LOS ANGELES-The Los Angeles region will likely recover fasterthan the rest of the state, but the economic recovery in Californiais going to be a slow climb at all levels, according to a new UCLAAnderson Forecast issued Tuesday. The forecast, covering marketsfrom the local level in California to the national economy,foresees a tepid recovery with unemployment levels slowlydeclining.

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Forecast director Edward Leamer, in a report titled “A HomelessRecovery,” says that this time around, the economy can’t count onfree-spending consumers to boost it along. Instead, Leamer citestoday’s “frugal consumers” and says: “If the next year is going tobring exceptional growth, consumers will need to express theiroptimism in the way that really countsbuying homes andcars. And that is not going to happen if businesses continue toexpress their pessimism in the way that really countsbynot hiring workers.”

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Leamer’s report is part of the second quarterly forecast by theAnderson school, which expects that the California economy isexpected to grow a bit slower than the nation’s for 2010, andslightly faster thereafter. In another element of the forecast,UCLA Anderson senior economist David Shulman says the recovery willbe “rocky” in the commercial real estate sector. “There is just toomuch debt that has to be worked through,” Shulman writes.

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Leamer’s report cites an “economic Catch-22.” He explains thatsignificant reductions in the unemployment rate require real grossdomestic product growth in the range of 5% to 6%, compared withnormal GDP growth of 3%. As a consequence, consumers concernedabout their employment status are reluctant to spend and businessesconcerned about growth are reluctant to hire, Leamer points out.UCLA Anderson’s forecast for GDP growth this year is 3.4%, followedby 2.4% in 2011 and 2.8% in 2012, well below the 5% growth ofprevious recoveries and even a bit below the 3% long-term normalgrowth.

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In the California forecast, UCLA Anderson senior economist JerryNickelsburg says the state “will grow slower than the US and a slowrecovery in jobs will leave unemployment at 12.1% for the year.” Headds, “The latter part of our forecast (through 2012) calls forhealth care, professional and business services, exports,construction and technology-related manufacturing sectors togenerate a bit more robust growth in California.”

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However, Nickelsburg notes, though the state will grow morerapidly in the following two years, job creation will not be fastenough to push the unemployment rate below double digits until2012. “Unlike other deep recessions, the rapidity of the recovery,at least on the unemployment front, will be muted,” Nickelsburgwrites.

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The most recent forecast for the next three years is slightlyweaker than suggested in the March report. Slow growth in 2010 isexpected as government and construction continue to restructure anda reticent consumer nationwide does not boost imports to levelsthat would ignite the logistics industry. Specific to theconstruction sector, Nickelsburg describes a divided state, ascoastal California recovers while inland California, devastated bythe collapse of the real estate market, continues to languish.

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UCLA Anderson economist Julia Thornton Snider calls her reporton the L.A. economy “Emerging from Quicksand.” She says that LosAngeles, with its “natural deep-water harbor, large-scale logisticsindustry and export-oriented manufacturing, is well positioned tobenefit from an export-driven expansion and we expect (Los Angeles)to recover more rapidly than California as a whole.” She says thatthe evidence is building that a recovery is under way, pointing outthat exports turned the tide first and provide the most naturalengine for recovery, with housing now showing signs of a recoveryas well. Job growth is the necessary next step and the forecastsays that it will start to revive this year, although unemploymentwill remain “painfully high” through 2012.

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