There could be other looming dangers in the economy, said Sung Won Sohn, an economist with the Martin V. Smith School of Business and Economics at Cal State Channel Islands. Among them are commercial building, high-tech manufacturing, logistics and warehousing.
Other economists point to travel, tourism and entertainment, all areas in which people have reduced spending following the housing crash.
The forecast also predicts that increased government intervention in the economy will spur inflation and result in higher taxes -- no matter which candidate is elected in November.
The forecasters declined to use the term recession to describe the situation at either the state or the national level.
Edward Leamer, also an author of the report, said the housing turmoil did so much damage in large part because the economy is too dependent on consumer spending.
"The low rates of interest, the innovations in the financial markets and the tax cuts have turned us into a consumption-loving, debt-ridden, foreign-depending society," he wrote in the forecast.
As homeowners lost equity in their homes -- or lost them altogether -- they were no longer able to borrow against the properties to pay for remodeling jobs, vacations, college tuition or other expenses.
Massive defaults on home mortgages also caused banks to tighten lending, not only to individuals but to businesses as well. Businesses unable to finance new ventures have in turn laid off workers and unemployment in the state has climbed to 7.7%, with 240,000 jobs lost in the last year.
Michael D. Pattinson, chief executive of Barratt American Homes, a Carlsbad builder, said he laid off 100 of the company's 130 employees this year. Barratt American built 500 homes a year during the height of the housing boom, but has only 20 under construction now. Pattinson says that the credit crunch has kept him from getting loans to build additional houses for which he says there is still demand, and that with financing he could have saved at least 20 of those jobs.
Government jobs will drop further in 2009, as declining tax revenues and budget cuts cause more layoffs and open positions to be left unfilled, said Howard Roth, chief economist for Gov. Arnold Schwarzenegger.
Other sectors that might have compensated for declines in government spending and construction also appear troubled, said economist Sohn. Tourism and exports, for instance, will probably be weakened as foreign consumers face their own economic challenges.
