Economists from the UCLA Anderson Business Forecast warned that the country will experience a recession within the next year, ending the nation's longest economic expansion on record. While the Bay Area may be among the hardest hit, they noted, Southern California may fare better than the rest of the nation with only a mild slowdown.

"There is a virtual certainty that the U.S. economy is going to experience a recession, beginning no later than the first quarter of 2002," said Edward Leamer, forecast director.

According to the econometric model used by the Anderson forecasters, the probability of a recession has increased to 90%, up from 60% in December 2000. That rise is driven, first, by the disappointing profits in the fourth quarter last year, Leamer said, and, second, by a dramatic decline in employees' weekly hours as manufacturers cope with sales cutbacks.

Rather than describing this year's projected economic downturn as a recession or slowdown, Leamer said it is more aptly called a transition.

"The recession that we had in the early '90s described a moment in time between two economies that were basically the same," Leamer said. "The end of the Reagan expansion and the beginning of the Bush/Clinton expansion were basically the same economic times. What we're experiencing today is a fundamental change in economic lifestyle."

"It's the 'morning after' of the night before," Leamer said. "We had a great party for four years, and it was a lot of fun. But the future isn't going to be the same, and we're in an adjustment period. That's the 2001 transition."

The country, he said, will be moving from the "Internet Rush Period" of 1996-2000, characterized by companies' mad dash to build Web sites, into another economic lifestyle, spurred by a lower level of sustainable growth that he believes will be in effect by 2002-03. In this new economy, technology and communications devices will still matter, he said, but will not play as important a role. Consumers will be thriftier and save more, especially for the projected retiree boom that's expected to hit between 2010-30, he said.

"Rather than putting a nickel in a dot-com, we'll actually have to do some personal saving," Leamer said, noting that many Americans spent their nest eggs investing in dot-coms and stocks.

The national economic downturn, however, is further along than California's slump, said Tom Lieser, author of the California Forecast. But the Bay Area may be especially vulnerable because of the declining national investment in the high-tech industry. Home prices in the Bay Area - which are 116%, or $220,000, higher than in Los Angeles - may also fall significantly, he predicted.

Southern California, however, may skirt a recession, even though the region may experience some stress, including a potentially costly strike in the entertainment industry, he said. But since the region is not as dependent on the information technology industry, it will likely fare much better, he added. Los Angeles will also benefit from having the Department of Water and Power as its main energy provider, sparing the city from blackouts and brownouts triggered by the state's electricity crisis.

Statewide, the energy crisis should not have a devastating effect on the state's economy, forecasters said. Increased prices announced by the California Public Utilities Commission should provide incentive to businesses and consumers to conserve energy, preventing disruption to industry, Lieser said. However, he cautioned, if the energy crisis is prolonged, it would significantly deter future business expansion.