A famous quarterly forecast released Wednesday by University of California in Los Angeles ( UCLA) predicted California economy will remain sluggish until 2005, when the populous US state will start a five-year spurt.

In the latest UCLA Anderson Forecast, economists lowered their estimates for California's economic performance despite a recent flurry of upbeat indicators.

They believed that employment, taxable sales and personal income, all key revenue sources for the state, will probably register smaller gains in 2004 than previously anticipated.

Still, UCLA forecasters said California's economy is returning to life, although not quickly enough. Major sectors, from trade to tourism, have stabilized; and even the battered technology industry is showing signs of improvement.

Job seekers will have a tough time as California's job slide has lasted more than two years and has surprised many economists who had expected the labor market to improve by now.

UCLA analysts predicted that continued weakness in northern California will more than offset modest gains in the southern part, resulting in net payroll losses this year and a slower start to 2004 than previously thought.

Employment growth next year is anticipated to be around 1 percent, down from the 1.8 percent rate forecast in June. The US labor situation is not expected to grow any faster in 2004.

In 2005, though, the state's labor market should start heating up as employers finally boost payrolls to meet the demands of a growing economy, according to UCLA economists.

A pickup in job market would help California's finances, which have been battered more than other states' because a disproportionate number of the jobs lost in the state in recent years were in high-paying technology fields.

Personal income taxes account for 60 percent of the state's general fund. This year, UCLA forecasters say, personal income is expected to grow by a relatively weak 3.2 percent.

Consumer spending also is likely to remain sluggish because of the lousy job market and slow income growth.

After soaring 12 percent in 2000, statewide taxable sales were flat in 2001 and declined 1.3 percent last year. The Anderson Forecast has lowered its taxable sales growth projection to 1.7 percent this year from 2.1 percent and trimmed the 2004 estimate to 4.1 percent from 5 percent.

At the same time, UCLA economists were confident that the worst was over for California, which probably has got out of recession. For example, the pace of job losses has slowed, the trade sector is recovering, while the tourism sector has held up better than other travel hot spots.

Even the state's long-suffering manufacturing sector, which has lost more than 300,000 jobs during the economic downturn, is expected to see those declines slow to a trickle next year.

Though many economists were encouraged by revised figures released by the federal government last month showing 3.1 percent annualized growth in the second quarter, Edward Leamer, director of the UCLA forecast, said those figures were pumped up by military spending and consumer durables, which are not expected to continue.

He is projecting 2.3 percent real GDP growth this year, followed by 3 percent growth in 2004 and 3.7 percent in 2005. Leamer expects US unemployment to average 6.4 percent in 2004, up from its August level of 6.1 percent.

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