Hawai'i's economic recession will continue into next year and will be followed by a gradual recovery, according to an economic forecast for First Hawaiian Bank.

The outlook, released this morning shows the number of jobs and visitors will shrink next year, while the unemployment rate rises to 5.5 percent.

"The bottom line is that Hawai'i can expect a contracting economy this year as well as next," said Leroy Laney, a Hawaii Pacific University professor of economics and finance, who prepared the projections for First Hawaiian.

Laney, presenting his forecast at the bank's annual Business Outlook Forum, said much will depend on the national economy pulls out of its own recession and how consumers react to deep travel discounts being offered by hotels and others currently.

Laney projected the number of jobs in the state will fall by 1.3 percent next year.

He also said the state's inflation rate will fall to 3.5 percent next year and that visitor arrivals will decline 5 percent in 2009.

Laney said personal income adjusted for inflation will be down 1.5 percent next year and follow this year's 1.0 percent downturn.