The worst of the recession is past for San Luis Obispo County, but a return to normal growth will be slow and probably won't begin until the end of 2010, according to an economic forecast released Friday.

Beacon Economics, a group of researchers and advisers, prepared the forecast for 2010 through 2013 for the UCSB Economic Forecast Project.

"Although the region's economy faces significant pressures, ultimately, 2010 looks like the beginning of a return to growth for the county of San Luis Obispo," Brad Kemp, director of regional research for Beacon Economics, said in his forecast.

But forecasters also noted that the recovery is hard to predict because "political" decisions made in Sacramento and Washington, D.C., can skew normal economic indicators.

Most of the decline in home prices has already taken place, but foreclosures will continue, along with a continuing slide in home prices, according to Kemp's report.

More small businesses are expected to go bankrupt, particularly those that can't obtain financing in the current tight credit market.

Nonfarm employment also is predicted to continue its decline through the second quarter of 2010, Kemp said.

But there are some bright spots: Unemployment is expected to peak during the fourth quarter of 2009 at

9.3 percent, and more jobs are expected in the construction industry from new developments already springing up.

Personal income, which has declined since 2008, is expected to begin rising again in 2010, and that is expected to increase consumer spending.

Kemp said that will help with the economic recovery, which will be driven by consumer spending in real estate, retail sales and tourism.

Recovery details

Kemp noted that in 2005 alone, home prices shot up 102 percent, with the median price peaking at $582,900. But the bursting price bubble caused the median to drop to $379,490 by the second quarter of this year.

An oversupply of existing homes will continue to push the median price down by about 12 percent, or $45,000, through the first quarter of 2011, he said.

"Prices will then begin to return to a reasonable and sustainable growth rate - unlike what the market experienced during the earlier part of this decade," Kemp said.

The county's construction industry suffered the most from the housing collapse, he said, with the companies losing 29.6 percent of their positions - or 2,435 jobs - since 2006.

Kemp predicted another 540 jobs will be lost through the second quarter of 2010. But even though construction unemployment is expected to ease up late next year, jobs still will not return to their 2006 peak level by 2013.

Wages will also remain lower than before the recession, Kemp said.

Unlike other recessions in the past 30 years, the county's per-capita income fell - nearly $600 since peaking in the fourth quarter of 2008, Kemp said.

That, combined with rising unemployment, led the county's consumers to sharply curtail spending, in turn causing a drop in taxable sales of more than $262 million since 2007, when taxable spending peaked at $1.14 billion.

Although taxable sales improved slightly in recent months, Kemp said another dip is expected in early 2010 before growth returns at the end of the year.

San Luis Obispo County's retailers suffered the most from the lack of consumer spending, Kemp said, leading to nearly 1,200 people being laid off, a loss of 8.3 percent of the retail workforce.

"The good news is that most of the losses that will occur in this industry have already happened, and Beacon Economics expects the industry to return to slight growth in the second quarter of 2010," he said.

Lack of spending also hurt the leisure and hospitality sector, which lost more than 1,090 jobs since 2007 - the third-biggest drop among the county's industries.

Moderate growth in leisure and hospitality jobs is expected in the third quarter of 2010, but employment will be stagnant in 2011 and 2012, according to the forecast.

"Ultimately, falling sales tax revenue and a reduction in property taxes will take a heavy toll on local and state government budgets in San Luis Obispo County," Kemp said.

By the third quarter of 2010, the government sector is expected to lose more than 400 jobs from its peak employment in 2008.