The slowest growing industries are projected to be manufacturing and the finance, insurance, and real estate sector. The performance in even these sectors, however, represents a marked improvement from their poor experience in recent years caused by sharp declines in the aerospace and banking industries. Both of these sectors have bottomed out in recent months. This has been a positive development, especially for Southern California, which had borne the brunt of the above-noted declines in aerospace and banking. To Recover Slowly .
Home construction remains the weakest area of California's economic outlook.
Despite improving home sales, permits for new residential construction will likely remain below 100,000 units in 1996, or less than one-half of the average during most of the 1980s. The weakness is most pronounced in the multi-family market, where new construction remains at only about 15 percent to 20 percent of the 1980s average. Continued softness in new home prices in key regions of the state, coupled with a large inventory of existing homes on the market, appear to be contributing to the ongoing weakness. Our forecast assumes that continued job and income growth, coupled with modest increases in home prices, will lead to higher construction rates during the next three years. However, as shown in Figure 5, we project that home construction will remain well below the levels routinely achieved during most of the 1980s.