Examining Government's Job-Creation Numbers

The federal government releases its report on the how the economic stimulus has affected employment. The White House says jobs 650,000 have been saved or created under its plan.

ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. Im Robert Siegel.

The White House issued a progress report late today on the government effort to stimulate the economy. Vice President Joe Biden, who has the stimulus portfolio, says that so far more than 640,000 jobs are directly traceable to stimulus spending.

Vice President JOE BIDEN: The Recovery Act is operating as advertised, but wasnt advertised as the only horse to carry the sleigh, to get us out of this ditch, but to play an incredibly important role.

SIEGEL: The vice president says the Obama administration is on track to meet its promise of creating or saving some 3.5 million jobs by the end of next year.

NPR White House correspondent Scott Horsley joins us now to talk about the new numbers. Hi, Scott.

SCOTT HORSLEY: Good to be with you, Robert.

SIEGEL: How did the administration arrive at this figure of more than 640,000 jobs?

HORSLEY: Well, as part of their transparency effort, the White House has asked every local government, private contractor, non-profit group, anybody who got a sizeable chunk of stimulus dollars was supposed to report back to the government how many people did you hire or keep on the payroll with that money. And they added all that up and came up with the improbably precise figure of 640,329 jobs that are directly traceable of the stimulus.

Now, half of those are teachers. There are police officers who wouldve been laid off, but for the federal government back-filling local coffers, about 80,000 jobs are in construction. The White House is really trying to answer the question, you know, where are the jobs for all this money that weve spent?

SIEGEL: But White House economists have also said that they think the stimulus is responsible for at least a million jobs. Why the different numbers?

HORSLEY: Well, this is really two different ways of accounting for it. Ive explained how the 640 figure is really just a matter of going out and counting actual bodies. But that doesnt cover everything. In fact, the people that had to report on this money account for only about 160 billion of the 340 billion that had been spent as of last month. It doesnt include the money, for example, that went to workers in the form of tax cuts. It doesnt include the extra unemployment benefits. And it doesnt include indirect spending, if, for example, a contractor thats building a new road went out and bought some asphalt and then the asphalt company had to hire somebody.

SIEGEL: Hire somebody.

HORSLEY: It doesnt include that. So what the White House economists do is they take a model and basically say, well, if weve pumped $340 billion into the economy, we just reckon its created about a million jobs and these arent necessarily jobs that you can follow the dollar directly from the U.S. Treasury into someones paycheck, but its not an unreasonable estimate of how many jobs are out there.

SIEGEL: Well, we have these numbers coming out of the White House today. Earlier in the week we had numbers showing gross domestic product that was increasing in the last quarter, but the unemployment rate keeps going up. Its nearing 10 percent now. And every month we get a report of hundreds of thousands more jobs lost.

HORSLEY: Yeah, and thats the real challenge here, both for the people who are out of work and also for the politicians who are trying to explain whats going on here. You have to remember those monthly jobs numbers are net. Every month a lot of people are hired, a lot of people are laid off, you add them together and if the layoffs outnumber the new hires, then you have a negative bottom line. And thats what weve had, really, since the beginning of last year.

Now, the pace of the job loss has slowed considerably and the administration wants some credit for that. At the same time, the president and his team always want to acknowledge the real economic suffering out there, and Vice President Biden did that today.

Vice Pres. BIDEN: My grandpop used to have an expression from Scranton. Hed say, and I mean this literally, it wasnt viewed as a joke, hed say, Joey, when the guy in Dickson City, a small town above Scranton, is out of work, its an economic slowdown. When your brother-in-law is out of work, its a recession. When youre out of work, its a depression. And its a depression for millions of American people. And were not going to be satisfied until we see a net creation in jobs in every monthly report. But were moving in the right direction.

HORSLEY: And thats the line the administration is trying to walk here, saying our efforts are helping, but we understand its not good enough yet.

SIEGEL: Now, Republicans in Congress who generally voted against the stimulus package have complained that it is not working to create jobs. How have they responded to the White House numbers today?

HORSLEY: Well, its interesting. The vice president was flanked today by a Republican Governor, Arnold Schwarzenegger of California, as well as a Democratic governor. And Schwarzenegger said, you know, this shouldnt be a partisan issue. It shouldnt be about Republicans or Democrats. It should be about jobs, jobs, jobs. But here in Washington it is very much a partisan issue. And the Republicans in Congress make hay every month when the job numbers comes out and say the stimulus isnt working and why not we do it our way?

SIEGEL: What does this say about the possibility of a second stimulus package?

HORSLEY: Well, the administration says its willing to consider all sorts of options and fine tuning and extending some of the major parts of stimulus that are due to expire, but theyre not really talking seriously about a big, new multibillion dollar stimulus.

SIEGEL: NPR White House reporter Scott Horsley. Thank you, Scott.

HORSLEY: My pleasure.

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Is The Stimulus Really Working?

Work on a highway project near Snoqualmie Pass, Wash. i

Sections of worn concrete are removed from a section of Interstate 90 during a repaving project in June near Snoqualmie Pass, Wash., one of several projects on the roadway that are being paid for by federal stimulus money. Elaine Thompson/AP hide caption

itoggle caption Elaine Thompson/AP
Work on a highway project near Snoqualmie Pass, Wash.

Sections of worn concrete are removed from a section of Interstate 90 during a repaving project in June near Snoqualmie Pass, Wash., one of several projects on the roadway that are being paid for by federal stimulus money.

Elaine Thompson/AP

With the recession apparently over, the White House is eager to credit the American Recovery and Reinvestment Act of 2009 that it pushed through Congress in February with putting the economy on the road to a full turnaround.

But the pros and cons of the massive government spending program are still being sorted out. Here's a brief look at what we know and what we don't about the effects of the stimulus.

How many jobs were created by stimulus spending?

The White House says stimulus programs directly created or "saved" more than 640,000 jobs. But with unemployment at 9.8 percent and expected to go higher, critics take issue with those numbers.

"I honestly think it's impossible to differentiate jobs created from jobs saved," says Steven Ricchiuto, an economist with Mizuho Securities USA. "That's just impossible to know. It's politics at its worst for the administration to suggest otherwise."

The economy grew at a 3.5 percent pace in the third quarter after shrinking for four quarters in a row. How much of that growth is stimulus-related?

Council of Economic Advisers Chairman Christina Romer says 3 to 4 percentage points of GDP can be attributed to stimulus spending and incentives. "This suggests that in the absence of the Recovery Act, real GDP would have risen little, if at all, this past quarter."

Most economists wouldn't go that far, but they don't discount the effect of the stimulus.

"I think with the combination of the Cash for Clunkers and tax credits for first-time homebuyers, you're looking at easily 2 percent of the 3.5 percent growth rate for the quarter," Ricchiuto says.

David Wyss, chief economist at Standard & Poor's, says the stimulus represents about half of the GDP growth for the third quarter. "Cash for Clunkers could have added a full percentage point all on its own," he says.

How much of the stimulus money has already been spent?

The Recovery Act is a two-year program, and most of the spending has yet to be rolled out. So far, about $339 billion, or 43 percent of the $787 billion in stimulus funds, has been paid out, according to Recovery.gov, the government Web site that tracks the stimulus initiative.

Is there need for another round of stimulus?

If much of the recent growth in the economy can be traced back to government spending, then calls for more spending are likely. But "we should at least give the current stimulus a chance to work," Wyss says.

"With the budget deficit being so large, they shouldn't try to do anything else," says Ricchiuto. "You can put a Band-Aid on a cut but in the end; it just needs to heal on its own."

What could happen if the stimulus is wound down too quickly?

The White House and some independent economists have warned that pulling back on stimulus spending too early could kick the legs out from under the recovery and trigger a "double dip" recession.

That concern is reinforced by reports that consumer spending continues to fall (the Commerce Department reports a 0.5 percent plunge in September, the biggest drop in nine months) and the expectation that unemployment will keep rising, staying above 10 percent through next year. That, along with tight consumer credit, will put a lid on consumer spending, which accounts for a whopping 70 percent of GDP.

Ricchiuto says he's "solidly in the double-dip camp."

"I think consumers are going to increase their savings rate even more and that is going to have negative short-term consequences for the economy," he says. "I don't see people looking at the modest gains they've clawed back in their 401(k)s and saying 'Gee, I ought to go out and spend.' "

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