Forecast Sees More Economic Struggle

The California economy is likely to continue struggling through the end of the year and into 2004, weighed down by the state’s budget shortfall, efforts to recall Gov. Gray Davis and sharp increases in costs for workers’ compensation insurance, according to a forecast to be released today.

Although the national economy will improve in the months to come, economists at the Los Angeles County Economic Development Corp. say California businesses’ uncertainty about the effects of the state’s $38-million budget shortfall are curbing hiring and spending.

“We started to show a recovery late in 2002 and in January 2003 and then everything went south again,” said Jack Kyser, the private nonprofit group’s chief economist. “This has national implications.... California is going to act as a brake, because it’s such a big chunk of the national economy.”

LAEDC analysts predicted that the state’s woes would bring more pain to job seekers, with unemployment holding at 6.7% for 2003. That number probably would edge down slightly in 2004 to 6.2%, the LAEDC predicted.

The group for a second time also reduced its estimates of new nonfarm jobs the state would create in 2003, predicting a gain of 76,700 jobs, or 0.5%.

LAEDC analysts last year predicted a 260,000 gain in jobs for 2003, then in January cut that estimate to 94,000. The latest forecast reflected government job losses as well as the reluctance of businesses to hire new employees in the face of workers’ compensation increases.

Los Angeles County, hurt by the outbreak of severe acute respiratory syndrome, the war in Iraq and the pressures on business, will still pull out a modest recovery, the LAEDC predicts.

Trade growth, a small uptick in aerospace employment, home building and splashy new projects -- including the Walt Disney Concert Hall in downtown Los Angeles -- probably will boost the local economic picture.

Although it predicted some improvement in film and television production, the LAEDC reduced the industry’s overall rating from A-minus in January to B-minus in the latest report.

The economists said the sector failed to achieve anticipated employment gains. It also continued to be troubled by production outside the region and box-office receipts that through June 2003 trailed those of last year, the report said.

Still, LAEDC analysts predicted that the state’s jobs picture would be strongest in Southern California, though they projected only a modest increase of 59,700 jobs.

The Bay Area will continue to lose jobs this year, according to the report, with a total reduction of 42,800 positions. But the group offered hope for improvement next year, forecasting losses of 2,000 jobs. In Central California, 2003 will be weighed down by job losses in Sacramento, with the region gaining only 10,700 jobs by the end of the year, analysts said.

The LAEDC offered a few bright spots in its midyear economic update. Analysts said the technology sector probably would achieve a “modest recovery” by the end of the year as a result of new orders for computers and semiconductors.

California exporters, including farmers, would benefit from the weaker U.S. dollar, the analysts said. And the group forecast some growth in tourism, mainly from domestic travelers.