California is in for a rough 18 months as the real estate slowdown is expected to push the state to the brink of recession, warns the UCLA Anderson Forecast in an updated report released Wednesday morning.


Forecast economist Ryan Ratcliff predicts that year-over-year job growth will slow to 0.7 percent, half of the 2006 growth rate, while unemployment will rise to near 6 percent from the current 5.3 percent. Personal income growth is also expected to slow to 4.7 percent from a robust 6.4 percent in 2006


This prognosis is more pessimistic than in previous quarters because no sectors have emerged to take up the slack as real estate and financial services sectors hit by the sub-prime collapse have racked up job losses.


But, Ratcliff says the state, like the nation, should escape a full-blown recession, unless there's a substantial weakening in another economic sector or the real estate collapse is more severe than anticipated.


With the majority of adjustable rate mortgages expected to have their interest rates reset to higher levels in the next 12 months, Ratcliff predicts the real estate collapse should moderate by the end of 2008, setting the stage for a broader economic rebound in 2009.

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