HILO, Hawai'i — The high cost of housing throughout the state is restricting the pool of available labor because workers can't afford to move here, a consultant for First Hawaiian Bank said yesterday.

Leroy Laney, professor of economics and finance at Hawai'i Pacific University, told the Hawaii Island Chamber of Commerce that the problem is particularly acute in Kona, where unemployment is below 1 percent, and employers in all sectors of the economy say it is becoming increasingly difficult to fill vacancies.

That labor shortage may be creating a drag on the economy, with Big Island job growth slowing to 3 percent in the first six months of this year from 3.7 percent last year. The labor shortage is most severe in the construction industry, he said.

"The indigenous labor supply can't meet the demand, and increasing costs of living — especially housing costs — keep a lid on in-migration," Laney told listeners at the 31st Annual Hawai'i County Business Outlook Forum.

Still, Laney predicted continued economic strength this year and next on the Big Island, with job growth and inflation-adjusted personal income growth chugging along in the 2 percent to 3 percent range. He predicted population growth would average just over 1 percent.

Laney said the cost of housing on the eastern half of the Big Island is lower than elsewhere in the state, but he noted that prices are rising rapidly.

The median single-family home price in North Hilo climbed 200 percent from 2001 to $400,000 in the first half of 2005, while the median price in North Kona rose 128 percent during the same period to $608,000, Laney said.

"As home prices continue to rise, they escalate well beyond the reach of many who live and work on the Big Island, and this is especially painful for new entrants to the market and those considering relocation here," Laney said. "Even more, it extends well beyond working class families into the professional ranks. An economy cannot continue to function without many of these positions."

Construction on the Big Island continues its boom, with $896 million in business, residential and public works construction that was authorized in the year that ended June 30.

"With so much development, infrastructure struggles to keep up, but it seems to be a losing battle," Laney said. "Work continues on the Saddle Road connecting the two sides of the island, but traffic congestion in Kona has reached gridlock proportions."

One of the biggest growth industries in Kona is desalinated deep-seawater, which has become a hit product in Japan, where it is marketed as a pure and nutrient-rich alternative to tap and spring water.

The industry, which sprang up about two years ago, has created more than 100 jobs and draws millions of dollars in capital investments and hundreds of thousands of dollars in royalties from a previously untapped natural resource.

At the same time, tourism is having an "extremely good year," with Big Island arrivals up 17 percent in the first six months of this year.

The island stands to gain from continued "explosive growth" in cruise ship arrivals, with the 2,000-passenger Pride of Hawai'i expected to join other vessels on interisland cruises next May, Laney said.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.