"You've got the economic stimulus package, President Obama's mortgage package he introduced (Wednesday), and a lot of people are starting to say the housing industry will start to bottom out in 2009," said Jack Kyser, one of the authors of the report from the Los Angeles County Economic Development Corp. "We are looking for some improvement; it's going to be modest improvement."

The LAEDC's 2009-2010 Economic Forecast & Industry Outlook shows negative trends in most business sectors with some key industries, including fashion, entertainment and finance, facing changed business models. According to the report, there are "difficult times ahead for the nation, the state and Southern California through most of 2009." The report shows the economy finally reaching bottom by this summer.

The official start of the recession was December 2007, which would make the downturn between 19 and 21 months long if the report's authors are correct that the slide will halt sometime this summer. That would make this the longest downturn since World War II. Furthermore, the report projects the U.S. economy will shrink by 2.9% during 2009, then experience modest 1.5% growth in 2010.

As expected, more bad news is in store in 2009 for the automotive and housing industries, with 10.4 million light vehicles expected to be sold during the year compared with 16.1 million sold in 2007. And about 525,000 housing starts are projected for 2009, which is down from a peak of just over two million starts in 2005, the report shows.

US annual nonfarm employment will drop by 4.4 million jobs during 2009, and the unemployment rate will average 8.7% during the year, rising to 9.5% in 2010. Non-farm employment in California will fall by 3%, or 447,500 jobs, while the unemployment will average a 10.5% in 2009.

Expect continued job losses in construction, manufacturing, retail and financial services, with noticeable declines in nonfarm employment for the year in the Riverside-San Bernardino and Ventura County areas, each with declines of 3.2%. The report forecasts a 2.9% employment drop for Orange County, while Los Angeles County should record a decline of 2.2%. San Diego County will see a 1.8% loss in non-farm jobs.

"As far as jobs, I think you're going to have the feeling that it is a jobless recovery," Kyser said. "Businesses are going to be cautious about hiring." He added, "The job situation is not going to be great for the next two years." To put it in perspective, that means it will be 2011 when the employment picture begins to look noticeably brighter, Kyser said.

California's housing industry will continue to be depressed, especially in the inland areas, while the number of housing permits issued in California during 2009 will slide to 52,300 units from a high of 212,960 units in 2004. The resale housing segment will continue to see large numbers of foreclosed properties and short-sales hitting the market, the report states.

Another non-surprise: Commercial real estate will struggle in 2009, according to the report. Funding for new projects or loan roll-overs will be difficult to obtain, and some office and retail developments could go into foreclosure, according to the report.

"In commercial, it's not a pretty picture," Kyser said. "If you have a loan rolling over soon, it will be tough, and if you want to do any new projects, there's going to be no money to be had. And this situation isn't going to bottom until 2010 because lenders have been burned; they're going to be very cautious."

And "as for retail," he added, "weaker retail malls that have lost a lot of tenants could be candidates for a shutdown." Overall, the state's retail sector is also being hammered, with sales expected to decline by 6% in 2009, the report shows.

International trade activity at the region's ports and airports will continue to decline. Container activity at the twin ports of Los Angeles and Long Beach is forecast for 12.4 million TEUs to be moved in 2009. That's down from a peak in 2006 when 15.76 million TEUs were handled.

Some good news is the report's authors expect the federal government's stimulus plan will start to have a positive impact by year-end 2009, providing a positive boost for the state and Southern California economy, especially the stimulus plan's call for infrastructure improvements, which are much needed in the region.

Kyser, who likes to add some positive outlook to his forecasts and his comments on the economy, acknowledged that 2009 is the year when we are likely to see some light at the end of the tunnel, however he tempered his optimism, emphasizing, "the operative word is 'modest.'"

Instant Insights /

Report: Longest US Recession Since WWII

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