State looks to be emerging from recession, Southland lags behind.

There is light at the end of the California economy's recessionary tunnel, according to a report issued last week by the UCLA Business Forecasting Project -- but Los Angeles may yet have to wait to join the national economic revival.

The good news is that "after almost four years in the dumpster, California's economy is beginning to show signs of life, particularly in the job market," wrote UCLA forecaster Larry Kimball, project director.

The bad news for Southlanders is that the aerospace industry, centered here, will continue to contract -- moreover, it is unlikely that a savior industry, offering equal, high-paying jobs, will fill the void.

"There is no prospect for stabilizing aerospace employment through 1996. ... Given California's high cost structure, it is not likely that aerospace will be replaced by other manufacturing industry in the near future," wrote Kimball, in the quarterly report.

Nevertheless, statewide employment should grow 2.5 percent in 1994, a nice U-turn in light of the three years of payroll contraction in 1991 through 1993, said Kimball.

But in unsettling news for homeowners, Kimball projected that statewide home prices, adjusted for inflation, should continue to slide through at least 1996, the furthest out that Kimball forecast.

Statewide, real median house prices fell 6 percent in 1990, 0.4 percent in 1991, 5.3 percent in 1992, and 5.6 percent in 1993, reported Kimball.

For 1994, Kimball slates another 5.3 percent dip, followed by a 4.4 percent reduction in 1995, and 1.7 downdraft in 1996.

Homeowners should be partially shielded from the effects of falling real home prices. Due to inflation, in nominal terms home prices should be more or less stable in the coming years, hovering around $180,000, estimated Kimball. For homeowners anticipating selling their homes, that would mean that paying off mortgages would not be so onerous.

In other bad news for landlords and retailers, Kimball predicted that net inmigration to the state would grind to a standstill, falling to almost zero in 1994 through 1996. This contrasts sharply to the mid- and late 1980s, when more than 400,000 people a year (net of outmigration) moved to the state.

Los Angeles County, according to Nancy Bolton, project demographer, is bearing the brunt of the Golden State's new unpopularity.

"We expect a net outmigration of 140,000 from Los Angeles County in 1994, and continuing net outmigration in 1995 and 1996, although at lower levels," she said. There was a net outmigration of about 100,000 in 1993 from Los Angeles County, said Bolton.

Still, things are perking up, by some measures. Statewide in January, the number of business failures was 23.3 percent below the year-earlier figures, perhaps a sign that the shake-out from the long recession is coming to an end.

Some took issue with the UCLA forecast to the extent that it predicted job growth, without predicting growth in tourism or manufacturing.

Tourism and manufacturing are industries that attract money into the regional economy, said local economist and government consultant Goetz Wolff.

"Where is the job growth going to come from, especially if we don't have job growth in tourism or manufacturing?" asked Wolff.

Too, he pointed out that Southern California remains an island apart from the rest of the state. While the state, excluding Southern California, experienced a 3 percent increase in non-manufacturing employment from 1989 through 1993, the five-county Southern California region lost 2 percent of its non-manufacturing jobs.

California economy

                               Taxable          Median
               Employment       sales        house prices

1995(e)          12,122        $299.7        $134,900
1994(e)          11,957         281.0         141,100
1993             12,000         271.9         148,900
1992             12,153         272.3         157,700
1991             12,358         270.8         166,500

Note: Employment in thousands, sales in billions, house prices in constant
1987 dollars

Source: UCLA Business Forecasting Project

And in manufacturing, the five-county Southland region lost about one-fifth of the job base from 1989 through 1993, while the rest of the state lost only 6.3 percent of the existing factory jobs.

Wolff said that predictions for the state as a whole don't necessarily mean much for Southern California, given the dichotomy between Southern California and the rest of the state.

In another observation, the UCLA business forecasters said that the Jan. 17 earthquake should neither harm nor spur local business much. The $14.4 billion worth of relief funds from public and private sectors may create another 20,000 jobs in the Southland in the coming 18 months -- but there are nearly 4 million already employed in Los Angeles County, a sum so vast as to dwarf the expected increase in employment.