Photos: Hawaiian paradise

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  1. Waimea Canyon, Kauai

    Kalalau Valley, on Kauai's west side, is more than 3,000 feet deep and provides stunning panoramic views. Waimea is nicknamed "The Grand Canyon of the Pacific." (John Borthwick / Lonely Planet) Back to slideshow navigation
  2. Honolulu, Hawaii

    Men row their Hawaiian outrigger canoe towards Waikiki beach, with Diamond Head in the background. Outrigger canoes are now used for recreation purposes and to ride the waves, but in times past they were the main means of transportation between the Hawaiian Islands. (Mike Nelson / AFP - Getty Images) Back to slideshow navigation
  3. The tranquil waters of Oahu

    Hanauma Bay is one of the finest stretches of beach in the world. (Eric L Wheater / Lonely Planet) Back to slideshow navigation
  4. Surfer's paradise

    Australian Luke Egan competes on Oahu's North Shore, one of the best places in Hawaii to ride the big waves. (AFP) Back to slideshow navigation
  5. Water colors

    A school of manini fish pass over a coral reef at Hanauma Bay Nature Preserve in Honolulu, Hawaii. (Donald Miralle / Getty Images) Back to slideshow navigation
  6. Wailua Falls

    The beautiful 83-foot tiered Wailua Falls is an easily accessible, must-see waterfall on the island of Kauai. Wailua Falls was first made famous when it was featured in the television show, "Fantasy Island." (James Randklev / Corbis) Back to slideshow navigation
  7. Emerald peaks

    The iconic, towering emerald peaks of the 1,200-foot Iao Needle, stand out in Maui's Iao Valley State Park. (Adina Tovy Amsel / Lonely Planet) Back to slideshow navigation
  8. Historic reminder

    The USS Arizona Memorial in Pearl Harbor, Hawaii, marks the resting place of many of the battleship's 1,177 crew members who lost their lives during the Attack on Pearl Harbor on Dec. 7, 1941 by the Japanese. The memorial is the "ground zero" of World War II. (Kevin Winter / Getty Images) Back to slideshow navigation
  9. Aloha!

    Hula dancers welcome the sailing crew of a Hokule'a, a canoe, into Kailua Bay. (Ronen Zilberman / AP) Back to slideshow navigation
  10. The heart of Hawaii

    The sun sets on Honolulu, Oahu's capital and Hawaii's largest, most populous city. (Robert Y. Ono / Corbis) Back to slideshow navigation
  11. Polynesian heat

    Brandon OFueo Maneafaiga, 23, of Waianae, Hawaii balances two flaming knifes during the 13th Annual World Fireknife Championship at the Polynesian Cultural Centre in Laie, Hawaii. (Lucy Pemoni / Reuters) Back to slideshow navigation
  12. Explosive attraction

    People watch from a viewing area as an explosion takes place on Kilauea, one of the world's most active volcanoes, in Pahoa, Hawaii. Legend says the volcano goddess Pele dug fire pits as she traveled from island to island looking for a home with her brothers and sisters. She finally settled at Kilauea's summit, where she lives at Halemaumau crater. (Leigh Hilbert / AP) Back to slideshow navigation
  13. Forces of nature

    The Dragon's Teeth are bizarre lava formations eroded by wind and salt spray at Makalua-puna Point. (Karl Lehmann / Lonely Planet) Back to slideshow navigation
  14. Heaven on Earth

    Astronomy observatories are seen on the peak of the snow-covered, Mauna Kea mountain near Hilo, Hawaii. Mauna Kea is a dormant volcano. (Tim Wright / AP) Back to slideshow navigation
  15. On the way to Sainthood

    Tourists walk through a cemetery past the grave, left, of Father Damien at Kalawao, Hawaii. After cancer patient Audrey Toguchi prayed to Father Damien, known for helping leprosy patients in Hawaii, to help her, and her cancer went away, Pope Benedict XVI approved the case in July 2008 as Damien's second miracle, opening the way for the 19th century Belgian priest to be declared a saint. (Eric Risberg / AP) Back to slideshow navigation
  16. Cool colors

    Rainbow eucalyptus (Mindanao Gum) trees grow in Keanae, Maui. Once a year, these magnificent trees shed their bark and take on the colors of the rainbow. (James Randklev / Corbis) Back to slideshow navigation
  17. Magic Sands

    An aerial view of La'aloa Beach Park or Magic Sands beach in Kailua-Kona, Hawaii. The beach is called Magic Sands because when rough surf hits, all of the sand is emptied off the beach and temporarily moved out to sea. (Brian Powers / AP) Back to slideshow navigation
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updated 9/25/2009 6:29:48 PM ET 2009-09-25T22:29:48

Hawaii's economy is years away from a full recovery, but there are a few positive signs that the state is moving past the recession, University of Hawaii economists said in a quarterly forecast released Friday.

Tourism from Japan rebounded better than expected from the swine flu scare earlier this year, the university's Economic Research Organization found.

Also, average consumer prices in Hawaii will drop instead of rise, and income in the state will fall by less than predicted, the forecast said.

"Japan returned to growth in the second quarter, and it appears likely that the U.S. will post positive growth for the current quarter," the executive summary to the group's report said.

But hotel occupancy rates are still at historically low levels — predicted to average an abysmal 66.1 percent this year — and will remain below 70 percent until the end of 2011, the economists found.

The state's tourism industry will be slow to recover, partly because of cautious consumers on the U.S. mainland, the report said. Also, unemployment will continue to increase and state government's budget woes will continue to be a drag.

"Recovery means a return to growth, not a return to business as usual," the report said.

The economists predicted only a 4.4 percent drop in total visitor arrivals, instead of the 6.8 percent loss they forecasted in their June analysis. That's partly due to the return of tourism by Japanese visitors, as well as the deep discounts hotels are offering to attract business.

Other economic measures are similarly mixed. For example, there was a 3.6 percent decline in jobs in August, and the unemployment rate will likely increase from about 7 percent this summer to more than 8 percent next year, the economists said.

On the other hand, inflation is nearly nonexistent because of low energy prices and stable rents, the economists said. Average consumer prices will drop by a half-percent this year rather than the half-percent rise forecast by the university in June, the report said.

They also estimate that real income will fall by substantially less than they expected back in June — the result of smaller declines among private businesses, a delay in implementation of state worker furloughs and a stronger-than-expected stock market, which has improved prospects for dividend income.

But the state's budget problems are a big concern, the economists said. After all contract negotiations have ended, every state workers is likely to see a pay cut of some sort, and businesses could face higher unemployment compensation costs.

"As a result, unemployment will remain relatively high for a number of years, income gains will be hard to come by and economic conditions will remain difficult for many families," the report concluded.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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