Forecasters see good times ahead in California.

UCLA economists say export boom is in wings

In a nutshell, the state economy is growing slowly and will stay on the steady upward path for some time, the UCLA Business Forecasting Project team said last week.

And, in a startling prediction, UCLA economists Larry Kimbell and Tom Lieser forecast that the feeble dollar should result in an export boom that will lift the state economy in the second half of the 1990s, and that the seemingly chronic national trade deficit should be nearly wiped out by 1997.

The California economy last year "showed the strongest evidence that we are emerging from the recession since the halcyon days of 1989, six years ago," reported Kimbell and Lieser, in their quarterly report.

Statewide, more than half of the 520,000 jobs that disappeared in the recession have been recovered, and all-time record employment levels, around 12.7 million, should be reached by 1996, predicted Kimbell and Lieser.

Still, the two are not as optimistic as they were in December, when they spoke of a "surge" in the California economy.

"Why is California struggling to join the national recovery?" they asked rhetorically.

They cited answers:

* Corporate downsizing has cut job growth in financial institutions and certain service industries.

* The aerospace sector is continuing to shrink, although the worst is over.

* Residential construction remains weak, and house prices continue to slack.

* The large number of recent natural disasters, the Orange County fiscal problems and the Mexican peso collapse are odd one-time events, but together have weighed upon the economy.

* Continued restraints on spending at the local, state and federal levels is crimping an economy that used to feed on government spending.

Overall, however, the outlook is for steady growth, as the state economy piggy-backs on the ongoing national economic recovery, said the forecasters.

Now for the outlook

And then they offered the forecasting unit's predictions:

* Total statewide employment should increase by 1.9 percent in 1995, and another 1.9 percent in 1996. In the two years, 478,000 jobs should be created. In past years, about one-third of total state job creation took place in Los Angeles County, although that is no guarantee of where jobs will be created in the future.

* Retail spending should grow nicely, rising statewide 5.4 percent in 1995 and another 2.9 percent in 1996, after adjustment for inflation, according to the forecasters.

This is a turnaround from the early 1990s; state taxable sales fell 14 percent from 1990 to 1993, after adjustment for inflation.

* Consumer prices should beat up moderately, rising 2 percent in 1995 and 3.4 percent in 1996, according to the forecast.

The risks to the forecast are a possible national recession and the Mexican financial crisis, said the forecasters.

Mexican slump to hurt

"A sharp reduction in exports to Mexico seems virtually certain," Kimbell and Lieser wrote.

About 0.8 to 0.9 percent of the state economy is made up of exports to Mexico. Especially hard hit by the collapse of the Mexican market for exports will be the electronics, machinery and computers, rubber and plastics and food processing industries.

Goetz Wolf, a Los Angeles area economic expert, commented last week; "We will see an increase in immigration here. The opportunities in Los Angeles are still better than in Mexico, and we will be living with the ramifications of that."

Nationwide, Kimbell and Lieser predict a boom in exports in the mid- to late 1990s, with sales to foreigners rising by 9.5 percent in 1995, another 10.5 percent in 1996, and then a hefty 13.2 percent in 1997. Imports should be crimped by the weak dollar.

The national trade deficit could almost be wiped out by 1997, shrinking to a relatively insignificant $29.6 billion, according to the forecast.

If this happens, it would mark a huge reversal in that deficit, which soared to more than $110 billion in 1994, and appears heading higher in 1995.

The feeble greenback should become only more so in the years ahead, slipping further against the yen and stronger European currencies, predicted Kimbell and Lieser.

The decrease in the dollar's value should continue "regardless of the growing purchasing power parity discrepancies," they wrote.

The UCLA Business Forecast is geared to statewide and national figures. The data is not broken down by county, or even by Southern California vs. Northern California, so there were no numbers released pertaining strictly to the Southland business outlook.