SAN FRANCISCO (Reuters) - A nascent economic recovery is under way in California, but the state still faces a long slog in rebuilding payrolls slashed by recession, the mortgage crisis and turmoil in housing and financial markets, a report by the UCLA Anderson Forecast said on Wednesday.
The report by the economic forecasting unit said payroll gains in September and October show a rebound has taken hold in the most populous U.S. state, albeit a modest one.
"The preliminary indication of a new recovery having begun in September yields a slightly more optimistic forecast," the report said.
California's economy is poised to trim its double-digit unemployment rate with job growth of 1.4 percent next year and 2.1 percent the following year, the report said.
Job gains, however, will not be strong enough to push California's jobless rate - 11.7 percent in October - into single-digits until 2014, the report said.
The economic forecasting unit has a more optimistic outlook for California than just a few months ago in part due to recent jobs gains in the state's Central Valley and its Inland Empire region, east of Los Angeles.
Both areas have been swamped with foreclosures that have devastated construction payrolls and sent local unemployment levels soaring.
But recent data show the two regions have joined California's coastal metropolitan areas, which have benefited from expansion in their high-technology sectors as well as trade activity through their ports, with job gains.
The gains for the state as a whole have been running recently at a faster rate than the country as a whole.
"These data present the first solid indication that inland California has bottomed out and a recovery in the hardest hit regions of California has begun," the report said.
It also cautioned that inland California's economic pain will, however, persist for years to come as it is unclear which industries can create jobs there in the way construction had.
(Reporting by Jim Christie, Editing by Gary Crosse)