UCLA Forecast for State Is Surprisingly Rosy : Economy: Report says California will see a 1% net gain in new jobs in 1994 as recovery moves faster than expected.

California will see an increase of 111,000 net new jobs in 1994--a better performance than the flat job growth predicted earlier--as the state’s fledgling recovery proceeds faster than expected, according to a report expected to be released today by the UCLA Business Forecasting Project.

While that 1% rate of job growth is less than the long-term state average of 3%, it is nevertheless another sign that the economy is getting better, UCLA said in its most optimistic forecast since the recession began in 1990.

And while structural changes in the economy will continue to roil the state’s job market for several years, UCLA predicted that an upturn in normal economic cycles will generate a net gain of more than 770,000 new jobs in the next three years. That would make for a compound annual growth rate of 2.1% in non-farm jobs.

“Although suffering from continuing job losses in defense-related aerospace, due to budget cuts and consolidation elsewhere, we believe this recovery will last,” the report says. The report, issued every three months, is more optimistic than the June forecast, which predicted a 0.1% drop in employment for 1994. The optimism is all the more striking because the UCLA group had come under fire from business during the recession for being unduly pessimistic in its forecasts--predictions that turned out to be largely accurate.

Even with continuing aerospace layoffs such as those from the recently announced Martin Marietta-Lockheed merger and the virtual shutdown of Hughes Aircraft’s Fullerton complex, California will “not go back into recession,” according to the forecast.

The unemployment rate, meanwhile, will fall from about 9%--or nearly three percentage points above the national rate--to 7% in 1997, due to more jobs and population shrinkage as people look elsewhere for work. The state rate will remain about a percentage point above the national average.

The forecast is in keeping with other recent predictions that the state’s economy will continue to improve.

In June, the Palo Alto-based Center for Continuing Study of the California Economy predicted that the state could add 310,000 jobs a year by 2005, a rate of growth that would outpace the nation’s.

Walter Hahn, an economist with Kenneth Leventhal & Co. in Newport Beach, agreed with the UCLA projections. But he added that Los Angeles County will continue to lag the rest of the state, saying job growth will not occur here until 1995 at the earliest.

“The problem is that L.A. County had 84% of the state’s total job losses in 1991 through 1993,” he said. Orange County, by contrast, will probably break even in job growth this year, he said.

UCLA predicted that most of the state’s new jobs will be in the service sector, excluding wholesale and retail trade. Non-financial services will generate 96,000 of the 111,000 new non-farm jobs created in 1994. The most robust growth will occur in the movie industry, already one of the faster-growing industries in the state, with an average annual growth rate of 11% through 1997.

But even heretofore ailing industries should hold their own, the forecast says. Wholesale and retail trade will begin to add jobs in 1994, accelerating in 1995 and 1996 as retail spending picks up.

Construction, which got an overnight boost after the Northridge earthquake, will also grow. The building trades will add 94,000 jobs from 1995 through 1997, bringing that sector’s employment back to 1990 levels.

And employment in non-aerospace manufacturing is likely to remain stable through 1997, the forecast says--an improvement over its June prediction that manufacturing would continue to decline.

The forecast notes that despite evidence that a California recovery is under way, consumers continue to feel pessimistic.