"California is tip-toeing along the edge of a recession, while some of its larger metropolitan areas have been in one since mid-2007," the report states. It shows the balance of 2008 and much of 2009 seeing a mixture of good and bad news for California, "with the outcome looking more and more precarious."

Since the Downtown Los Angeles-based LAEDC's last report in February, the Southern California region, the state and the nation have undergone myriad changes, namely skyrocketing costs of energy and commodities. And "don't forget, you have the intensification of the financial sector problems," says Jack Kyser, one of the authors of the report and chief economist for the LAEDC.

"Look at what's happening at IndyMac; in a way it's kind of funny to watch these people clamoring to pull their money out of IndyMac, and it's historically one of the most solid financial institutions around and these people are panicking," Kyser says. "You have a lot of fear out there among consumers."

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