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McCarthy Building Companies Ramping Up Construction on Triton Center Project for the University of California, San Diego

By Brian Hoover, Senior Editor / Photos contributed by: McCarthy Building Companies / All renderings courtesy of LMN Architects

The University of California, San Diego (UC San Diego), as we know it today, officially began in 1958 when the University of California decided to establish a new campus in the burgeoning San Diego area. The campus opened its doors to students in 1964, with an initial focus on

science and technology. Over the years, UC San Diego has grown into a world-renowned research institution, earning a reputation for its contributions to various academic fields, including science, engineering, medicine, and the arts.

UC San Diego has been enjoying tremendous growth with student enrollment increasing

nearly 56,000 students for a total of 294,309 over the past decade. To keep up with this soaring pace, the University of California Board of Regents approved several building projects over the years and recently gave its San Diego campus permission to construct a massive new student center and a 2,400-bed housing

The Triton Center

complex that together will cost around $1.1 billion.

UC San Diego awarded the $428-million Triton Center project to McCarthy Building Companies (McCarthy), who began construction in June 2023. Designed by LMN Architects, the 419,000 GSF Triton Center project calls for the construction of four separate buildings along with a new 151-car cast-in-place parking structure. The Triton Center has been referred to as the grand entrance or gateway to the university, offering a blend of arts, culture, entertainment, and student academic resources.

Steven Homan is a senior project manager for McCarthy and responsible for overseeing the Triton Center project. “This is a ground-up project, and we are currently in the earthmoving phase and preparing for pads and foundations. Two of the five structures we are constructing are steel, and the other three are cast-in-place concrete, including the parking structure,” says Homan. “This is really five projects in one, all located within a nine-acre common central location. The Triton Center project represents our 17th project for the University, one of our long-standing clients.”

According to Homan, each individual structure is unique. Building A will serve as the academic student center or “Student Success Building,” while also housing the university chancellor’s new office. The six-story structural steel building is one of the tallest buildings within the center, and includes a teaching and learning commons, dining, global education, campus support, and an outdoor area. Upon completion, it will encompass a 134,671 square foot area with 126,00 GSF with 76,000 of assignable square feet (ASF).

Building A

Building B

Building D

Building C

Building B is a cast-in-place concrete structure that is four stories tall and designated as the Student Health and Well-Being Building. This structure includes facilities designed to support the student’s physical and mental health, complete with a pharmacy and urgent care center. Building B will measure 88,700 GSF with 55,700 ASF.

Building C’s circular shape will make it stand out from the other structures. To add to its uniqueness, Building C will also boast an exterior LED media mesh screen for displaying movies and other media for students, faculty, and visitors to view from the central courtyard plaza. Building C is designated as the Alumni and Welcome Center that will include meeting and celebration spaces along with other amenities for graduates. This six-level concrete structure will encompass a 34,000 GSF area with 17,200 ASF.

Finally, Building D will be a multi-level four-story max, steel structure that will serve as a 500 person celebration and gallery space. The north half of the

building is structural steel while the south half is an all-concrete parking structure. Its several unique rooms will offer displays, art exhibits, and what has been called an “immersive gallery.” This building will encompass 70,000 GSF with 76,000 ASF for the Meta Gallery and Celebration spaces, with an additional 100,600 GSF dedicated for parking and loading.

Homan says McCarthy is self-performing the concrete work on the Triton Center project with all five structures consuming approximately 22,000 cubic yards of concrete and 1,600 tons of structural steel by job completion in April 2026. “Before any of the mass and rough grading could commence, we had to demolish five existing structures. Once this was complete, our subcontractor, Sierra Pacific West, began moving what will be around 30,000 cubic yards of dirt,” says Homan. “This is where we are currently with crews set to pour footings and pads soon.”

McCarthy has subcontracted the underground wet and dry utility scope of work to West-Tech

Contracting, Inc. Additionally, Dynalectric San Diego is handling the electrical infrastructure, while A.O. Reed is installing the underground mechanical hydronic piping. “We have a long list of subcontractors scheduled to work on the Triton Center project with the workforce at peak expected to be at 400 plus or minus between McCarthy and the various trades. The structures are being built simultaneously, and to avoid logistical issues, the team members and building elements need to be maintained for continuity,” says Homan. “The laborers and craftworkers are required to park at the Torrey Pines Gliderport, which is around two and a half miles from the job site. McCarthy has contracted with a charter bus service to bring the craft personnel back and forth each day. We monitor this closely as we need everyone on-site working on time to remain on schedule. This is just one of the many challenges we have and will face on this high-profile project.”

Above: McCarthy Building Companies’ subcontractor, Sierra Pacific West, moving more than 30,000 cubic yards of dirt in preparation of the construction of Triton Center structures for UC San Diego.

Below: Set to open in 2026, the four-building Triton Center complex will centralize essential services and programs while also providing space for relaxation and enrichment.

All renderings courtesy of LMN Architects.

Homan explains that the first priority of everyone on-site is the safety of the students, faculty, and other pedestrians making their way in and out of the UC San Diego campus each day. “We have taken great precautions to not disturb the overall college experience. We are essentially taking over a large piece of real estate in the heart of campus, and it was a monumental task to get students and faculty comfortable going around the work area. There are bus stops nearby and people all over the place, and our dedicated safety manager and flag personnel from our craft labor subcontractors have done an excellent job managing the traffic. We also have our four project engineers who put on their ‘safety hat’ daily to make sure everything remains safe and secure.”

A project of this magnitude requires the best people, equipment, and technology to get it all done safely and on schedule. “We are utilizing a couple of new software platforms on this project to streamline the process and ensure that things go smoothly. PLOT is one of the software programs we are using to help manage jobsite

deliveries, material procurement, gate shutdowns, crane picks, and anything and everything that comes on or off the jobsite. We are piloting this program right now and, so far, it is working out well. It essentially replaced the old school whiteboard with subcontractors, timing, and schedules,” continues Homan. “We are also using a program called Inertia, which is an online inspection request platform that makes navigating inspections easier. Our IOR (inspector of record) is using the program to streamline inspection requests to ensure that he has the right inspectors dialed in each workday. This program has also been working out well so far on this project. Everything matters on a job of this magnitude, and we are interested in using any sort of technology that will benefit our client.”

The four state-of-the-art buildings that make up Triton Center are designed to create an integrated central hub for

student support. “The McCarthy team is honored to partner with LMN Architects to create the UC San Diego Triton Center as the new heart of the UC San Diego campus. I am proud to work alongside every McCarthy team member, including our project manager, Turner Rogers,” concludes Homan. “I also want to give a big shout out to Nate Long, McCarthy project director, for his dedication to UC San Diego as a client and for his leadership on previous UC San Diego projects that have provided the opportunity to build the iconic Triton Center.”

For more information on the new UC San Diego Triton Center located in La Jolla at 9500 Gilman Drive, please visit UC San Diego Triton Center.

For more information on McCarthy Building Companies, Inc. and their ongoing and upcoming projects in California and other states, please visit McCarthy.com or call their San Diego office at (858) 784-0347. Cc

Ramp

Above: Artist rendering of Triton Center courtyard.

{ Continued from page 8 }

Courtyard

Skanska Traylor Shea Joint Venture

Continues to Progress on Westside Subway Phase 1

Purple D Line Extension Project Scheduled for Completion in 2025 Despite Unique Tunneling Challenges

By Brian Hoover, Senior Editor / Photos

The Los Angeles subway system, known as Metro Rail, began in the 1990s with the Blue Line. It addressed the city’s traffic issues and marked the start of modern rail transit. The Red Line (1993), Green Line (1995), Gold Line, and Purple Line were later additions, connecting various neighborhoods. The ongoing Purple Line D Extension Project aims to expand the system further westward, reaching Beverly Hills and Westwood. The Purple D Line is a key part of Los Angeles’ subway system, connecting downtown Union Station to Wilshire/Western in Koreatown. Operated by Metro, the D Line helps reduce traffic and is part of the city’s eco-friendly transportation efforts. The City of Los Angeles has been planning the D Line route since the 1960s and conducted soil borings as early as the 1980s. Plans were stalled in 1985 after a methane seep caused a fiery explosion

at a department store near the La Brea Tar Pits. The explosion brought about a moratorium on tunneling until operations resumed in 1993.

The Purple Line D Extension Transit Project began in 2015 and is being constructed in three sections (phases). Section 1 encompasses the Wilshire/La Brea Station, Wilshire/Fairfax Station, and the Wilshire/La Cienega Station, which is slated to open in 2025. Section 2 includes the Wilshire/Rodeo Station, the Century City/Constellation Station, and is scheduled to open in 2025. Lastly, Section 3, which is on track to open in 2027, includes Westwood/UCLA Station and the Westwood/VA Hospital Station.

Metro’s Westside Subway Extension, Section 1 is being constructed by Skanska Traylor Shea Joint Venture and is a 3.9-mile heavy rail subway in the Wilshire Corridor of Los Angeles. Since its start, they have worked on

three underground stations, approximately 3.4 miles of twinbore tunnels, a Tunnel Boring Machine (TBM) Extraction Shaft, and complex systems and track work.

There were many expected and even unforeseen challenges during the construction of Westside Subway Extension, Phase 1, as the Skanska Traylor Shea Joint Venture successfully bored two twin tunnels, 22 feet in diameter, each approximately 4 miles long and 80-110 feet below ground surface. Much of the challenging tunneling conditions were created by the line’s proximity to the historic La Brea Tar Pits. Since the initial plans to build the line in 1960, the tunneling in this area has been deemed unsafe and by some, seemingly impossible. The joint venture team made it possible by mobilizing and utilizing two Herrenknecht multi-mode twin earth balance pressure tunnel boring machines (TBMs)

contributed by: Skanska Traylor Shea Joint Venture

affectionately referred to as Elsie and Soyeon. Elsie was responsible for boring the eastbound tunnel, beginning in October 2018. Soyeon also began operating in 2018, working simultaneously with Elsie for maximum production. These 1,000-ton, 400-foot-long, 22-foot-diameter TBMs have excavated miles of soil some 80+ feet below the Los Angeles surface. The Westside Subway Extension Phase 1 project is now approximately 80 percent finished with 100 percent of the tunneling safely completed.

Skanska Traylor Shea Joint Venture’s Purple D Line work has been managed by several joint venture team members, including Geoffrey Bender, Senior Project Manager at Skanska and Construction Manager of the Joint Venture. “The tunneling occurred in conditions that were classified as ‘gassy’ or even ‘extra hazardous,’ as our crews

dealt with asphalt-impacted soils known as ‘tar sands,” says Bender. “Our team was prepared to encounter underground gases which included an extensive monitoring program and ventilation systems to ensure the safety of the public and all employees.” According to Bender, one such instance occurred during Reach 2 tunnel mining. “Our joint venture encountered incidents of gas intrusion into the TBMs that resulted in precautionary shutdown of the boring machines. Whenever gas was discovered at a very low limit, immediate evacuation of tunnels and adjacent stations was required. Additionally, notification to and approval from Cal-OSHA to re-enter the underground work areas was necessary. The entire process could take anywhere from a few minutes to a few hours,” continues Bender.

“Added precautions included that cell phones were not permitted without special $2,000 explosion-proof safety cases. While the work and schedule were both impacted, the section of tunnel mining was completed without any safety incidents due to elevated gas levels. In addition to dangerous gases, the area also contained seismic faults and several geological variations from dense sands to silty sands, interbedded with layers of silts and clays.”

To begin the massive boring operations, the joint venture crews first had to excavate the entire station area where the machines would make their initial launch. “Our launching pit, also the La Brea Station excavation site, measured 1,000 feet in length, 65 to 70 feet in width, and 80 feet in depth. Because this area was designated as ‘gassy,’ by Cal-OSHA, we again took

Left: Artist rendering of Purple Line D Wilshire/LaCienega Station.

Below: Metro project extends the Purple D Line from Koreatown through Miracle Mile, adding three new stations at Wilshire/La Brea, Wilshire/Fairfax and Wilshire/La Cienega.

measures to avoid any sort of combustion while performing the excavation,” says Bender. “We utilized conventional excavators like the Cat 395F and 335F on the surface to excavate the launching pit to a reachable depth. When it came to the machines moving material below surface equipment reach, the decision was made to use older heavy equipment such as Cat 953B and 973B track loaders. These units were retrofitted by the joint venture to remove almost all of the electronic components and replace them with mechanical ones.”

Bender says that modifications were also made to lower the overall operating temperatures of the equipment fleet and the older equipment allowed the joint venture to use less original electrical components that

required modification. “Retrofitted CAT 325C excavators and Gradall excavators would feed the track loaders for station excavations to an awaiting Liebherr crane used to hoist spoils to the surface for off hauling, continues Bender. “Additionally, we used retrofitted compact equipment, like mini excavators and skid steer loaders, to excavate a cross passage between the two bored tunnels every 750 feet.”

The Skanska Traylor Shea Joint Venture utilized top-down excavation and bottom-up concrete construction using soldier piles and lagging, tiebacks, internal bracing, utility support, and HDPE membranes. The tunnel itself utilized a precast segmental lining which served as the initial ground support and final lining. Bender informally refers to the soil

material extracted from the boring operations as ‘tunnel muck,’ and explains how this material is brought up from the TBMs to the surface to be disposed of. “Our crews injected a conditioning agent into the earth which changes the material into more of a slurry state or muck type consistency. We made use of conveyor systems, up to two miles long, to bring the tunnel muck up to street level. These conveyors dumped onto a vertical conveyor and then to another overland conveyor topside that discharged the spoils into a muck bin before being disposed of,” continues Bender. “At the height of construction, our joint venture crews numbered more than 350 self-performing employees with an additional 120 to 170 subcontractors also working onsite. During the tunneling operations, our joint venture TBM crews would travel two miles underground to the east

{ Continued on page 16 }

Left and Above: Retrofitted CAT 325C excavators and Gradall excavators would feed the track loaders for station excavations to an awaiting Liebherr crane used to hoist spoils to the surface for off hauling.

{ Continued from page 14 }

before disassembling the boring machines to return to La Brea Station to resume tunneling the remaining two miles to the west.”

According to Bender, there were several other challenges, including stormwater runoff. “The three large, deep station excavations became retention basins during storm events due to stormwater sheets flow, and the porous temporary decking system that was Wilshire Boulevard. Our subcontractor, STS, pumped this runoff to the surface where it was treated

and tested before being moved into the City storm drainage system. During the excavation of cross-passages, several locations experienced the intrusion of groundwater that exceeded design expectations,” says Bender. “Additional ground treatment, pumping, and excavation support were implemented on a location-bylocation basis to allow work to progress.”

Bender says that the Fairfax Station, across the street

from the La Brea Tar Pits, also included a ‘Paleo Zone,’ which presented paleontological concerns for potential fossil discoveries during station excavation. “Because of the potential of archaeological finds, excavation for this station took place 6 inches at a time while in the 40-ft deep Paleo Zone. We found several artifacts through the project stations excavations, including a juvenile mammoth skull unearthed at the La Brea Station,” says Bender. “These

Left: Brookville 20-ton mining locomotive used to push and pull Herrenknecht multi-mode twin earth balance pressure tunnel boring machines on Purple D Line projects.

Below: Metro Purple Line D station tunnel and tracks under construction.

discoveries required proper handling and transport for any and all encountered fossils within the excavation areas.”

When Bender was asked about any other interesting or unusual challenges that the joint venture crews encountered during the boring process, he immediately recalled an anomaly found on Wilshire Boulevard and San Vincente. “Early on and prior to mining a reach from one station to another, we bored a conduit down at tunnel level. Once the conduit

was in the ground, we pulled a magnetometer through the conduit to look for any ferrous materials within the reach,” says Bender. “We did locate an old bridge foundation at San Vincente and constructed a grout curtain on each side of where the tunnel would be located to prevent any gas from penetrating the area. Next, we brought the boring machine up and had joint venture team members under pressure, like a scuba diver, placed in front of the machine to excavate by hand

until they chipped into a piece of steel. The steel in this area was then removed so that the boring machine could continue and avoid any costly damage.”

Once the Skanska Traylor Shea Joint Venture $1.6 billion Westside Subway Phase 1 project is complete, Phases 2 ($1.37 billion) and 3 ($1.4 billion) will continue with Tutor Perini, and all phases will be open to the public in 2027. For more information on Phase 1 of the Purple Line D Extension Westside Subway Phase 1 Project, please visit https:// partners.skanska.com/usa/ clients/lametro/wse/outreach/ sitepages/home.aspx. Cc

Left: Herrenknecht tunnel boring machine breaks through on segment of Purple D Line project.

Above: Herrenknecht multi-mode twin earth balance pressure tunnel boring machine at Long Beach station.

Why the Bulk Materials Industry is Overdue for Transformation

By Paul Foley, CEO of Bulk Exchange

Construction firms, from large enterprise outfits to owner-operated shops, are considering technology to transform their business. And why not? Costs are escalating, staffing poses significant challenges, and the industry is trending toward a younger workforce. Technology is the key driver for containing costs, automating tasks, and delivering a better experience to employees.

Despite these opportunities, many aspects of construction don’t have efficient solutions, causing many processes to remain firmly old school. While there are a handful of standout technology companies that have digitized the industry, the average contractor or supplier still relies on manual, outdated methods that could be handled online.

And yet, the construction industry manages some of the largest, most important, and most expensive projects on Earth. Technology that could streamline, improve, and optimize construction is critical.

Enter Bulk Exchange. I founded this company to solve the issues I had personally experienced as an excavation contractor for the last 30 years, over three continents. We are proudly made by the industry, for the industry. Built in collaboration with suppliers and estimators nationwide, we are employing innovative technology to create efficient solutions for all sides of the bulk materials industry.

A bulk materials marketplace means suppliers and contractors can connect online, enhancing and simplifying every step of the search-to-fulfillment lifecycle.

For the first time, supply and demand can connect via a central marketplace, making it easier to buy, sell, and move materials. The Bulk Exchange market place provides an industry-specific search engine with comprehensive solutions for finding and listing materials, accessing list prices, and submitting or responding to RFPs.

Benefit of Tech #1 - Centralized Search Engine

A marketplace approach is particularly important for major building projects. These projects have an intense focus on the planning stages, including finding and tracking real-time pricing.

Major Building Projects are often built by a large entity that may not be local to an area. They have no go-to platform to source

the information they need and may not have local relationships. Contractors, whether at national companies or local owneroperated shops, have to call around to local truckers/ brokers or competitors for information on suppliers in an area, and generally rely on word of mouth. It’s an incredibly anecdotal, manual process considering these are multi-million dollar projects.

A marketplace allows for centralized data, which simplifies the lives of supplier salespeople and project managers, and estimators who previously had to exchange weekly calls to ensure their pricing information was up-to-date.

Benefit of Tech #2 - Automate Bidding

For small and medium-sized contractors who don’t have the estimating staff or scouts to do the bird-dogging and reconnaissance in an area to find pricing for disposal sites and suppliers, AI can read through and decipher large swaths of bid docs, specs, submittals, and docs that are synonymous with major building projects. Large contracting firms can create more efficiencies when bidding jobs; instead of a team of estimators averaging six bids per week, they could push out 8-10.

Benefit of Tech #3 - Create a System of Record

Going deeper, without a centralized technology solution, there’s no system of record or single source of truth. Even though there can be vaults of files capturing quotes and RFPs to and from multiple vendors over multiple dates, they all live separately on texts, emails, phone calls, and notepads.

We built Bulk Exchange to capture all of this activity, time stamp, show a detailed audit of communications, and make all files/revisions easily discoverable.

A given project might not even happen for months or years, so a clear history of events and correspondence makes life easier and less risky for both vendors and customers.

And then there’s ESG. Guys like me don’t know what we don’t know, so we drive by facilities all the time which adds significant trucking costs to a project, and site crew productivity goes way down due to guys standing around waiting for trucks stuck in traffic. We designed our carbon calculator

powered by our marketplace data to allow users to evaluate not only material costs but also environmental impact due to distance hauling. This ties in with the trend of “Distance Matters” which empowers small businesses to decrease expenses and increase the project volume.

The future of technology for bulk materials is promising, and Bulk Exchange stands at the forefront, ready to lead the transformation. Cc

2024 California Forecast

SLOWER GROWTH IN SHORT AND LONG-RUN

CULPRITS: HIGH TAXES AND WEAK DEMOGRAPHICS

As we forecasted both in December 2022 and at our June Update, job growth in California dropped sharply in 2023. The actual drop from 5.6 in 2022 to 1.8 percent is a downward trend that will continue into 2024 as it will in the US.

During the decade of the 2010s, California’s job growth exceeded the U.S. on an annual basis by 1-2 percent. Since the pandemic, the growth rates have been at parity. More unsettling for the future of the state’s economy is its slower job growth in the all-important Advanced Industries, a job sector that commands salaries almost double the statewide average. These jobs in high value-added sectors like technology, software development, aerospace, and medical products are tracked by the ChapmanUCI Innovation Index.

Since 2005, the state has experienced four distinct growth stages. But over the entire 2005 – 2023 period, California’s percentage of all the advanced jobs in the U.S. remained at about 19 percent.

This is in sharp contrast with the states that ranked low in state and local taxes. Their share of advanced workers in the U.S. increased from 25 to almost 30.5 percent, an increase of 5.5 percent. These differences in share growth are reflected in the total number of jobs generated during the 2005 – 2023 year period. While California’s total number

of advanced workers increased 41% from 117,000 to 165,000, the low-tax states increased 75% from 150,000 to 263,000.

California’s rank as the second highest of all 50 states in the Tax Foundation’s ranking of state and local taxes shows up in other areas as well. California, for example, has lost over 1.7 million people in net domestic migration over the 2016- 2022 period. Our research suggests that an increasing percentage of those leaving the state are comprised of people with adjusted

Chapman University – A. Gary Anderson Center For Economic Research / Prepared and written by Dr. James L. Doti, Ph.D. and Dr. Raymond Sfeir, Ph.D.

gross income (AGI) over $200,000 per year. The loss in California’s population and AGI caused by people-flight has many long-term consequences. In an analysis conducted by our Anderson Center, we found that those states that experienced high population growth also experienced the highest increase in per capita personal income and vice versa.

More comprehensive analyses relating to the interplay between state and local taxes and economic growth are presented in three articles included after the forecast section in our Review. In 2024, for example, we see the total number of housing permits continuing to decline to 102,000 units after peaking at 130,000 units in 2022. The article on pages 26-27 of our review, suggests that this short-run decline will continue in the long run as the state experiences lower population growth.

Housing prices are forecasted to stabilize at low but positive levels in 2024. Given the sharp increase in mortgage rates, housing prices should have fallen more sharply. The fact that they haven’t is explained by the fact that homeowners don’t want to lose their fixed-rate mortgages that were taken out when rates were significantly lower. As shown in the following figure, 81 percent of current mortgages are below 5 percent. Cc

The Economic & Business Review, published semiannually by the A. Gary Anderson Center for Economic Research, is owned and provided as an educational service by Chapman University. For more information on the https://economicforecast. chapman.edu/

2024 U.S. Forecast

STRONG FISCAL STIMULUS FUELS GROWTH

AND HIGHER INTEREST RATES

10-YEAR T-BOND AND 30-YEAR MORTGAGE

In December 2022, we forecasted that real GDP would experience a mild recession, declining -0.4 percent. We later revised that to positive growth of 0.4 percent at our Update Forecast in June. But we continued to forecast a recession in the last half of 2023.

We then projected that 2023 will finish the year with real GDP growth at 2.4 percent rather than our December forecast of -0.4 percent. In dollar terms, instead of real GDP declining $87 billion as we forecasted December 2022, we changed our projection to represent an increase by $523 billion –that’s a difference of $610 billion.

What happened?

Although there are a number of reasons, we believe the principal reason was a sharply higher fiscal stimulus. As late as May 2023, most analysts projected a federal budget deficit of $1.4 trillion. Now, after including the impact of an adjustment relating to student loans, the deficit for the 2022-23 fiscal year is $2.1 trillion, an increase of $700 billion over and above most mid-year projections. The fiscal short-run stimulus from this higher projected deficit fueled a rapid increase in government purchases of goods and services. That, in turn, buoyed strong job growth, leading to higher consumer spending.

The resulting boost in consumer spending helped the economy skirt a recession, but it will have negative

INTEREST RATE

HOUSING STARTS AND HOME SALES

long-term economic consequences. Without the Fed at the ready to monetize the deficit by buying back the increasing supply of new Treasury debt, long-term bond, and mortgage rates will remain elevated. High mortgage rates will prevent any meaningful recovery in residential housing. Although we believe that the housing sector has reached a trough in both housing starts and home sales, we don’t see a housing recovery in the offing.

More important than housing starts in our model is total non-farm job growth. The recently reported net increase of almost 300,000 jobs this past September was followed in October by a more moderate increase of 150,000. Because of the erratic nature of month-to-

Chapman University – A. Gary Anderson Center For Economic Research / Prepared and written by Dr. James L. Doti, Ph.D. and Dr. Raymond Sfeir, Ph.D.

month changes, year-to-year percentage changes in job growth are a more reliable indicator of future growth in real GDP. That statistic has been on a steady decline since the beginning of 2022. We are forecasting that job growth will continue declining through the first half of 2024 to a low but non-recessionary level of about 0.5 percent.

Given our monetarist tradition, it shouldn’t be surprising that the money supply also enters into our real GDP forecasting equation. In that regard, recent pronouncements of the Fed suggest that it will continue its contractionary policy of allowing its T-Bond and mortgage-backed securities to mature to the tune of about $90 billion per month without repurchase. That policy, of course, can change at any time. But, the four-quarter lag we’ve estimated before year-toyear changes in the money supply affect prices and income suggests that the rate of inflation will continue to decline through 2024.

The continuing decline in inflationary pressure, we believe, will induce the Fed to not only end its policy of raising short-term interest rates but even lead it to reduce the Fed Funds rate by 50 basis points in 2024 to 4.8 percent by year-end 2024. But the very forces leading the Fed to reduce the Fed Funds rate, such as high long-term rates, a weak construction sector, and low job growth, will also lead to lower real GDP growth. Our forecast calls for quarter-to-quarter annualized real GDP to decline in the first quarter of 2024 before staging a mild recovery.

One-quarter of negative real GDP growth is not the stuff of a recession; rather, it points to the possibility of the long-sought-after “soft landing.”

In fact, the interest rate spread, measured by the difference between the 10-year T-Bond and Federal Funds rate, still points to a recession. All seven

REAL

recessions since 1967 have been preceded by the spread turning negative, on average, about 5 quarters before the onset of a recession. As shown in the interest rate chart, the spread turned negative in late 2022. A five-quarter average lag points to a recession in 2024Q1, the very quarter that we’re forecasting a decline in real GDP. And while our forecast calls for the spread to turn positive in 2024, that doesn’t mean we’re out of the woods. In every recession since 1969, the spread increased throughout the recessionary period. Bottom line: The U.S. economy will experience weak growth during the first half of 2024. Whether it will be weak enough for a recession is too close to call. Cc

The Economic & Business Review, published semiannually by the A. Gary Anderson Center for Economic Research, is owned and provided as an educational service by Chapman University. For more information on the https://economicforecast.chapman.edu/

MISSION STATEMENT

CHAPMAN UNIVERSITY

provides personalized education of distinction that leads to inquiring, ethical and productive lives as global citizens.

THE GEORGE L. ARGYROS COLLEGE OF BUSINESS AND ECONOMICS provides students and alumni with unmatched access to exceptional teachers and scholars, a network of top executives and opportunities for practice-based business education in one of the nation’s most dynamic business communities.

THE A. GARY ANDERSON CENTER FOR ECONOMIC RESEARCH provides data, facilities and support to encourage faculty and students to engage in economic research of high quality, and to widely disseminate the results.