vacation to Hawaii. Technically, we're bringing your ears to Hawaii, rest of your body not included.

1:27The Beige Book highlights an economic mystery in the state. Unemployment is low, they have a huge demand for workers, and yet some parts of the economy are not in great shape. Trouble, as they say, in paradise.

1:43It's always good to remind everyone how this award show works. There are 12 regional banks in the Federal Reserve System. Each one studies their local economy and brings back little stories of what they see. They publish them in the document known as the Beige Book, and we give awards to the best stories. Our runner-up this time is the Minneapolis Fed. Not just for their new video version of the Beige Book that we talked about at the beginning. We welcome the competition. We do, despite the mean thing I said about them earlier. The Minneapolis Fed had the best quote to prepare for 2026. Robert?

2:14So the Minneapolis Fed was talking about the weak labor market. And they talked to a contact in hiring who said, quote, more businesses were using temporary or contract workers to stay flexible in uncertain times. And we should note they're referring to economic uncertainty and not all the other uncertainty in the country right now. Good point. And now time for the main award. The Beji goes to the San Francisco Fed. Coming to the stages, getting a note here, San Francisco didn't make the ceremony. Didn't think they were going to win, huh? Guess not. We do have a backup plan, though, for when regional Federal Reserve banks are apparently too busy to accept the Beji.

3:02We give it to a notable resident of the district to hold. And since the winning anecdote involves Hawaii, we're going to the islands, Waylon. Ooh, we need a Hawaiian hero. You know, I googled that phrase, Hawaiian hero, and I came up with an organization called U-Hero. It stands for the University of Hawaii Economic Research Organization. Ah, so you're an economic hero. That's the goal. Carl Bonham runs U-Hero and is a professor at the University of Hawaii. I feel like we're doing this interview solely because it is so cold in most of the U.S. right now. We just want to be transported to warmer climes.

3:37It's Arctic here, too, by our standards. I think in my bedroom right now, it's about 71 degrees, which is quite chilly and very windy. Oh, nobody wants to hear that, Carl. 71 degrees. We're calling you up so that you can accept the Beji Award on behalf of the San Francisco Fed. Absolutely. It'd be my pleasure. And the winning entry grabs our attention because it was so unusual. It reads, in Hawaii, labor shortages impacted the harvest for macadamia nuts and coffee. And I did a little bit of research, and it's not just in agriculture. The unemployment rate for the state of Hawaii is just 2.2 percent.

4:15People are desperate for workers in farming, sure, but also in tourism jobs and construction. What exactly is the issue, Carl, with hiring workers there? We're all the way out here in the Pacific. When the economy starts adding jobs, workers aren't going to suddenly jump on a plane and flood our markets. It's much more complicated. Labor is not as mobile. You could ask just about any business person in the state and they'll tell you that one of their biggest challenges is finding skilled workers. Carl, I don't mean to econ-splain supply and demand to you, but people may be listening to this and thinking just pay more money.

4:52Like if you have a labor shortage, pay more. Oh, exactly. And you're right. If our labor market was as tight as the unemployment rate suggests, you would certainly expect that wages would be going up faster than they are. And they're not. Coral went on to explain that there are challenges facing businesses in Hawaii that make it hard to raise wages. Rising costs from inflation, tariffs, insurance rates going up. And Hawaii is seeing its tourism industry struggle. People are still coming to the beaches of Waikiki, but they're spending less compared to previous decades. Maybe they're staying in a hotel, but they're not doing the$300 beach luau with hula lessons.

5:29Particularly when you've done it several times, right? Or you've done the Sunset Catabran cruise or the whale cruise there. The winning Beige Book entry specifically mentioned the challenges of getting workers on macadamia nut farms. So we decided to call up someone who runs one. Jeff Clark is the president of Hamakua Macadamia Nut Company, although he calls them macnuts. Mac nuts. I love it. If I kept saying macadamia all day, we don't have time for all those syllables. So most Hawaiian mac nuts are grown on the big island of Hawaii, which if you've ever been there, you know, is basically on the side of several volcanoes, right?

6:08And so it's a good news, bad news situation for the nuts. I mean, the volcanic soil means a great tasting mac. It has a rich, buttery taste and texture that is unmatched by any other region. But growing anything on the sloped side of a volcano means it's really hard to harvest the mac nuts. Macadamia nuts, you actually get down on your knees and pick up nuts off of the ground. Wait, wait, really? There's not a machine that does this for you? A lot of the orchards that were planted in Hawaii were actually planted as far back as the 1960s. And so sometimes they were not planted on the most forgiving land, meaning, you know, the slope is too much for mechanical harvesting.

6:52And so many of the orchards in the state and on the Big Island are still hand harvested. OK, now I'm getting why the labor shortage is affecting the macadamias. Hand harvesting nuts in the hot sun on your hands and knees. It's got to be one of the hardest jobs in Hawaii. Jeff told us they do bring in immigrant labor on a legal visa. They pay around$20 an hour. But they also have to build housing for the workers because real estate is so pricey in Hawaii. And I imagine they're competing for the macadamia nut market with places where they grow it much cheaper. The solution they're looking at now on the Big Island is to try to start to replant some of those old macadamia trees on flatter ground where they can finally use harvesting equipment.

7:35We cannot afford to hand harvest macadamia nuts anymore. We really need to move towards mechanization. It just takes a long time to grow new trees and to get them macnutting properly. Macnutting, you turn it into a verb. I'm doing it. Well, maybe with a cool term like that, you can get the tourists in to help. Like, pick your own macadamia nuts. For a price. Sure, sure. Congratulations again to the San Francisco Fed for alerting us to the interesting labor situation on the islands. And thanks to University of Hawaii professor Carl Bonham for accepting the award. I noticed, Carl, that even when we're talking to the most serious economists in Hawaii, they still all wear the colorful Hawaiian shirts.

8:20Everyone does it. When we hire new faculty, it takes them a little while to get the hang of it. Right. And they stick out a little bit when they're wearing their golf shirts or whatever, their regular button down shirts. But they adapt within a few years. I'm wearing long underwear right now in New York City. So must be nice.