This report presents the methodology for short-run forecasting of personal income and employment in Hawaii. The econometric model developed in the study is used to make actual forecasts through 1973 of income and employment, with major components forecasted separately. Several sets of forecasts are made, under different assumptions on external conditions, demonstrating the model's value in comparing the effects of different government policies. Sample forecasts for the 1966-68 period which were made as a test of the model's predictive powers show that the model is quite accurate, especially in projecting employment. (BH)