Wednesday, November 11, 2009

How Effective Has The Stimulus Been For Jobs?

Although the stimulus has been slow to produce the jobs that were expected, a second stimulus would likely be too politically damaging to pursue. The White House economists estimate that a million jobs have been created or saved, however the number of jobless Americans continues to grow to record highs. See the following post from Economist's View.

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

Counting the Jobs Produced by the Stimulus, by Gary Burtless, Brookings: When the stimulus package was enacted last winter, the Administration said its goal was to create or save 3½ 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 Walmart, Safeway, or Disney World 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 awhile 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.

This article has been republished from Mark Thoma's blog, Economist's View.
Subscribe to NuWire's free weekly investment newsletter:
  
Your information will not be shared

0 comments:

Post a Comment

Home

© 2013 NuWire Investor and NuWire, Inc. All Rights Reserved.