In California, the economy may stop shrinking by the fourth quarter, but it will remain flat and probably will not grow until the beginning of 2010. Normal growth won't return until the middle of 2010, and high unemployment will remain until 2012 or longer, the forecasters said.
Hikes in the state's sales and income taxes will also erase some of the gains families and individuals would receive from the federal stimulus package.
Manufacturing, construction and financial services will keep shedding jobs until 2011. Education and health sectors are expected to add workers this year, but slow down the pace in 2010.
For The Record
Los Angeles Times Saturday, March 28, 2009 Home Edition Main News Part A Page 4 National Desk 1 inches; 52 words Type of Material: Correction
Economic report: An article about a UCLA economic forecast in Business on Wednesday included a photograph of a half-built condominium complex in Murietta. The caption indicated the project had been halted because of the recession. The development has been stalled for several years because of litigation, according to Murietta Mayor Gary Thomasian.
The numbers were derived by using what forecasters call econometrics -- a combination of historical statistics and economic theory to predict the direction of the economy.
For example, UCLA forecasters looked at how few new homes were being built in California in relation to the state's population growth. The assumption was that returning demand would double the number of housing permits pulled by 2011 and add jobs to the construction industry.
What it often can't account for are conditions that have never before occurred, like the federally backed program enticing private investors to snap up toxic mortgage-backed securities announced Monday by Treasury Secretary Timothy F. Geithner.
Although stocks tumbled Tuesday, the Dow Jones index has gained more than 1,100 points since March 9 in response to that and other moves -- amid hopes that the government's efforts to revive the economy could bear fruit sooner than expected.
To help the housing market, the Federal Reserve announced plans last week to spend $1 trillion -- an expenditure aimed largely at bringing down interest rates on home mortgages, and on Tuesday a key lending industry association predicted that Americans would take out an additional $800 billion in new mortgages.
"It's hard to keep up with how fast the financial markets" keep changing, Shulman said.
Diane Swonk, chief economist for Mesirow Financial, said the flaw of forecasting is that it's often conducted for the short term to satisfy corporate or governmental clients, and it's too scientific to effectively measure human behavior.
Swonk and other economists said experts in the field disagree widely on the direction that the economy will take over the next few months and years.
"There's a lack of certainty," said Esmael Adibi, co-author of the Chapman University forecast.
Adibi is unafraid to tout his group's work, but he said forecasting today was markedly more difficult because of core changes in the nation's economic engines such as financial lending and the role of the Treasury.
Chapman had predicted in December that the nation's unemployment rate would average 7.8% this year, a rate already exceeded by 0.3 percentage points today.
"Obviously we were wrong," Adibi said.
Forecasting, Adibi said, was not about being precise. Anyone who nails GDP growth to the exact decimal point has simply guessed correctly, he said.
"If you capture things within a reasonable margin of error then you're doing a good job," he said.
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david.pierson@latimes.com
