"California is tip-toeing along the edge of a recession, whilesome of its larger metropolitan areas have been in one sincemid-2007," the report states. It shows the balance of 2008 and muchof 2009 seeing a mixture of good and bad news for California, "withthe outcome looking more and more precarious."

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Since the Downtown Los Angeles-based LAEDC's last report inFebruary, the Southern California region, the state and the nationhave undergone myriad changes, namely skyrocketing costs of energyand commodities. And "don't forget, you have the intensification ofthe financial sector problems," says Jack Kyser, one of the authorsof the report and chief economist for the LAEDC.

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"Look at what's happening at IndyMac; in a way it's kind offunny to watch these people clamoring to pull their money out ofIndyMac, and it's historically one of the most solid financialinstitutions around and these people are panicking," Kyser says."You have a lot of fear out there among consumers."

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The report, which focuses on California and the Southlandregion, also offers a glance at the authors' views of the USeconomy. The report forecasts modest growth for the US, with theGDP rising 1.7% this year and about the same in 2009, which "isgoing to be a little bit better than '08, but it's not going to bea wonderful year," Kyser says. "It's going to be 2010 before peoplestart being comfortable about what's going on."

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The forecast offers differing outlooks across the state. "Thingslook rather good in San Francisco," Kyser notes, while in SouthernCalifornia, "of the five metro areas, three are in recession." Thereport calls for comparative economic hard times in Ventura, Orangeand Riverside-San Bernardino counties based on the magnitude ofemployment losses, and the relative lack of anticipated personalincome growth in those areas.

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The report pins the brunt of economic woes in those threecounties on the housing slump, which is taking its toll on officespace in Orange County as financial firms fold, is hurting retailand industrial space leasing and sales prices in the Riverside-SanBernardino area as jobs dwindle, and has caused job losses and lossof income-growth in Ventura.

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The report shows Los Angeles and San Diego counties withstandingthe downturn best, Kyser says, adding, "they're inching along"thanks to continued growth in the health services industry,international tourism bolstered by a weak US dollar andtechnology.Industries like bio-medicine and technology will beSouthern California's strong suits over the next few years, whilefinancial services, and just about any sector related toresidential real estate, will be economic drags, the reportshows.

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As for housing, the report is bleak: "We're looking for early2009 in LA County for signs of stabilization," Kyser says, addingand "In Riverside-San Bernardino, we think it's going to be2010."

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Gas prices may continue to play a role in slowing theRiverside-San Bernardino area, as people begin to factor in thecost of commuting to the relatively cheaper cost to live in thoseareas, the report shows. "I think in some cases you're going to seeshifts in how people develop out there. It's going to definitelyact as a drag on retail in that area," Kyser says.

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The LAEDC today issued a separate report, "Foreign DirectInvestmentIn Los Angeles County," which the group has compiled forthe first time. The report outlines direct investments from 15countries and 4,512 separate firms directly generating more than136,000 direct jobs and $7.6 billion in payroll for L.A.County.

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Kyser believes that as the dollar continues to lag, investmentby foreign firms will only continue to grow. "We feel that this isan opportunity because the dollar is weak right now and firms cancome in and get a lot of benefits," he says.

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The report shows Japan is still the largest foreign directinvestor Southern California, followed by the UK, France, Germanyand Canada.

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Los Angeles, with 1,591 foreign establishments, topped theSouthern California list of places with the most foreign investors,followed by Torrance (310), Long Beach (212) Santa Monica (134) andPasadena (127). The top five industry sectors for foreign-owned andaffiliated businesses are: Retail trade, wholesale trade,manufacturing, finance and insurance, and transportation andwarehousing.

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