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UCLA Forecasters See More Tough Times : Economy: Study predicts Californians won't see relief from recession until 1994 at the earliest.

April 01, 1993|JONATHAN PETERSON | TIMES STAFF WRITER

The stubborn recession will maintain a vice grip on California until at least early next year, when the state will then have a chance of joining the national recovery, the UCLA Business Forecasting Project predicted Wednesday.

The U.S. economy, meanwhile, will expand in 1993 at a moderate 3.5% pace, aided by lower interest rates. The forecasters said they were "nervously optimistic" about the national picture, which still faces problems in defense, commercial construction and a possible decline in exports.

"The national economy is growing faster than we expected, clearly a positive development for California," said David G. Hensley, director of the forecasting project.

But Hensley hedged his bets that conditions will turn around next year in the state. His forecast, he declared, should be interpreted to mean growth is unlikely before early 1994--"not that we feel confident that a recovery will begin at that time."

Distress in aerospace and defense, impending layoffs in state and local government and weak property values all stand in the way of a California recovery.

Non-farm employment actually is expected to decline by 0.7% this year, before turning slightly positive in 1994. California's unemployment rate could average 10.1% this year, even higher than the current 9.8% rate. Nationally, the jobless rate stands at 7%.

Moreover, the "debacle" in aerospace is forecast to continue in California, with new layoffs from commercial aircraft makers and defense manufacturers.

Overall, aerospace-related job losses could exceed 38,000 this year. And Hensley cautioned that President Clinton's plans for further defense cuts raise the possibility that defense firms could pile on new job cuts.

The state's fiscal woes add yet another problem and threaten "widespread, outright layoffs in California government" later this year. The UCLA economists said that this "last shoe to drop" in the statewide slump could cost 31,000 jobs, as public employers trim their payrolls by 1.8%.

Lingering troubles in the housing market also continue to batter consumer confidence within the state.

An analysis of home prices in Los Angeles County found that values were slipping in all levels of the market through the end of 1992, with much of the weakness concentrated in the top 20% of home prices.

"There is no evidence that the market was stabilizing at year's end," the analysis said.

For all the trouble signs, however, the UCLA researchers could point to a few glimmers of hope for beleaguered California.

The prospect that President Clinton's economic stimulus will steer new federal spending to the state, the stronger national economy and an upturn in home sales all could bode well for the future, they concluded.

Times staff writer James Flanigan contributed to this story.

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