Administration projects strong stimulus job growth

By the end of the Obama administration's first term in office, the $787 billion Recovery Act will have saved or created roughly 6.8 million jobs that last one calendar year, according to a new report the White House released on Monday.

The 12-page document from the White House Council on Economic Advisers uses macroeconomic models and projections to estimate how many jobs likely will be created or retained using stimulus funding. To obtain the 6.8 million job-year figure -- categorized as one job for one year -- the panel added the estimated number of positions that would saved or created during the next four years. The council did not focus on individual stimulus spending projects because such an approach tends to create inflated job estimates, said Christina Romer, who leads the council, in television interviews last weekend.

While the report creates a framework for agencies to use in developing job estimates, direct recipients of stimulus funds still must report back to the White House on actual job creation figures. Recipients will receive guidance from the administration on how to report actual job creation soon.

A senior administration official who spoke about the report on background Monday acknowledged that most of the early findings were based on estimates and that more concrete data will be known as actual spending reports from recipients trickle in. "This thing is just now starting to hit the economy," the official said.

The report used a "conservative rule of thumb" calculating that a 1 percent increase in gross domestic product would correspond to a bump of approximately 1 million jobs.

Using that model as a baseline, the council projected that the administration will meet its oft-repeated goal of creating or saving approximately 3.5 million jobs by the fourth quarter of 2010.

The senior administration official, however, did note that since the Recovery Act was passed in February, unemployment numbers have risen, which will affect the job creation data.

Jobs attributed to the recovery package would increase in 2009 and 2010, before decreasing in the subsequent two years as stimulus money is withdrawn, the report showed.

The report noted that focusing on any given time period to evaluate the Recovery Act's progress on job creation could be difficult since substantial spending in 2009 is devoted to short-term financial assistance while results from greater long-term funding investments are expected in 2011.

"For that reason, in looking at a specific part of the program, it is more helpful to look at the employment effects in terms of total job-years over the next four years," the report stated.

But not all stimulus spending is equal in creating or saving jobs, the council suggested.

For example, the report found that each of the three primary areas of economic stimulus -- government spending, tax cuts, and state fiscal relief -- would see an estimated boost of $100 billion in fiscal 2009.

But the panel estimated that $1 of government spending would create roughly 1.6 times as many job-years as a dollar of tax cuts, and 1.3 times as many job-years as a dollar of state fiscal relief.

The report calculated that it will take slightly more than $92,000 in government spending annually to create one job-year. Tax cuts and state fiscal relief would cost $145,000 and $116,000 respectively to yield one job-year.

The White House will require agencies to use that methodology in their early estimates of job-years created.

"This procedure is somewhat crude and does not take into account the obvious differences in wages and other costs across different types of projects and across different parts of the country," the report said. "It does, however, take into account the key difference between tax changes or state fiscal relief, and direct government investment spending."

The council suggested that some data could be impossible to track. Direct reporting requirements cover only one-third of stimulus funds. The Recovery Act included roughly $271 billion in direct government investment spending, the bulk of which the government expects to be able to track.

But there is no established system, however, for tracking job creation with the rest of the stimulus funds, including tax cuts, state relief or and transfer payments, such as food stamps, to people directly hurt by the recession.

In addition, the report said individual recipient reports will be unable to track jobs created by direct recipient suppliers, such as the company that manufactured the asphalt used on a Recovery Act highway project.