The Stimulus Package's Real Jobs Impact

Gary Burtless argues that the job creation numbers the administration issued underestimate the true size of the impact:

When the stimulus package was enacted last winter, the Administration said its goal was to create or save 3-1/2 million jobs by the end of next year. How closely has the Administration come to achieving that goal? A couple of weeks ago the White House issued an interim report on jobs directly created or saved as a result of one part of the stimulus package, the grants or contracts directly made by the federal government or indirectly provided through federal aid to state and local governments. The report has been subject to minor carping and major criticism...

In essence, the reports distilled by the White House provided evidence from 150,000 anecdotes. According to the Administration’s summary, the reports offered evidence that 640,000 jobs have been directly created or saved... Jared Bernstein, the Vice President’s chief economist, emphasized that the 640,000 count represents an incomplete tally of the total jobs added or saved as a result of the stimulus package. It ignores, for example, the jobs created or saved as a result of personal tax cuts or hikes in unemployment compensation checks. We cannot collect anecdotes from Wal-mart (WMT), Safeway (SWY), or Disney (DIS) telling us how many jobs have been produced by higher consumer spending induced by the stimulus package. ... We must rely on elaborate, less transparent data analysis to uncover the indirect effects of the stimulus package. When the indirect effects are included, White House economists estimate that over a million jobs have so far been added or saved as a result of the stimulus.

The Wall Street Journal suggests that the White House estimate of 640,000 jobs directly saved or created may overstate direct job creation by 20,000 positions. Even if the Journal’s estimate is correct, the difference represents less than 2% of the total number of jobs directly or indirectly saved and created by the stimulus. ...

Unless the labor market deteriorates much further, I am pessimistic about the political prospects for another major stimulus package. The Administration’s opponents have been successful in sowing doubts about the wisdom of the last stimulus. ...

In this political environment it is unlikely Congress will pass a major new stimulus package anytime soon. What is more likely - indeed, what is essential - is the continuation of stimulus programs that are currently scheduled to expire. Last week the House and Senate extended unemployment protection for workers who have lost jobs in the current recession. These protections ought to be extended until the job market improves significantly... If unemployment is likely to remain over 9% for an extended time, there is a compelling case for additional public infrastructure investment. Given high unemployment in the construction and capital goods industries and federal borrowing costs that remain near a post-war low, it makes sense to invest in public capital projects over the next few years. If the federal government does not have adequate plans for such investments, it should start making them soon.

It's going to take quite a while for the economy to generate enough jobs to return unemployment to normal levels, and more stimulus to help the process along is certainly needed. But I also think that its hard to imagine a major stimulus package getting through Congress. If Washington's interest in helping wanes as the business and the financial sectors begin to recover even though labor markets continue to struggle, then, despite the professed allegiance of many Democrats to the working class, it will tell you that their true allegiance lies elsewhere.

Comments

[User 477397:]

There is no way to know how many jobs were created or saved because of the stimulus. Depending upon your political persuasion the number can vary drastically. As for another stimulus, it appears to me that the Democrats purposely held back from spending the full stimulus package this year so they could dump it into the economy next year to have maximum impact on the election. As for who they care about - that is a mute point. Once a person gets to DC they are there for themselves and the working class and middle class be damned.

Nov 11 05:06 PM

[conceptwizard:]

This horrible news only underscores the fact that even though 70% of stimulus spending has gone to fill in Medicaid and state budget holes, our states are still in dire straits because state tax revenue is collapsing across the country. Stimulus money is not going into job creation, just job salvation.

Nov 11 06:06 PM

[bob adamson:]

A very solid analysis from NuWire Investor.

It is pointless from an economic standpoint to try at this point in time to fine-tune the calculation of jobs saved or created by the stimulus package. One could argue, for example, that if there had been no stimulus intervention during the critical October of 2008 to March of 2009 period, then a much deeper recession or even a deflationary depression would have ensued with millions of further job losses extending for years into the future. One can also argue that job growth may be surprisingly brisk within two quarters by which time the economically dampening effect of the October of 2008 to March of 2009 period in the minds of consumers and employers will have further dissipated. On the other side, it can be argued that much that was in the stimulus package was not effectively targeted at job market issues and that the jobs effect is consequently modest. Only time will disclose the real answer to these conjectures.

The important thing, as NuWire Investor stresses, is that stimulus is not prematurely withdrawn, even at the risk of some modest inflation (and there really isn’t a significant indication that this is imminent), until the recovery really takes hold solidly in the real economy.

Nov 12 03:10 AM