UCLA economic forecast sees no signs of near-term L.A. recovery.

The huge Southland economy, three years deep into its longest-lasting recession since the Great Depression, still has at least a year and maybe two before economic growth resumes, predicted a quarterly report on the California economy issued last week by the UCLA John E. Anderson School of Management.

Angelenos, even more than other Californians, should continue to witness shrinking job rolls and retail sales, according to the forecast.

In his gloomiest assessment yet of California's economic future UCLA Business Forecasting Project Director David Hensley said, "Critical industries have not developed sufficient momentum to jump-start the economy. Housing is flat on its back, and manufacturing employment is dropping like a stone. The window of opportunity for California to emerge from recession this year has probably closed. The economy is still sinking and government cutbacks are just around the corner."

Statewide, employment is expected to continue to contract into 1994, predicted Hensley.

Los Angeles will not escape the continuing economic contraction -- in fact, Southern California will likely bear the brunt of bad news, as it has for the last three years.

"Los Angeles County is the focal point of the state's recession," wrote Patricia Nomura, co-author of the UCLA report. "The region continues to plummet. Taxable sales have dropped more than 7 percent from their peak, and have not yet bottomed. About 65 percent of the state's current dollar losses in sales have occurred in Los Angeles County."

In bone-chilling news for Southlanders, Hensley predicted that aerospace employment would fall 16.2 percent in 1993, and another 9.1 percent in 1994.

"The direction of the defense budget, and the possibility of still more cuts at Douglas (McDonnell Douglas Corp., the aircraft manufacturer) and the slowdown in the commercial aircraft industry means this sector is still vulnerable," said Hensley.

Statewide, Hensley predicted a 1.4 percent decrease in job rolls in 1993, followed by a 0.1 percent decline in 1994.

The forecasters prepared no estimates of the number or percent of jobs that many disappear in Los Angeles County in the remainder of 1993 and 1994, as opposed to in the state. But Hensley left no doubt that Los Angeles County would fare worse than the state.

"If the state recovers in spring (1994) -- and that's if -- the county will follow three to six months later," said Hensley.

The forecaster shied away from predicting a recovery, even for the state, by spring but would only state, "We think it is unlikely there will be a recovery before then."

A sign of the depth of the current economic slowdown: In early 1993, help-wanted classified advertising in Los Angeles was running at about 40 percent of the level of January 1991, observed Hensley.

The soft economy, as widely reported, is undermining the region's home prices, said the UCLA group, which releases quarterly forecasts on the state and national economies.

In a study of homes in the Los Angeles, Ventura, San Diego and Orange county markets, UCLA researcher Nelson Pedroza found that Southland houses have depreciated by 15 percent in the last two years, measured on a per-square-foot basis. (Pedrozo did not adjust for inflation.)

Some zip codes have endured truly spectacular price depreciations -- for example, the 90064 zone, an area of Los Angeles sandwiched between Beverly Hills and Culver City, has posted a 51 percent price plunge in the two-year period.

Another area, the somewhat tony part of the City of Santa Monica north of Montana Avenue, witnessed a 37 percent drop in home prices in the same time frame, said Pedroza.

Declining home prices have become something of a self-fulfilling prophecy in the last two years, said the forecasters.

"We have speculated that falling house prices are undercutting demand, because potential buyers fear they will suffer a capital loss," said Hensley.

In other words, buyers are waiting for the bottom before buying -- but by pulling in their horns, potential homebuyers are causing the bottom to deepen.

Thus, local consumers who are homeowners are feeling less wealthy, as their big nest egg -- the family homestead -- decreases in value each year.

They may feel compelled to save more money -- thus cutting consumer expenditures, said Hensley.

Even with prices down, local home prices remain far above national averages -- raising troubling questions about the future for homeowners, said Hensley.

"Our house prices are still way out of line with the rest of the country," said Hensley. "I think there is more erosion to come on house prices."

Hensley was loath to predict how suddenly, and how far, house prices would come down -- but he did say he doubted prices could fall to the national average. "I don't think we will see a median average price of $100,000 in Los Angeles (compared to the current $185,000)," he said. But he warned, "Interest rates have come way down, and it has done nothing for house prices. You have to assume price erosion in the future."

And Los Angeles faces enormous challenges, particularly in the realm of public services, said Hensley. Big revenues cuts for government should translate into smaller public payrolls and less services -- just when the state needs to invest in its infrastructure, he said.

"We have lifestyle concerns. The schools are a mess, our infrastructure is aging. Recently, the County of San Joaquin stopped prosecuting misdemeanors, and the (Los Angeles) District Attorney has proposed a budget in which he will not prosecute misdemeanors and non-violent felonies," said Hensley.

The San Joaquin non-prosecution story got onto national television -- something that, if it happened in Los Angeles, would no doubt also warrant national media coverage, said Hensley.

"The cutback of such basic services would be another big blow to our recovery efforts," he said.

A separate report issued two weeks ago on the Los Angeles County economy, by Chapman University, also presented a gloomy view of the future.

The Chapman report predicted another 1.3 percent decrease in local employment in 1993, on top of the cumulative 9.8 percent decrease in job rolls the county has endured since 1990.

Taxable sales, after two years of decline, should about level off in 1993, while the building industry should remain in the doldrums, predicted the Chapman report.

Local home prices should fall 5.7 percent in 1993, compared with 4.3 percent in 1992, according to the Chapman outlook.