Looking Ahead

Is slower growth on the horizon? A new UCLA economic forecast highlights five forces that could lead to a less robust California economy in the near future. Some have special significance for Los Angeles:

* The high cost of housing. Areas of urban, coastal California are increasingly unaffordable for people with average incomes. Since 1985, prices of existing homes have soared 40% in the state, with even higher escalation in Los Angeles County.

* Traffic congestion. UCLA cited a Los Angeles Times survey in which a quarter of those responding cited traffic headaches as the biggest problem facing Los Angeles County.

* Lower defense spending. Real levels of spending may decline at 3% rates over the next few years. Even deeper cuts are possible, with “serious ramifications” for Los Angeles and other areas with large defense-oriented industries.

* Pollution. Measures to combat air pollution problems will prove costly, particularly for residents of the Los Angeles Basin.

* Immigration reform. Despite a lack of evidence that tougher immigration policies have slowed economic growth, UCLA researchers point out that penalties for employers who hire undocumented aliens are relatively new. A disruption in the labor supply could hurt agriculture, manufacturing and other industries.

UCLA analysts are forecasting a nationwide recession to begin late this summer, most likely triggered by rising interest rates. Here are highlights of the California economic forecast, unveiled last week:

* Inflation-adjusted personal income will grow 4.1% in 1990 but only 0.1% next year because of the downturn. It should rise again in 1991 to 3.0%.

* Employment in the state will increases 2.5% this year but drop 0.2% in 1990 before resuming growth at a 2.2% rate in 1991.

* Home-price inflation will cool off but still persist, with prices of existing homes rising 12.7% in 1989 and prices of new homes increasing by 8.9%.

* The boom in housing construction will end, with slightly fewer than 200,000 units built this year--the lowest level since 1983--and construction dipping further to 150,000 units in 1990.