California Asphalt Magazine - 2024 Forecast Issue

FORECAST ISSUE

FORMULA FOR SUCCESS With the world watching, All States Materials Group, a CalAPA member, helps deliver a winning performance in Las Vegas

INSIDE: UCLA Anderson economic forecast for 2024 CalAPA’s exclusive ‘Better’Worse’ survey Association News: Leaders honored at annual dinner

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Publisher’s Letter We’re still in this fight As someone with a writer’s background, and also a movie buff, my ear is acutely aware of movie lines that are recycled over and over, known derisively as “tropes.” One such line is “We’ve got company.” Usually it is uttered by a bad guy letting the other bad guys know that the cops are on the way. Think Danny Trejo in “Con Air” as one of many examples. But sometimes it is a line from one of the good guys letting others know that the bad guys are on scene.

Think “Jurassic Park,” “Toy Story” or “Ghostbusters.”

There’s another oft-repeated line that appears again and again, usually in war movies. The line is, “We’re still in this fight.” Usually it is shouted by a leader when his forces are under siege to rally his troops when things appear bleakest. “Independence Day” is a prominent example that comes to mind.

Because history is written by the victors, this rallying cry comes when things look dire, but then – usually against impossible odds – things turn around and the good guys win.

I was reminded of this line recently when I was attending the National Asphalt Pavement Association Annual Meeting in Orlando earlier this year. I and other brave souls from California were representing our state on the national stage, and other attendees were eager to learn from our experiences. It wasn’t always this way, I should note. Some years ago if I mentioned I was from California the typical reaction from my colleagues from other states was something along the lines of, “Keep those crazy ideas in your state.” These days, however, if you’re from California you’re in great demand. Our status as an economic colossus – the fifth largest economy in the world – and a bellwether state for environmental regulations – make the lessons we have learned of great interest to other states who see those trends migrating eastward.

Indeed, it may seem like to try to make it in the asphalt business in California means to be under siege. With our state solidly in the blue column, and new laws and regulations popping up seemingly every week, it can be overwhelming to try to stay out in front of it all. One misstep can be costly, and even put a business at risk.

But as I made my way around the various educational sessions and spoke with my colleagues on breaks, my message was always the same: “We’re still in this fight.” We are battle-scarred, but unbowed. To borrow another line from “Independence Day,” when faced with annihilation by an alien race, the president (played by Bill Pullman) exhorts his volunteer forces to resist against seemingly impossible odds. “We are fighting for our right to live. To exist. … We will not go quietly into the night!

We will not vanish without a fight! We’re going to live on! We’re going to survive!”

Not every company in the asphalt business in California is a member of our association. But every company is represented by us, whether they pay us or not. They benefit from what we do. We’re fighting for every one of them, against bad regulations, half-baked specifications, ill-considered policies, and, yes, sometimes even ruthless competitors. It’s tough and sometimes thankless work.

But we live and work here. Our business cannot be exported to other states or overseas. This is our industry, and we’re going to do everything we can to protect it. They haven’t licked us yet. “We’re still in this fight.” Not a movie trope, but a true rallying cry for all of us.

Russell W. Snyder, CAE Executive Director CalAPA

4

California Asphalt Magazine • 2023 Public Works Issue

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Contents Volume 28, Issue 1

4

Publisher’s Letter

8

Member Profile

14

CalAPA's ‘Better-Worse’ survey

20

FORMULA FOR SUCCESS With the world watching, All States Materials Group, a CalAPA member, helps deliver a winning performance in Las Vegas

Page 8 "Better" (by percentage of respondents) 80

Confidence down slightly in our 14th annual 'Better-Worse' survey; work force remains dominant concern for 2024

60 50 40

The UCLA Anderson Forecast for the nation

30 20 10

1995 Déjà Vu All Over Again: The U.S. Economic Outlook

28

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0 2010

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2018

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Page 14

The UCLA Anderson Forecast for California From Rapid to Anemic Growth: The California Report

34

Association News Another memorable night at the CalAPA annual dinner at the fabled Jonathan Club in downtown L.A. Page 34

On the Cover:

Cover design by Aldo Myftari, Construction Marketing Services, LLC.

THE CALIFORNIA ASPHALT PAVEMENT ASSOCIATION www.calapa.net HEADQUARTERS: EXECUTIVE DIRECTOR: TECHNICAL DIRECTOR: MEMBER SERVICES MANAGER: MEMBER SERVICE COORDINATOR: GUEST PUBLISHER: PUBLISHED BY: GRAPHIC DESIGN: CONTRIBUTING WRITERS: ADVERTISING SALES:

P.O. Box 981300 • West Sacramento • CA 95798 (Mailing Address) 1550 Harbor Blvd., Suite 120 • West Sacramento • CA 95691 • (916) 791-5044 Russell W. Snyder, CAE, rsnyder@calapa.net Brandon M. Milar, P.E., bmilar@calapa.net Sophie You, syou@calapa.net Jackie Henry, jhenry@calapa.net Russell W. Snyder, CAE, CalAPA Construction Marketing Services, LLC • (909) 772-3121 P.O. Box 892977 • Temecula • CA 92589 Aldo Myftari Brian Hoover, CMS and Russell W. Snyder, CAE, CalAPA Kerry Hoover, CMS, (909) 772-3121

Copyright © 2024 – All Rights Reserved. No portion of this publication may be reused in any form without prior permission of the California Asphalt Pavement Association. California Asphalt is the official publication of the California Asphalt Pavement Association. This bimonthly magazine distributes to members of the California Asphalt Pavem­­ent Association; contractors; construction material producers; Federal, State and Local Government Officials; and others interested in asphalt pavements in California and gaining exclusive insight about the issues, trends and people that are shaping the future of the industry.

6

California Asphalt Magazine • 2024 Forecast Issue

FORMULA FOR SUCCESS With the world watching, All States Materials Group, a CalAPA member, helps deliver a winning performance in Las Vegas

By Brian Hoover / Photos by BuildWitt and CMS

A

s any race car driver will tell you, it’s the little things that can add up to a winning formula. And having a solid team backing you up helps as well. The same is true of asphalt pavements.

All States Materials Group (ASMG), a CalAPA member, represents Zydex Industries, the manufacturer of a family of bitumen additives including ZycoTherm, NanoTac, DuraTac, TerraSil, and ZycoBond. All States Materials Group has over 65 years in the asphalt paving and construction industry with capabilities including the materials supply of liquid asphalt, asphalt emulsions, asphalt binder additives and specialty products, construction aggregates, hot mix asphalt, and ready-mix concrete, as well as a complete 8

range of pavement maintenance and construction services.

ASMG represents ZycoTherm, a product chosen to be included in the asphalt mix design for the Formula 1 Las Vegas Grand Prix racetrack. Formula 1 championship racing officially began in 1950, but its Grand Prix roots extend much further to the European Grand Prix championships of the 1920s and 1930s, when legends like Tazio Nuvolari raced alongside some of the world’s most prestigious motor racing drivers. The Fédération Internationale de l’Automobile (FIA) is the governing body for Formula 1 motorsport, which is currently owned by the US firm, Liberty Media. Formula 1 features 10 teams, with seven based in the UK, one in Switzerland, and two in Italy.

Each team must run two drivers who race at a top speed of 215 mph with an acceleration of 0 to 60 mph in 2.4 seconds. Currently, 23 events run from March to November in locations all around the world.

Some of the Formula 1 tracks utilize public roads, such as the street courses in Monaco or Singapore, and now the newest location in Las Vegas. The 2023 Formula 1 Heineken Silver Las Vegas Grand Prix (Las Vegas Grand Prix) was held on Nov. 18 on a temporary street circuit course that included several iconic sections of the Las Vegas Strip. The 2023 Las Vegas Grand Prix is a part of the 2023 Formula 1 World Championship, and practice runs began on Nov. 16 with qualifying

California Asphalt Magazine • 2024 Forecast Issue

Left: Las Vegas Paving placing special F1 track mix on the Las Vegas Strip.

and the race commencing on Nov. 18, 2023.

Construction of the 3.8-mile racetrack began more than a year ago when the contractor, Las Vegas Paving, started removing select median sections, modifying intersections, and milling 6 to 10 inches of existing roadway to make room for a denser, stronger 7.5-inch base layer. Most of the paving was done at night, and after the base layer was complete, crews began laying a final high-performance lift designed for durability and longevity, with a specific design for Formula 1 race cars. The finished race route in Las Vegas is expected to last longer than an average asphalt surface, with a top asphalt lift layer that is specifically designed for safety, speed, and performance.

Rory Klinger is the VP of asphalt supply and specialty products for ASMG, and recently recounted the use of Zycotherm for the Las Vegas Grand Prix racetrack. “The performance of Zycotherm in both laboratory studies and field applications has been excellent and we are excited about the potential opportunities it can provide for contractors, agencies and road managers on future projects,” says Klinger.

Antistrip/WMA additive used in Las Vegas Grand Prix asphalt paving mix Anti-strip and compaction aid additives play a crucial role in

enhancing the durability and performance of hot mix asphalt (HMA), making them an indispensable component in asphalt pavement technology.

These additives work to mitigate the detrimental effects of moisture on the bond between asphalt binder and aggregate, a phenomenon commonly known as stripping. Moisture-induced stripping can compromise the integrity of the asphalt mix, leading to premature pavement distress, reduced durability, and increased maintenance costs. By incorporating anti-strip/compaction aid additives into the asphalt mix, engineers and pavement professionals can significantly improve the resistance of the asphalt binder to moisture, ensuring a robust and long-lasting bond with the aggregates. This ultimately enhances the overall resilience of the HMA, providing a reliable and durable surface that can withstand the challenges of diverse weather conditions and heavy traffic loads.

The Las Vegas Grand Prix course was paved in two lifts with a special mix design containing an anti-stripping/warm mix asphalt additive manufactured by Zydex Group (Zydex) and distributed by CalAPA member, All States Materials Group (ASMG). This asphalt additive was selected for use as an anti-strip/compaction aid additive in the paving mix for the street circuit racecourse. Additives

California Asphalt Magazine • 2024 Forecast Issue

provide multiple benefits during the process of manufacturing, transferring, placement and compaction of HMA. According to ASMG, their additives can offer what is referred to as, “3C benefits,” (Chemical Bonding, Complete Coating, Consistent Compaction), when applied at low mixing and compaction temperatures, per Section 1.1 of Zydex Field Protocol.

Dr. Ajay Ranka, Founder & CEO – Zydex Group Established in 1997, Zydex is a specialty chemicals company created for the purpose of maintaining a sustainable world through the conservation of resources. The company offers a diverse set of chemical technologies for the textile, painting, waterproofing, agriculture, pavement, and construction industries. Zydex is recognized as a world leader in the development of non-polluting and ecologically conscious technologies and chemical innovations that foster a safer, greener, and more resourceefficient future.

Dr. Ajay Ranka is the founder, CEO, and managing director of Zydex Group. “We pursue the sustainability goal because if we do not reduce our footprint on the planet, we are all in trouble.

From maintaining bio levels to environmental protection, to limiting the resources which we 9

Above: Material transfer vehicle feeding hopper for paving machine on Las Vegas Strip.

Right: Unique paving application placing asphalt on the S-curve for the F1 racetrack in Las Vegas.

are consuming, the kind of footprint we are leaving behind is of great concern. Our company was founded on the principle that we innovate for sustainability,” says Dr. Ranka. “Our technology is chemically bonded, and it becomes part of the aggregate. That is why pavements that use these technologies tend to last longer and perform better. An added benefit includes reduced bitumen temperature for both mixing and paving. Maintaining a lower temperature and attaining higher or more consistent density is where our technology really shines.”

Brian Atkins – Business Development Manager, Zydex Industries Brian Atkins serves as the business development manager for Zydex here in the United States. “Formula 1 has its own specifications and special production methods for what they want in asphalt binders. A durable surface is of utmost importance for any roadway but imagine what would happen if a racetrack pavement failed during a race.

This would be an absolute disaster during any race, let alone one as highly visible as the Las Vegas Grand Prix,” says Atkins. “A lot of time, money, and research have gone into the design of this 10

pavement for the Formula 1 Las Vegas Grand Prix to ensure the track is safe for the drivers and holds up to the rigors of moving at speeds in excess of 200 mph.”

Atkins goes on to point out that many pavements are going to have to use some sort of polymer to achieve exceptional durability and smoothness. “In the case of a Formula 1 track, particularly high levels of polymer are necessary.

If you go from using unmodified asphalt to something using 3% to 4% polymer, that will result in a stickier mix design, which is ultimately and typically harder to work with out in the field,” says Atkins. “Formula 1 racetracks would be using a modified polymer at a rate of around 7% to 8%, which is more difficult to produce at asphalt plants and harder to get necessary and appropriate compaction. Therefore, from a Formula 1 perspective, having an additive that can address those concerns is of utmost importance.”

According to Atkins, Formula 1 has its own mix design, and they gave the parameters to the mix design company – PRI Asphalt Technologies, Inc. (PRI), a global leader in materials testing. “PRI helped tailor the pavement recipe for success and performed testing with our product, along with other additives. PRI has worked with our

materials in the past, and from their perspective, they felt that our product offered appropriate assistance to the contractor when placing the mix. Although we are less expensive than some other antistrip products, I don’t think that factored into the decision. It all came down to performance, and our product checked all the boxes,” continues Atkins. “After the decision to go with our product for the antistrip additive, the next step was to determine the dose, which was 0.1% by the weight of asphalt. We are proud that our product was chosen, and I think it speaks volumes about just how well this additive works.”

Another important feature of ZycoTherm is that it is typically added to the asphalt binder at a rate of around 0.05% by the weight of bitumen. “To put this into perspective, imagine a 6,000-gallon tanker load of bitumen at a plant being typically loaded with 25 to 30 gallons of traditional liquid antistrip additives.

One of the benefits is that our dosage rates are substantially lower,” says Atkins. “We are typically on the high end going to be dosing at 0.1% by the weight of asphalt and in some cases as low as 0.05%. In reference to the 6,000-gallon tanker example, we [ Continued on page 12 ]

California Asphalt Magazine • 2024 Forecast Issue

Right: Numerous vibratory compaction rollers compacting final F1 track surface lift.

Far Right: Laboratory Testing on sample containing ZycoTherm-SP Material.

[ Continued from page 10 ]

would be adding anywhere from 3 to 6 gallons of our product.”

Additives are being used every day all over the world. “ZycoTherm went through more than 10 years of performance testing and qualified with Caltrans and other state transportation departments across the United States as well as other countries. Additionally, the cost is minimal at 1% to 2% of the cost of the overall mix for an additive that will help to add a 50% to 100% increase in pavement life,” says Atkins. “I think what Formula 1 is looking for is really no different than what a DOT or other agency wants. I think they want a smooth, durable surface that will hold up under the stress of heavy traffic flow. Whether that be for tractor trailers carrying 80,000 pounds of weight, or Formula 1 racing cars going 215 mph.”

Laboratory Testing on ZycoTherm-SP Material Report Number: CP2C-2017-102 The California Pavement Preservation (CP2) Center Lab at the California State University, Chico is a California Department of Transportation (Caltrans) certified laboratory. CP2 conducted select tests on asphalt mixes using the ZychoTherm-SP product supplied

by Zydex, Industries, Inc. The objective of these and other tests were meant to evaluate the 12

effectiveness of the product for use in prevalent Caltrans type mixes to aid in preventing moisture sensitivity issues in mixes. DingXin Cheng, Ph.D., P.E. is a professor in the Department of Civil Engineering at California State University, Chico.

Additionally, Cheng serves as Director for the California Pavement Preservation Center and Director of the Tire Engineering Research Center. “Based on the laboratory performance testing including Modified Lottman Test, Hamburg Wheel Tracking Test, and Boiling Water Test, with the right dosage of the ZycoThem-SP, the additive significantly improved the performance of control hot mix asphalt, says Cheng. “For detailed information, please see our testing report on our website at https://www.csuchico.edu/cp2c/.”

Another CalAPA member, Knife River, a construction materials and contracting company, donated the aggregates and RAP from its Stony Creek plant in Orland for use in the testing. “Knife River Construction has a very good working relationship with the California Pavement Preservation Center Lab,” says Tim Denlay, QC manager, Knife River.

“We are always happy to help them any way we can. The work the CP2 Center does to improve pavement preservation practices is very important to our Industry.”

Knife River also donated the binder for testing. The asphalt

binder performance grade tested was PG64-16. Control samples, along with samples with recommended dosage, were considered in the study per Section 4.1 of Zydex Laboratory Protocol. The binder was heated to the mixing temperature for the grade of AC being used (325ºF) before adding the additive. The ZycoTherm-SP was added with measured drop by drop by a lab technician while another technician continued stirring the mixture for two minutes to complete the mixing process. The dosage used was the percent by weight of binder, according to the recommendations.

The asphalt mix conformed to a prevalent mix design supplied

by Knife River based in Chico.

Because Reclaimed Asphalt Pavement (RAP) was used in the mix and per Section 3.2 of Zydex Field Protocol, the base doses of ZycoTherm-SP were increased by 0.025% of the total binder weight, giving dose percentage of 0.075%. The aggregate and binder used in the mix design was the standard for the Caltrans District 3 involved, and the aggregates and binder were supplied by Knife River. Several tests were performed by the California Pavement Preservation Center - Califorina State University, Chico. Testing included gyratory compaction, tensile strength ratio, Hamburg wheel track and extended boiling

California Asphalt Magazine • 2024 Forecast Issue

Summary of ZycoTherm-SP Materials Testing Results

DOSAGE OF ZYCHOTHERM SP Quality Characteristic

Test Method

CONTROL

0.075%

Moisture Susceptibility (average dry strength, psi)

AASHTO T 283

137.43

138.8

Moisture Susceptibility (average wet strength, psi)

AASHTO T 283

124.19

128.4

Tensile Strength Ratio, (S2/S1, %)

AASHTO T 283

0.90

0.93

Hamburg Wheel Track (average minimum # passes at 0.5 inches rut depth)

AASHTO T 324

>20,000

>25,000

Hamburg Wheel Track (average inflection point minimum # passes)

AASHTO T 324

>20,000

>25,000

Boiling Water Test (average % coating, visual observations)

ASTM D3625

100%, dull finish, more fines observed, dry looking

100% coated: shiny coated aggregates, clusters stuck together, less fines observed

testing. Specifically, the following tests were performed on the dosed mix design and control: AASHTO T283: Resistance of Compacted Hot Mix Asphalt to MoistureInduced Damage, AASHTO T324: Hamburg Wheel-Track Testing of Compacted Hot Mix Asphalt and ASTM D3625: Effect of Water on Bituminous-Coated Aggregate Using Boiling Water.

Testing Results Concerning the gyratory compaction testing by the CP2 Center Lab, when 0.075% ZycoTherm-SP (the additive) was added, the samples were easier to compact, easier to clean up the testing equipment and required a lower number of gyrations compared to the control sample.

Tensile strength tests for each sample set were conducted by using the Toni Technik machine. The sample with 0.075% of the additive had the higher wet and dry strengths as well as higher tensile strength

ratio than control sample. The Hamburg wheel track test revealed that the 0.075% type sample sets performed better than the control sample with the maximum passes of 25,000 being completed before reaching 0.5 inches rut depth with no inflection point. Details of the boiling water test concluded that all types of HMA material was observed to be fully coated after being subjected to one hour of boiling water as recommended in the task order. The control material did however appear dry and more crumbly after it dried for 24 hours.

The HMA material with 0.075% percentage of the additive appeared shiny, more clusters of aggregates with less fines segregated out. The right amount of additive is important to improve the performance of the hot mix asphalt. For this particular Knife River mix design, 0.075% of the additive is a good dosage. The results of the Moisture Resistance test, Hamburg Wheel Track test,

California Asphalt Magazine • 2024 Forecast Issue

and Boiling Water testing all show benefits with the 0.075% dosage.

Come race day on Nov. 15, the asphalt track performed as expected, presenting a dazzling backdrop to the iconic images of the Las Vegas Strip and roaring race cars watched by a celebritystudded crowd and a worldwide TV audience. Max Verstappen from the Netherlands, with Red Bull Racing, took the checkered flag in the 50-lap race with a winning time of 1:29.08. It was a spectacle befitting the venue, and smoothriding asphalt was at the center of it all.

For more information on ZycoTherm or other Zydex products, please visit All States Materials Group online at www.asmg.com or call Rick Bird, All States technical sales manager at (775) 690-8513. CA Brian Hoover is co-owner of Construction Marketing Services, LLC, and editor of CalContractor Magazine.

13

EXCLUSIVE:

Confidence down slightly in our 14th annual 'Better-Worse' survey; work force remains dominant concern for 2024

By Russell W. Snyder

T

he results are in. The 14th annual CalAPA "Better or Worse" survey found respondents slightly more pessimistic about the year ahead than they were in 2022, but with plenty of uncertainty about what 2024 will bring. Finding skilled workers remained one of the top concerns, with the economy, inflation and the regulatory environment also contributing to the gloomy outlook.

The brief, non-scientific poll of more than 2,600 "Asphalt Insider" newsletter subscribers, conducted in November, found optimism in short supply and similar to the levels recorded last year as the industry emerged from the shadow of the COVID-19 pandemic. The number of respondents who said next year would be better than 2023 stood at 30%, which was down slightly from the 32% recorded in the survey a year ago. Those who said next year would be worse than 2023 came in at 32%, also down 2 percentage points from last year. The biggest percentage of respondents, 35%, said next year would be about the same, which was up from 29% who selected that option in last year's survey. It is the first time since 2013 when more people chose the “Same” answer over “Better.”

The numbers remain in stark contrast to the heady days in 2017 and 2018, when the passage of 14

"Better" (by percentage of respondents) 80 70 60 50 40 30 20 10 0 2010

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Percentage of respondents since 2010 to the CalAPA survey who replied that the coming year will be “Better” than the previous year.

SB1 promised to funnel billions of dollars to deferred pavement improvement projects. In 2017 the “Better” figure was 62% and 2018 was at 67%, an all-time high for the survey. The “worse” tally in 2017 was just 5%, the all-time low for the survey, and the 2018 figure was 5%.

The all-time high for the “Worse” number was recorded last year when 34% of respondents said they believed 2023 would be worse than 2022.

The levels of pessimism were not quite as dire as recorded in surveys taken following the last major economic downturn in the

state. In 2011 the share of survey respondents that said the next year was going to be better was just 20%, the lowest ever recorded in the survey. The era was marked by reduced government funding and industry contraction, largely due to the popping of the housing bubble.

Still, the same year the number of respondents who said 2012 would be worse stood at 22% -- dramatically better than this year’s 32%.

Responses in the "Don't Know" category remained near historic lows, at 2%. Last year [ Continued on page 16 ]

California Asphalt Magazine • 2024 Forecast Issue

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[ Continued from page 14 ]

only 3% selected the "Don't Know" option. The highest "Don't Know" number, 11%, was recorded in 2012 as the state was still feeling the aftereffects of the Great Recession.

Workforce issues, a persistent theme in the survey in recent years, plus worries about the economy and inflation plus two foreign wars were on the minds of many who responded to this year’s annual survey.

“Finding qualified personnel is getting harder every year,” one state agency respondent commented. Added a local agency official: “Not enough staff to accommodate increased work year after year.” An industry respondent said simply there was a lack of “employable personnel.”

The CalAPA Board of Directors identified this trend in its strategic plan update last year, and the association has initiated numerous workforce recruitment and retention activities. The newly minted Women of Asphalt California Branch has also placed workforce recruitment and development at the center of its many activities. More announcements are to come from the association on this topic in the coming year.

The survey validated a trend first identified last year that COVID-19-related concerns were disappearing into the rear-view mirror. Only one survey respondent mentioned COVID-19, and that was only a historical reference in a comment about work trends.

“2023 has pulled back from the Covid years (2020 to 2022), which were very busy,” one consultant commented.

According to the California Department of Public Health, there have been more than 104,705 deaths in California attributed to COVID-19 since it was declared a statewide health emergency in 2020.

16

"Same" (percentage of respondents) 60

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Percentage of respondents since 2010 to the CalAPA survey who replied that the coming year will be “About the Same” than the previous year.

Most comments about transportation funding tended to be dour. SB1, the $50 billion Road Repair & Accountability Act of 2017, has reached the sixth year of its 10-year implementation horizon, and a new $1 trillion federal infrastructure bill passed in late 2021 also promised to infuse more money to pavement repair.

However, there are persistent reports that those dollars are not showing up in pavement repairs.

A comprehensive CalAPA analysis of Caltrans data validated those anecdotal reports. Several survey respondents complained they have not seen road repairs at the level that was expected.

“Not enough funds to catch up with backlogged roadway maintenance,” one local agency representative wrote. The weather also played a part as California this year emerged from a yearslong drought. “Reduction in funds at the county level,” one supplier wrote, “due to budgets being depleted as monies were used for emergency snow removal and repairs.”

The state of the economy, which has been buffeted by rising

interest rates and inflation over the past year, was woven through the survey comments. “Inflation is hurting budgets,” one local agency respondent said. “Rising costs,” a liquid asphalt binder supplier added.

For the eighth year in a row, the survey added an optional question, “What is the No. 1 challenge where you work?”

That question elicited 93 written responses, more than double the number of those who commented last year. As it has in recent years, work force issues continued to dominate the comments. Next were supply chain issues, the economy, logistics, trucking, the regulatory environment, price inflation and competition.

As the workforce ages and enters retirement or moves to other fields, the survey suggests, the churn in personnel continues to place stress on industry and agency alike.

“Qualified labor. Qualified labor,” one industry respondent wrote twice for emphasis. “Skilled workforce” and “qualified workers”

California Asphalt Magazine • 2024 Forecast Issue

were mentioned several times by survey respondents asked to name the top challenge they face.

Government regulations were also top-of-mind for many who took the survey. One private industry respondent described the regulatory environment thusly: “Increasing adverse government regulation!” Another industry representative added, “Complex rules. Not enough government common sense.”

One contractor sought to connect the economy and regulatory environment to the workforce challenge. “We used to lose them (workers) to other contractors. Now they are leaving because they are sick of living in California with the ridiculous laws.”

The main CalAPA survey question is purposefully vague: "For your company or organization, how do you think 2024 will compare to 2023?" However, most of the voluntary comments offered up by survey respondents to justify their opinion centered around how much work is expected in the coming year. The answer varied by company, agency and region, reflecting the size and diversity of California's massive economy and the economic micro-climates that are spread across the state.

As in previous surveys, the weather largely depends upon where you are standing. Some respondents commented that work was brisk, while others were disappointed, particularly in some rural areas of California.

Some took the survey as an opportunity to vent.

“The anti-car, anti-road forces in government are better organized, better funded than the side arguing for more paving projects,” one “worse” respondent commented. Another “worse” responded added, “Less sales of equipment. Housing developments are thinning, less work.”

"Worse" (by percentage of respondents) 40 35 30 25 20 15 10 5 0 2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Percentage of respondents since 2010 to the CalAPA survey who replied that the coming year will be “Worse” than the previous year.

The looming crisis on how to pay for road repairs also emerged in the survey comments, with one respondent remarking, “Only getting worse because electric vehicles are not paying road user fees to use the roads.” Fuel and excise taxes have historically carried the bulk of the roadrepair funding load in California, but improving fuel economy and increasing sales of electric vehicles are starting to chip away at that funding scenario. According to preliminary data compiled by the California Department of Motor Vehicles (and released by the California Energy Commission), Californians purchased about 447,000 battery, plug-in hybrid or fuel cell electric vehicles in 2023, up about 30% from the year prior. Transportation California, a coalition supported by CalAPA, has identified the looming funding crisis as one of its top policy priorities this year.

A total of 165 people took part in the voluntary on-line survey, which was conducted from Oct. 18 to Nov. 16. In December, CalAPA members were sent an exclusive

California Asphalt Magazine • 2024 Forecast Issue

comprehensive analysis, “2024 Asphalt Market Forecast for California,” filled with exclusive data and insight available nowhere else. In addition, the association will send members two Asphalt Market Forecast updates in 2024. CA Russell W. Snyder, CAE, is executive director of the California Asphalt Pavement Association (CalAPA).

REFERENCES: California Energy Commission “New ZEV Sales in California” website, accessed Feb. 6, 2024. https://www.energy.ca.gov/datareports/energy-almanac/zeroemission-vehicle-and-infrastructurestatistics/new-zev-sales Snyder, R. (2023) “Confidence down sharply in our 13th annual ‘Better-Worse’ survey; economic uncertainty, supply chain and work force issues among top concerns for 2023,” California Asphalt, Journal of the California Asphalt Pavement Association.

Vol. 27, Issue 1 (January 2023).

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The UCLA Anderson Forecast for the nation

1995 Déjà Vu All Over Again: The U.S. Economic Outlook

By Jerry Nickelsburg Director, UCLA Anderson Forecast December 2023

20

CHART 1: Retail Sales (Goods + Leisure & Hospitality)

720,000

680,000

640,000

Millions of Dollars

600,000

560,000

520,000

480,000

440,000

400,000

360,000

320,000 2012

2014

Source: U.S. Census Bureau

2016

2018

2020

2022

fred.stlouisfed.org

CHART 2: Durable Goods – New Orders

Millions of Dollars

F

rom January 1994 to March 1995, the Federal Reserve affected an increase in the Fed Funds Rate from 3.68% to 6.30%. The 10-year minus 2-year Treasury yield curve went from 1.58 to 0.15 percentage points and by September the 10-year yield was lower than the Fed Funds rate. While not a technical inversion these patterns do mimic yield inversion patterns.

The increase in interest rates roiled financial markets as the Greenspan Fed sought to fight inflation. With higher interest rates from the bond sell-off, Orange County dove into bankruptcy.

The end of 1995 saw a government shutdown and though there were some concerns about a looming recession, the data indicated an economy that would continue the expansion albeit at a slower rate. The 1995 economy was different than that today.

It was still the time of desktop computers and floppy disks, a brand-new NAFTA, the beginning of the emergence of China, and decreasing geopolitical tensions.

But the data did not lie. After a 4.0% growth in 1994, the 1995 economy grew at 2.7% followed by a 3.8% in 1996.

Is the 2024 economy 1995 déjà vu? The data indicate so. This quarter, our forecast is almost unchanged from the forecast presented last quarter. The debt ceiling and government shutdown crises turned out to be short-lived as did the labor action with Detroit’s Big Three and impending government shutdown. Retail

sales were strong last quarter, and though a slowing of auto sales dominated October’s data, they look to continue growth (Chart 1), the backlog of durable goods

orders has grown (Chart 2), and factory construction is soaring (Chart 3). Though core inflation is coming down slowly, we do not expect the Fed to increase the Fed

California Asphalt Magazine • 2024 Forecast Issue

Funds rate for the balance of the year and to hold the rate where it currently sits until sufficient weakness in the economy, which we forecast for 2024, results in some moderate rate reductions.

With the growth of GDP beginning to accelerate towards the trend growth rate in 2025, lower inflation, and an unemployment rate hovering in the 3.9 range, we do not expect any further 2025 movement in the Fed Funds Rate.

This is not 1995 all over again, but a forecast with a somewhat similar pattern to 1994 through 1996. Why did the recession that so many economists called for not occur?

Usually “this time is different” turns out to be incorrect. But this time is different. First, monetary policy tightened at the same time as fiscal policy eased. The combination of the CHIPS Act, The Infrastructure Act, and the Inflation Reduction Act added significant demand to the economy and increased investment. In addition, the interest-sensitive sectors of housing and autos were not overbuilt.

Indeed, they were still recovering from unmet demand during the pandemic. Homeowners with 2%-3% mortgages were not opting to upsize or downsize into 7% mortgages pushing post-pandemic demand for housing, particularly among the next generation, into newly built homes. And autos and light trucks are still increasing rate as chips used in manufacturing them become increasingly available.

High gas prices also shifted some demand into EVs and auto manufacturers into large investments to meet that demand.

However, the heightened uncertainty today, particularly in the light of geopolitical events, also means that month-to-month data are not as reliable predictors of the coming months as before.

Monetary policy that pushes up interest rates does not tend to have a contemporaneous impact on the economy. Past data indicates

CHART 3: Factory Construction Spending

CHART 10: Unemployment Rate

United States: Unemployment rate

2021

2022

2023

2024

2025

Source: UCLA Anderson Forecast and U.S. Bureau of Labor Statistics

it shows up in interest-sensitive sectors six to nine months after the Fed increases rates. Romer and Romer’s analysis puts those effects beginning in 2023 and extending into 2024. Since we did not see these effects in 2023, they must have been masked by other economic events. Where it should be showing up is in interest-sensitive sectors, so it is important to note what else is happening there.

In a 2007 article, Professor Ed Leamer showed the importance of this for housing. It is the case that the current economic inertia ought to weaken and we expect some of what is predicted in the Romer and Romer analysis in 2024. Our forecast reflects that.

History tells us that this is a very

California Asphalt Magazine • 2024 Forecast Issue

imprecise tool for managing the economy. The weak growth we are forecasting for 2024 is now evident in the data. Retail sales remain above trend and year-over year have grown. But there is very little change between September and October (Chart 1). This is not atypical for October and occurred in the slowing economy of 1995.

Durable goods orders excluding transportation are up slightly on the strength of defense durable goods orders (Chart 2). Though non-defense orders retreated slightly, they are still at a high level, and importantly, the backlog of orders has increased.

At least three new defense programs will be ramping up in 2024; the B21, A27, and Grey Wolf 21

in addition to replacement material for that shipped to Ukraine. The excluded transportation orders were down, but this was a direct result of the Dubai Airshow. The show occurred in November and airlines postponed ordering until then. Look for transportation to increase dramatically after Boeing’s blockbuster airshow orders.

Finally, investment in factories continues at record levels, but the growth has leveled off. As with durable goods and retail sales, the data are indicating slower growth into the middle of next year, but not a retreat to recession levels.

Economic Growth In September we said, “We expect quarterly GDP growth in 2023 Q3 to be reported at 2.3%” and it came in at an astonishing 4.8%. That was due in part to inventory replacement following a weak inventory accumulation the previous quarter. As we are now expecting less inventory adjustment in the current quarter, the forecast is slightly weaker than 3 months ago and is now at 1.7%.

The balance of the forecast is much the same as our forecast in September, a weaker 2024 with three quarters of 1% growth which then accelerates back to 2.5% trend growth by the end of the forecast horizon (2025). The weaker 2024 reflects the impact of higher interest rates on consumption, housing, and business investment.

While these are not expected to contract, the rate of growth which feeds into the rate of growth of GDP will be under trend.

Monetary Policy and Inflation Monetary policy has been restrictive in the sense that the Fed’s actions have induced an increase in interest rates across the board. However, markets continue to predict future rates to be lower. That prediction has led to an inverted yield curve; one where 22

CHART 11: Housing Starts, Millions, Seasonally Adjusted Annual Rates

short rates are higher than long rates. Normally, that prediction is also a prediction of a recession, but it does not have to be. Rather, it is simply a market prediction of future interest rates which can be lower for a host of reasons (including the oft-cited recession).

With a weak 2024, in part due to the presence of high rates, and the fact that falling inflation will increase real interest rates thereby tightening credit conditions, we are forecasting a mild easing of the Fed Funds Rate. Specifically, we forecast that in the fourth quarter of 2024, the Fed will reverse this Autumn’s 25 basis point increase followed by one more reduction in the Fed Funds Rate in the first quarter of 2025 for a total of 50 basis points. With inflation continuing to fall and the economy picking up, we have the Fed standing pat for the balance of the Forecast at 4.8%. With the prospect of higher short-term rates fading into the past, we forecast the yield curve measured by 10year minus 2-year and 10-year minus 3-year Treasuries to turn right side up in the third quarter of 2024. This will be a relatively flat yield curve, with a weak 2024 leading to some expectation of further Fed rate cuts, but without

a return to a deeply inverted yield curve.

The two key elements of this forecast are inflation and GDP growth. With GDP growth at 0.7%, 1.0%, and 1.0% in Q2, Q3 and Q4 of 2024, the Fed will be concerned about an impending recession. A 1% economy is one that, statistically speaking, is not significantly different from a no-growth economy. The Fed’s preferred measure of inflation, the Core Personal Consumption Expenditure Price Index (PCE), will have fallen from 4.6% in Q1 2023 to 2.9% in Q2 2024, and the Headline PCE will have fallen from 4.9% to 2.8% over the same period. While these are not yet at the Fed’s target of 2%, the trend, the stickiness of inflation being due to residential rents, the implicit tightening of credit conditions, and a much weaker economy gives rise to our forecast of a slight move by the Fed beginning in 2024 Q4.

Employment Labor markets have been strong since the economic recovery after the pandemic. Total non-farm payroll jobs increased by 4.3% in 2022 and is expected to increase by 2.4% through August of 2023. [ Continued on page 24 ]

California Asphalt Magazine • 2024 Forecast Issue

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The fact that 2023 is lower is more a function of running out of workers than an absence of jobs.

The unemployment rate fell to a low of 3.5% before increasing to 3.8%. The Job Openings and Layoffs report still has the ratio of job openings to job seekers at 5.3 and the August openings level at 8.8 million jobs nationwide.

The recent rise in unemployment can be traced in the main to new entrants to the labor market rather than layoffs. The layoff rate as measured by the ratio of new unemployment claims to payroll employment is at historically low levels. However, slower growth in the economy in 2024 will result in fewer new jobs and therefore, an increase in the unemployment rate to 3.9% plus or minus a few tenths of a percent as job growth lags behind growth in the labor force.

Chart 19: Housing Starts 2.0 (Millions of Units SAAR) 1.8 1.69

1.72

1.6 1.57 1.58 1.58

1.64

1.45

1.4

1.41

1.44 1.46

1.45 1.39

1.48

1.51

1.54 1.56

1.57 1.59

1.62

1.36

1.2 1.0 0.8

I

II III IV I

II III IV I

II III IV I

II III IV I

II III IV

2021

2022

2023

2024

2025

Chart 20: Federal Government Expenditures and Revenues 40% (% of GDP) 36%

Housing Markets Weak housing markets are a characteristic of recessions.

From Chart 11, it is evident that weakness is a pattern of decline to levels between 1.2 and 0.5 million starts per year. It also corresponds to the aftermath of building in the 2 million range. The latest data do not show the same pattern. With underbuilding over the last 15 years and a growing population there remains latent demand for new housing. This is exacerbated by the migration to the Sun Belt and the lack of existing housing inventory since the onset of the pandemic.

Our forecast is for housing to remain close to, but under the historical average of 1.53 Million per year, enough to create a little weakness in 2023, but not enough to induce a recession. Although the October new home starts were at a level suggesting further weakness in housing, the issuance of new permits has been between 1.4 and 1.54 Million units on an annual basis over the last three months.

24

32% 28% 24% 20% 16% 2021

2022

2023 Expenditures

Since permits are taken out shortly before construction begins, this portends an increase in housing starts in the coming months.

Conclusion The oft-predicted but never seen “recession next quarter” has now faded in the face of expansionary fiscal policy, new national industrial policy, and a consumer who is happy to continue spending. Nevertheless, the impact of higher interest rates

2024

2025

Revenues

will be felt in restraining growth in 2024. As inflation slowly works its way back to the neighborhood of 3% per annum and is being kept high due primarily to residential rents, automobile repair, and new health insurance premia, we expect Fed policy to take a neutral stance and economic growth to rebound to trend rates.

Nevertheless, there are risks to the forecast. A protracted shutdown of government was averted until 2024, but the possibility still exists.

California Asphalt Magazine • 2024 Forecast Issue

4.5% and 3.8% respectively. Our forecast for 2024 and 2025 is for total employment growth rates to be 0.3% and 0.9%. Non-farm payroll jobs are expected to grow at a 1.8% and 1.7% rate during the same two years. Real personal income is forecast to grow by 1.7% in 2024 and 2.7% in 2025. In spite of the higher interest rates, the continued demand for a limited housing stock coupled with state policies inducing new homebuilding should result in the beginning of a recovery this year followed by solid growth in new home production thereafter. Our expectation is for 127K net new units to be permitted in 2024 and permitted new units to grow to 155K in 2025. Needless to say, this level of home building means that the prospect of the private sector building out of the housing affordability problem over the next three years is nil. CA

Will geopolitical events upset the current growth pattern? Will the election result in different national economic policies in 2025? These risks are substantial and bear watching as they could well drive the economy off its current growth path.

The Forecast The sector-by-sector analysis above results in a forecast for the California economy to, once again, grow faster than the U.S. but not by much. The risks to the forecast are political, geopolitical and the potential for interest rates to still disrupt the current expansion on the downside and increased international immigration and accelerated onshoring of technical manufacturing on the upside. The unemployment rate for the 4th quarter of this year is expected to average 4.7%, and the average for 2024 and 2025 is expected to be

Editor’s Note: This report was edited slightly from the original to conform with this publication’s style and usage guidelines and to accommodate space constraints.

Jerry Nickelsburg is the director of the UCLA Anderson Forecast and an adjunct professor of economics. The UCLA Anderson Forecast is published quarterly and is a unit of the UCLA Anderson School of Management.

The information provided in this article is only a small excerpt of the UCLA Anderson Forecast for the Nation and California. Visit www.uclaforecast. com to review the UCLA Anderson Forecast in its entirety. For information regarding sponsorship of the UCLA Anderson Forecast, please call (310) 825-1623.

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The UCLA Anderson Forecast for California

From Rapid to Anemic Growth: The California Report

By Jerry Nickelsburg Director, UCLA Anderson Forecast December 2023

28

Chart 1 CHANGE IN NO. OF JOBS BY SECTOR Thousands

(Feb. 2020 to October 2023)

300 250 200 150 100 50

Wholesale Trade

Information

Non-Durable Goods

Finance

Education (pvt + public)

Mgmt of Companies

Federal Gov't.

Mining & Logging

Other Svc.

Retail Trade

State & Local (excl Ed.)

Administ. Svc

Leisure & Hospitality

Durable Goods

Construction

Prof. Sci. & Tech.

-50

Tsp. Whs. & Util.

0 Health Care & Soc. Svc.

Introduction During the early part this year, uncertainty about California’s 2023 economic outlook was elevated in large part by the continued calls by some economists for a near-term recession. The most important source of this uncertainty was national economic policy. Even though recession worries have faded, increased military activity abroad and a sense of greater geopolitical risk have kept uncertainty about the future high.

And there are still those that say a recession is looming. The uncertainty factor combined with a slower-growing U.S. economy in 2024 leads to a slower-growing California economy. There is some indication in the employment numbers that the fourth quarter of this year and the early quarters of next year will have small but positive growth. However, the data signals are mixed. California’s labor force has declined of late and the unemployment rate has been inching up. While we still see tailwinds in the data, they have moved from relatively strong to a very mild breeze. As such, there is less confidence in California outperforming the US in 2024 than three months ago.

This California report begins with a look at the current employment situation including a discussion of three key sectors: technology, housing and construction, and logistics.

The report concludes with a discussion of the economic outlook for 2023 through 2025.

Source: edd.ca.gov

California Nonresiden al Construc on Authorized By Building Permits, Real Value

40 (Bil. 2012 $, S.A. Annualized) 35 30 25 20 15 10

2015

2020

2025

Source for residen al and nonresiden al permit and construc on data: Construc on Industry Research Board (CIRB), a service provided by the California Homebuilding Founda on (CHF). h p://www.cirbreport.org/

California Asphalt Magazine • 2024 Forecast Issue

California Construction Employment

California New Residential Units Authorized By Building Permits

180 (Thous., S.A. Annualized)

1,000 (Thous., S.A.)

160

900

140 120

800

100 80

700

60 40 20

600 2012

2014

2016

2018

Single-Family

2020

2022

2024

Multi-Family

Source for residential and nonresidential permit and construction data: Construction Industry Research Board (CIRB), a service provided by the California Homebuilding Foundation (CHF). http://www.cirbreport.org/

Employment Retrospective There are normally two measures of employment considered when analyzing labor markets in California; the household survey metric which counts the number of people employed and the enterprise survey metric which counts the number of payroll jobs. The household survey reports that the number of people employed in October 2023 was 1.7% below the number in the pre-pandemic peak.

The decline in employment over and above the decline in the labor force has led to an increase in the unemployment rate in October to 4.9%. The labor force decline is attributable to retirements, migration out-of-state, and individuals choosing to spend their time in non-market activities such as child raising. Breaking down the decrease in the labor force by county one finds that the majority of counties with a declining labor force are rural counties in northern and eastern California, counties that have been losing population for some time. However, their losses are small relative to the decline in the Bay Area labor force.

Over the same period, California’s non-farm payroll jobs increased, and it now exceeds the pre-pandemic level by 482,300

500

2015

jobs. The difference between the two metrics can be partly explained by the difference in the definition of employment in the two surveys.

The household survey is a measure based on the domicile of the worker. If a former San Francisco office worker is now remote in Phoenix, then they would not be counted in the labor force and employment numbers for California in the household survey. This would represent a decrease in the state’s aggregate labor force.

However, if their job was still at an enterprise in San Francisco, they would remain in the enterprise survey as employed in San Francisco. They are working in San Francisco (virtually) and living in Phoenix (in true life). This, at least in part, explains the large decline in San Francisco’s labor force.

Importantly, many of the new payroll jobs are in sectors different from those where job loss was the most acute. This disparity is evident in Chart 1. In the logistics, technology (professional, technical, and scientific services and information), construction, durable goods manufacturing, and healthcare sectors, job creation makes up the bulk of the increase.

Over the three months ending October 2023, the picture changed

California Asphalt Magazine • 2024 Forecast Issue

2020

2025

a bit. The three sectors with the largest gains in jobs have been health care and social services, public and private education, and leisure and hospitality.

The next three sectors with the largest number of new jobs are construction, state and local government, and retail trade.

The two sectors that have lost the most jobs in the last three months are information and professional and scientific services. While these sectors are tech-intensive sectors, they are not entirely tech. The information sector, for example, contains the print media, Hollywood, and telecommunications. The tech component losses in specific tech subsectors were confined to computing and data processing services and they were minimal.

The decline in information sector employment is almost all due to the two Hollywood labor actions.

Now that both labor actions are settled, the expectation is for the information sector to post solid growth in the coming six months. In professional, technical, and scientific services the tech subsectors, computer systems design and related services, and scientific research and development services, both grew. The decline 29

Housing Markets and Construction The housing market in California is misbehaving. Higher mortgage rates should send prices lower.

Though home prices are lower than their previous peak, the median price of existing singlefamily homes sold in the state declined on a seasonally adjusted basis by 5.5% from May of 2022 (Chart 5), they have been climbing since December in San Diego by 7.8%, in Los Angeles by 6.3% and 3.2% in San Francisco. With existing home sales at depression levels, builders are responding with new developments. The Allen 30

Chart 3

California Regional Job Gain (Dec. 2022 to October 2023, SAAR)

4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5%

North Bay

Silicon Valley

SJ Valley

San Francisco

San Diego

Los Angeles

Inland Empire

East Bay

U.S.

Orange County

Sac. Delta

Central Coast

0.0%

Source: edd.ca.gov

Chart 5

Thousands

in professional technical and scientific services resides in business services which include legal, accounting, consulting, and architecture.

One key difference between projected future layoffs in tech today and those in 2001 is that today tech is imbedded in more sectors and there exists a higher probability that green tech, med tech, aerospace tech, and the like will be able to absorb those layoffs.

In addition, the firms announcing layoffs might be California-based, but they are mostly large multinational firms with their announced layoffs extending across the globe. Finally, the latest infusion of venture capital money into AI research and development provides some heavy tailwinds for the Bay Area tech sector.

The pace of employment growth in California is of course, geographically variable. Over the 10 months of 2023 ending in October slower than the U.S. growth has been experienced by all but a few regions (Chart 3).

Though still positive, the slowest growth was in the Bay Area and in the San Joaquin Valley. The former is a direct result of the slowdown in tech growth and the latter is mostly related to the agriculture and food processing industry.

California Median SF Home Price (Jan. 2016 to Sept. 2023, SA)

900 850 800 750 700 650 600 550 500 450 400

2016

2017

2018

2019

2020

2021

2022

2023

Source: California Association of Realtors

Matkins/UCLA Anderson Forecast Commercial Real Estate Survey reported that ½ the panelists in Northern California and 60% in Southern California were beginning new multi-family projects in 2023/2024.

Relative to the rest of the nation, California's new home construction is holding up. Over the first three quarters of 2023 new building permits declined by over 20% in the Northeast and in the West excluding California compared to the first three quarters of 2022. The decline was 16.2% and 11.3% in the Midwest and the South respectively. For California, the decline was only

8.8%. Our expectation is that the new home products in the state and eased permitting processes will continue to ease the nationwide residential building downturn’s impact on the state.

As growth picks up after a pause in 2024, the volume of new building will increase once again.

The net domestic migration from California to other states as a consequence of the affordability of homes in the state is expected to continue through the forecast horizon and is part of the aforementioned decline in the labor force. However, it will be at an increasingly slower rate. That [ Continued on page 32 ]

California Asphalt Magazine • 2024 Forecast Issue

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California Taxable Sales

1,100 (Bil. $, S.A. Annualized) 1,000 900 800 700 600 500

2015

2020

2025

California New Car Registrations

2.2 (Mil., S.A. Annualized) 2.0 1.8 1.6 1.4 1.2 1.0 0.8

2015

2020

2025

California Unemployment Rate

16 (Percent, S.A.) 14 12 10 8 6 4 2

32

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2014

2016

2018

2020

2022

2024

part of the migration that has been due to high housing costs now confronts much higher housing costs in destination states. As relative affordability increases, the incentive to move for affordability diminishes somewhat for Austin, Salt Lake City, Boise, and elsewhere. To be sure, California housing will still bring a premium due to the more extensive amenities afforded to residents, but the gap has closed significantly. In the first half of this year, the gap widened slightly as expected. Many fully remote workers moved to hybrid work and moved back. Importantly, the abatement of the pandemic migration together with an increase in the supply of housing either pushed down prices or slowed their rise in cities attracting Californians.

Logistics In the last four California reports we documented the slowdown in goods movements through the primary seaports and airports of the state and suggested a bottoming out. This still looks to be the case, but it remains too early to declare a trend. The downturn in imported goods movement at the three major seaports reversed slightly over the last three months.

Some of the previous sharp downturn was due to trans-Pac shipping being diverted to East Coast ports as a risk mitigation strategy on the part of shippers with the still unsettled labor issues at West Coast ports, and some was due to a shift by households from goods purchases back to services. With the new labor contract in the union members’ hands, the risk should soon be in the past. Moreover, the longer shipping time coupled with the drought in Panama slowing passage to the Gulf ought to result in an increase in goods movement through the California ports over the coming year.

California Asphalt Magazine • 2024 Forecast Issue

California’s international airports tell a more optimistic story. However, international air cargo at LAX is lower than its mid-pandemic peak and there is no clear neutral nor positive trend.

Exports continue to erode as a function of a slowdown in economic activity in China, Germany, and elsewhere in the Pacific. Domestic goods movement by air is now slightly below pre-pandemic levels.

For both seaports and airports, the forecast has logistics growth through 2024 to be very weak. The expectation is that the accelerating growth forecast for 2025 will then begin to increase logistics demand.

This should be evident in transportation and warehousing activity, but increasingly automated warehouses will put a damper on employment growth. CA

California New Residential Units Authorized By Building Permits

180 (Thous., S.A. Annualized) 160 140 120 100

Editor’s Note: This report was edited slightly from the original to conform with this publication’s style and usage guidelines and to accommodate space constraints.

Jerry Nickelsburg is the director of the UCLA Anderson Forecast and an adjunct professor of economics. The UCLA Anderson Forecast is published quarterly and is a unit of the UCLA Anderson School of Management.

The information provided in this article is only a small excerpt of the UCLA Anderson Forecast for the Nation and California. Visit www.uclaforecast.com to review the UCLA Anderson Forecast in its entirety. For information regarding sponsorship of the UCLA Anderson Forecast, please call (310) 825-1623.

80 60 40 20

2012

2014

2016

2018

Single-Family

2020

2022

2024

Multi-Family

Source for residential and nonresidential permit and construction data: Construction Industry Research Board (CIRB), a service provided by the California Homebuilding Foundation (CHF). http://www.cirbreport.org/

California Construction Employment

1,000 (Thous., S.A.) 900 800 700 600 500

2015

2020

2025

California Population Growth

2 (% Ch. A. R.) 1

ASPHALT MARKET FORECAST An exclusive member-only report, “2024 Asphalt Market Forecast for California,” was sent to members Dec. 1. Two updates will be sent in 2024. Contact CalAPA for details.

0 -1 -2 -3 2000

California Asphalt Magazine • 2024 Forecast Issue

2005

2010

2015

2020

2025 33

ASSOCIATION NEWS Another memorable night at the CalAPA annual dinner at the fabled Jonathan Club in downtown L.A.

By Russell W. Snyder

T

he power and prestige of the historic Jonathan Club in downtown Los Angeles was a fitting venue for the 2024 CalAPA Annual Dinner and Awards program attended by more than 100 CalAPA members and special guests.

The Jan. 12 event included the annual election of members of the Board of Directors for 2024, plus the installation of association officers for the coming year. State Sen. Roger Niello delivered a memorable keynote address, and former Asphalt Institute Senior Engineer Bob Humer was honored for his many years of service to the asphalt industry.

The gala event was preceded by a meeting of the CalAPA Board of Directors, plus a separate "Women of Asphalt California Branch" luncheon, which took place on the 70th floor of the adjacent Hotel InterContinental in downtown Los Angeles with uplifting insight provided by pioneering women who have found success in the asphalt industry. CalAPA recently marked the 70th anniversary of its founding, and the annual gala at the historic Jonathan Club is an always popular event that brings industry leaders together to mark important association and industry accomplishments, pay tribute to its leaders, and look to the future.

Len Nawrocki with Valero (retired) led the group in the Pledge of Allegiance, and Steve Marvin with LaBelle Marvin offered up an inspirational invocation. A poignant moment of silence was observed in recognition of the asphalt industry family that passed away over the last year.

34

The CalAPA Annual Dinner keynote speaker State Senator Roger Niello who is a member of the Senate’s fiscal committee addressed the members and gave an informative speech on the state’s proposed budget.

The board members for 2024 were presented to the membership, and the passing of the gavel ceremony took place as outgoing Chairman Jeff Benedict with Valero administered the oath of office to incoming Chairman Scott Metcalf with Ergon Asphalt & Emulsions.

The regular board meeting gavel apparently was inadequate, so Metcalf handed Benedict a massive "Hammer of Thor" version in recognition of his outsized leadership over the past year.

The Board of Directors, under the association's updated bylaws, was elected on staggered terms.

Those who were elected for twoyear terms at the meeting were Benedict, Metcalf, Chris Handley with Tullis Inc.; Kody King with Mercer-Fraser; Eric Richard, Reed & Graham; Steve Ward with Pavement Recycling Systems; Chris Gerber with G3 Quality; plus advisory board members Phil Reader with George Reed Inc. and James Frasier with R.J. Noble Co. The association's officers for 2024

will be Metcalf (Chairman), Vice Chairman Frank Costa with DeSilva Gates, Treasurer Scott Bottomley with Sully-Miller and Secretary Chris Gerber with G3 Quality.

Benedict will serve as immediate past chair as well as serve on the Executive Committee.

The oath of office for CalAPA board members states, in part, that they will represent all members and place industry interests above personal and company interests, and also adhere to local, state and federal laws, including anti-trust law, CalAPA bylaws, conflictof-interest policies and the association's Code of Ethics.

Outgoing chairman Benedict highlighted a few of the association's accomplishments during the past year, including recognizing new companies that have joined the association, effective engagement on the legislative and regulatory front, the publication of the comprehensive asphalt market forecast and supporting national efforts to protect and enhance asphalt's market share. He also recognized the Women of Asphalt California Branch members, who were well-represented at the event, and noted that the association will be establishing a charitable foundation in 2024 to support workforce recruitment and development activities.

Several of the Women of Asphalt California Branch members held an informal luncheon earlier in the day, sponsored by WofA-CA Branch Co-Chair Mimi Le of MCK Services.

Inspiration and insight born of experience was provided by Deana Ward and Allison Ragan. Ragan's company, Black Diamond Asphalt, [ Continued on page 36 ]

California Asphalt Magazine • 2024 Forecast Issue

Russell Snyder, Executive Director, CalAPA with his opening remarks at the CalAPA Annual Dinner.

Jim St. Martin, Life Member/All States Materials Group, Don and Mary Goss and Ann St. Martin.

Steve Marvin, LaBelle Marvin gave the invocation.

Bobby Sanchez, Nixon-Egli Equipment (left), Steve Ward, Pavement Recycling Systems and Reed Nordberg, NixonEgli Equipment.

Steve Marin, LaBelle Marvin (left), Steve Cota, Patriot Risk & Insurance Services, Cindy and Scott. Metcalf, and Greg Hunt, Ergon Asphalt & Emulsions.

Jeff Benedict, Valero shares a few outgoing remarks with the audience.

Incoming CalAPA Chairman Scott Metcalf with Ergon Asphalt and Emulsions (left) presents a special "Hammer of Thor" gavel to outgoing Chairman Jeff Benedict of Valero.

Del Crandall, C & C Transportation (left), Anastasia Henning, C & C Transportation and John Todorovich, All American Asphalt.

The amazing Women of Asphalt California Branch was wellrepresented at the CalAPA Annual Dinner Jan. 12 at the Jonathan Club in Los Angeles.

It was announced that the association is creating a charitable foundation in part to support the workforce recruitment and development activities of the WofA branch.

California Asphalt Magazine • 2024 Forecast Issue

35

[ Continued from page 34 ]

was profiled in a special "Women of Asphalt" issue of CalAPA's association magazine, "California Asphalt," that was published in 2023. More information about the Women of Asphalt California Branch can be found on their webpage: www.calapa.net/womenof-asphalt.html The keynote address by Niello was timely as the Newsom administration just days before introduced a proposed $291 billion state budget for the 2024-25 fiscal year that begins on July 1. Of note, the governor's budget proposes various fund transfers, delays in some programs and a substantial draw-down on the state's "rainy day" fund to plug a massive budget deficit that could be $30 billion or more than $60 billion, depending on whom is talking.

Niello is a Certified Public Accountant by training and a member of the Senate's fiscal committee. The Republican from Fair Oaks expressed concern with the Newsom Administration budget, describing the fiscal strategy as, "If you have a hole ... you can solve it by assuming more revenue."

Whether those rosy assumptions will come to fruition has been met with much skepticism in Sacramento.

The Legislature will be holding hearings on the budget this Spring.

The California Constitution requires a balanced budget to be in place by the start of the state's fiscal year on July 1.

"It's not a sustainable budget, and a lot of it rides on the economy," Niello said, adding a bit of humor: "If you laid 100 economists head to foot, they couldn't reach a conclusion."

Following the dinner, many attended an "after-party on the newly refurbished "SkyBar" on the roof of the Jonathan Club with a panoramic view of downtown Los Angeles and picture-perfect weather, sponsored by Ergon Asphalt & Emulsions and Martin Marietta.

36

Bob Humer thanking the audience after receiving his recognition in the CalAPA “Hall of Fame" as an "Honorary Member."

Bob Humer (fourth from left) was inducted into the CalAPA “Hall of Fame" as an "Honorary Member" at the CalAPA Annual Dinner Jan. 12 at the Jonathan Club in Los Angeles. Pictured, from left: CalAPA Executive Director Russell Snyder; Len Nawrocki, Valero (retired); Jim St. Martin, CalAPA (retired); Humer and his wife, Sari; Bob McGennis with HF Sinclair of Arizona; Roger D. Smith, CalAPA & Asphalt Institute (retired); and Don Goss, Valero (retired).

The VIP Table Sponsors for the evening were Ergon Asphalt & Emulsions, Martin Marietta, R.J. Noble Co., Sully-Miller Contracting Co., and Valero. The reception sponsors were Albina Asphalt Asphalt, G3 Quality, Mercer-Fraser Company and San Joaquin Refining.

The lanyard sponsor was Pavement Recycling Systems, and the event sponsor was CRH. Additional photos of the event can be viewed on CalAPA's various social media channels.

Please feel free to “like” and share far and wide. CA Russell W. Snyder, CAE, is executive director of the California Asphalt Pavement Association (CalAPA).

REFERENCES: Snyder, R. (2023) “Addressing the workforce challenge, thanks to leadership by the Women of Asphalt California Chapter.” California Asphalt, Journal of the California Asphalt Pavement Association, Volume 27, Issue 3, PP 8-14.

California Asphalt Magazine • 2024 Forecast Issue

Bob Humer, in his own words

Irene and Roger Smith (seated left), Bob McGennis with HF Sinclair of Arizona, Bob Humer, Bob Rivers, Polyco, Sari Humer and Lili Rivers.

Bob and Sari Humer with Pete Lambert, McGuire & Hester.

Longtime Asphalt Institute Senior Regional Engineer Bob Humer was inducted into the CalAPA "Hall of Fame" on Jan. 12 as an "Honorary Member" at the CalAPA Annual Dinner and Awards Program.

A story about that event appears elsewhere in this issue.

After the event, the following note was received from Humer to the CalAPA offices addressed to CalAPA Executive Director Russell Snyder: "It was a great honor for Sari and I to attend and be recognized at the CalAPA 2024 Annual Dinner. I have always taken pride in working with you, with Brandon (CalAPA Technical Director Brandon Milar), the CalAPA Members and the other five States I served in the Western Region. It must be said here that nothing in our field gets done without significant Industry and Agency teamwork. All that was achieved was thanks to the dedicated professionals I had the opportunity to work with. Led by CalAPA we are respected for our engineering professionalism.

I am thanking all who came from far and near to celebrate with me our achievements, and especially those on the podium who bestowed this honor upon me. Thank you for a memorable evening."

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California Asphalt Magazine • 2024 Forecast Issue

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California Asphalt Magazine • 2024 Forecast Issue

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