State Unlikely to See Rebound Until Late 1994 : Economy: First Interstate’s gloomy report predicts Los Angeles County won’t begin an upturn until the first half of 1995.

In a particularly gloomy forecast, First Interstate Bancorp predicted Tuesday that California’s recession-plagued economy will not recover until the fourth quarter of 1994, and that an economic upturn in Los Angeles County won’t occur until the first half of 1995.

In its semiannual economic forecast, First Interstate based its prediction on a continuation of problems that have beset the state: defense cuts, weakness in non-residential construction and restructuring in a broad range of industries.

The continuing woes are expected to push statewide employment down through the first half of 1994 for a fourth year of job losses, the bank said.

“We think we’ll probably lose another 90,000 to 100,000 jobs before the recession ends,” chief economist Lynn Reaser said at a news conference in Los Angeles. The state has already lost nearly 600,000 jobs since the recession began in 1990.

She predicted that employment would fall 0.6% in 1994 before increasing by 2% in 1995. “We think the economy could start to stabilize around the middle of next year, but positive job growth will not take place until the end of next year,” she added.

The prediction is darker than the last forecast--issued in October, 1992, and updated in April--which said the recession would bottom out at the end of 1993.

Tuesday’s forecast also was more pessimistic than one put forward last month by the UCLA Business Forecasting Project--a group not known for optimistic outlooks. UCLA predicted recovery in the third quarter of next year and job growth of 0.5% at the end of 1994 over the previous fourth quarter.

Reaser said that Los Angeles County, which has accounted for two-thirds of the state’s total job losses so far, will be perhaps the last county in the country to participate in a national recovery that began 2 1/2 years ago.

Once it comes, the state’s recovery will be fueled by greater domestic and foreign demand for the state’s high-tech and other products, Reaser said. Moreover, companies and state and local governments will have completed layoffs, plant closures and other restructuring by the end of 1994, she noted.

The San Francisco Bay Area, Inland Empire and rural counties of the Central Valley--with generally lower costs and less dependence on defense industries--will lead the way, she said.

Other predictions:

* Unemployment in California will hover around 9% to 10% at the end of next year, compared to a national unemployment rate of 6.3%. But the unemployment rate will be softened somewhat as more people move out of state than in from other states.

“That giant ‘sucking sound’ you hear is the screeching of automobiles and hauling vans exiting the state,” the forecast said. Still, on balance, the state’s total population will grow by a half-million a year because of new births and newcomers from abroad.

* California manufacturing employment will “continue to be hammered” by defense cuts, as well as slack domestic and foreign demand.

* Housing is expected to grow, but not enough to pull the state out of its slump. Housing permits should grow about 31% next year, but the level will still be moderate at about 115,300 units, compared to about 88,000 this year, the lowest level since 1982, despite the lowest mortgage rates in decades, Reaser said.

* Home prices probably have not hit bottom. Reaser predicted they will fall about 3% this year and another 1% to 2% in 1994. In 1995, expect a modest upturn of 1% to 2%.

* Running counter to the trend, the entertainment and tourism industries promise to continue growing and adding new jobs.

* The outlook for the U.S. economy is for a continuation of moderate growth, to an average 3% increase in real gross domestic product in 1994. That growth will be accompanied by only modest job growth.