Washington - California is showing faint signs of an economic upturn after a harsh recession that began nearly four years ago and disrupted millions of its citizens' lives.

"I think the state's in a slow recovery," says David Hensley, vice president and real estate researcher for Salomon Brothers Inc.

Other analysts familiar with the state say it is too early to say if things are actually getting better. But, they agree, the worst is over and the economy appears to be stabilizing. There is also agreement that if the state does pick up this year, any recovery will be modest and fragile.

Since the beginning of the year, California has added about 40,000 nonfarm jobs, not a lot in a state where 12 million people are employed, but a welcome reversal since payrolls began shrinking in 1990.

Manufacturing employment, which has suffered as defense cut-backs slashed aerospace jobs to 200,000 from nearly 300,000, is still not expected to turn around any time soon. One reason is that the downsizing of the defense industry - which fueled the California boom in the 1980s - continues apace.

But construction employment has recorded some gains as low interest rates have spurred an increase in homebuilding, and sales of existing homes are up. Meanwhile, some businesses in the services sector, such as tourism, medical care, temporary help agencies, and entertainment, are healthy or doing better.

There is also evidence that consumer spending and demand for credit are strengthening. Retail sales, including auto sales, have picked up recently. And commercial banks in the state report some increases in lending, especially for home mortgages and large household purchases.

The Federal Reserve Bank of San Francisco, in its latest assessment of business conditions for the Fed's so-called "beige book" report that was released early this month, says that while conditions in California remain weak, "positive signs are starting to emerge."

The report says businesses have been investing heavily in computers and other office equipment to increase productivity and enhance their competitiveness. It also notes that home prices, which plunged in some areas of the state, now appear to be stabilizing. Agriculture, while not a big part of the state economy, is doing well, and farm exports are up.

Carolyn Sherwood Call, an economist at the San Francisco Fed, cautions that growth in California is still hampered by the downsizing of the defense industry, lean budgets at state and local government agencies, and weak commercial real estate markets. Employment in the state totals 11.96 million, which remains below the peak of 12.55 million in July 1990, she says.

Further, according to the U.S. Labor Department, the civilian jobless rate in California in April stood at 9.6%, higher than any large industrial state in the country.

Still, says Kenneth Ackbarali, senior economist for First Interstate, "we see signs of rising consumer confidence," especially in Northern California and in the Central Valley. The Los Angeles region, he says, is still struggling to rebuild from the earthquake, and tourism continues to suffer from the riots. But he predicts that business conditions in the southern part of the state will be improving before the year is over.

A rebound in California, with its large population and rich mix of resources, would provide substantial support for the general U.S. economy.

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