They were wrong.

As recently as June 2008, the economists at the UCLA Anderson Forecast had predicted a short and shallow national recession, and the state would skate past it. But as described in the latest forecast, released March 25, the recession turned out to be long and deep, and the state wasn't immune.

What happened? No one knew Wall Street would melt down, leading then-Treasury Secretary Henry Paulson to warn Congress that only a massive bailout could avert a new Great Depression. That touched off a panic that no one could've predicted, said Jerry Nickelsburg, forecast author and senior economist.

As winter approached, things were looking bad, and they've gotten worse since.

"We thought our forecast for California in December was somewhat pessimistic. What we did not realize was how fast things would deteriorate," Nickelsburg said.

The Los Angeles and California economies are "running on fumes" and will likely continue sputtering well into next year, according to the latest quarterly forecast.

The forecast projects a 2.6 percent drop in employment this year and a statewide unemployment rate nearing 12 percent.

The county is especially vulnerable now because of its heavy reliance on international trade, Nickelsburg said. The collapse in consumer spending and the global economic slowdown has sent cargo volumes plummeting nearly 40 percent from year-ago levels at the ports of Los Angeles and Long Beach. That decrease, in turn, has depressed related economic activity in the once-booming logistics industry.

"The economic downturn here has been amplified by this industry," Nickelsburg said.

The June forecast had predicted that the state's unemployment rate would top out at around 6 percent; instead, it shot up to 10.5 percent as of last month and is expected to reach near 12 percent.

Looking forward, Nickelsburg said the state's economy is unlikely to begin recovering until next year and normal growth will not resume until the end of 2010.

On the plus side for Los Angeles, he said the housing correction has been less severe than in other parts of the state. The forecast raises the possibility the two-year standstill in residential construction could lead to housing shortages, especially at lower price points, when demand returns.

The biggest wild cards for both the state and local forecasts are consumer spending and global trade. A long-term structural shift in consumer spending patterns could delay a recovery into 2011. But if pent-up demand prompts a spending rebound, a recovery will come sooner. Economists are uncertain about when global trade will start picking up again.

The tens of billions of federal stimulus dollars bound for California can help, but that will depend on when and where the money lands.

The key point, Nickelsburg said, is that the region's recovery depends on forces largely outside local or even state control. "There does not appear to be anything uniquely Californian to bring us out of the recession."

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