Sluggish Economy May Linger in State : Forecasting: UCLA raises specter that state’s headache could persist into 1994, although a summer improvement is still anticipated.

In a slightly more pessimistic forecast than previously issued, UCLA economists on Tuesday raised the possibility that California’s economic headache could linger into 1994.

The latest quarterly report by the UCLA Business Forecasting Project generally reinforced earlier predictions that the state’s recession is expected to end next summer, thanks to the improvement in the U.S. economy and anticipated upturns in housing starts and consumer spending. But there is a slim chance that the state’s slump could continue even longer because construction and consumer spending have yet to show much life, the report stated.

The Forecasting Project was a bit more optimistic about the prospects for national economic growth.

“Growth in the national economy is accelerating,” wrote David Hensley, director of the UCLA Business Forecasting Project. A sudden strengthening in the U.S. economy last summer has continued, and real consumer spending has increased for six consecutive months, he said.

The group is predicting that the U.S. economy will grow 2.8% in 1993, up from the group’s earlier prediction of 2.2% for the year and growth of 2% for 1992.

“However, the question concerning the California economy in the near term is whether the state finally is poised to recover. In our best judgment, the answer is no,” Hensley said.

California continues to be troubled by a shrinking defense industry, state budget problems, too many non-residential buildings and overpriced real estate, the report stated.

California’s total non-farm employment will drop 2.3% this year and 1.1% in 1993 before turning up in 1994 with a 1.5% increase. In September, the group had predicted decreases of 1.9% in 1992 and 0.9% in 1993, followed by an increase of 1.7% in 1994.

The UCLA group, which tends to be more pessimistic than other economy watchers, raised the possibility that California’s recession could hang around until 1994 because the pace of home building and consumer spending are so slow.

What’s more, the U.S. economic recovery has not been vigorous enough to pull the state out of the worst recession since the 1930s. In addition, the state’s international trading partners, including Japan, Canada and Western Europe, are having economic problems of their own.

Housing starts in California should rise a modest 16% to 111,000 next year, which is a downward revision from the 124,000 new units previously predicted. Unemployment will rise above 11% in 1993 and will stay there through 1994, the report said.

UCLA’s California forecast “assumes a weak recovery beginning in the fall of ‘93, but given the fact that the conditions necessary for recovery still are not on the horizon, we caution that the recession could very well last into 1994,” the report said.

Bank of America senior economist Fred Cannon said he also expects the state’s economy to turn around at midyear.