Despite Signs of Life, Stimulus not Stimulating the Jobs Market

On October 21st, I wrote that the stimulus package did not appear to be working based on some jobs statistics cited in that post. I have also written in the past that I believed that the Keynesian notions of government spending that backed up the stimulus plan have long been discredited. On the other side of the spectrum, many people believe that the stimulus plan was too little and/or too late to be effective. I also believe that the difficulty in accurately determining how many jobs are 'created or saved' by any government plan is incredibly difficult, and is more likely to lead to argument than a clear picture of economic health.

Of course, there are concrete examples where x amount of dollars of aid money save x amount of teaching jobs in a certain community, or where a certain influx of grant money sparks a company to hire a certain amount of workers for a project. These are certainly beneficial results, and have been rightly noted by proponents of the plan. However, even in these concrete numbers, there are real concerns. For example, how many of those jobs are permanent, and how many are actually the result of government action as opposed to other factors?

Despite such concerns, the White House has recently released and touted some statistics that paint a rosier picture than some of the numbers we have seen in the past. For example, this Yahoo article discusses today's White House claim that around 650,000 jobs have been 'saved or created' since the package was passed in February. The administration claims that this puts the economy on track to add around 2.8 million jobs over the next year to meet the 3.4 million job goal for the end of 2010 which was set in conjunction with passing the plan. If on point, these would presumably be good signs for the overall health of the economy and should be seen as positive.



However, even if these numbers are correct, which is dubious based on the events of the past few days where it was reported that initial numbers had been significantly overstated, and due to the difficulties of accurate counting, it is difficult to see the economy adding an additional 2.8 million jobs over the next year. I certainly hope it does, but even this number is probably understated as the 3.4 million number is for jobs created, not jobs created and saved. Therefore, 2.8 million jobs is the least number of jobs that will need to be tied to the stimulus plan to meet the goal, and it is probably a bit higher.

An even bigger problem is that none of the numbers discussed, right or wrong, are actually indicators that the economy is growing. The unemployment rate is still on the increase, and people are still losing jobs. The numbers in question are merely those that can be tied directly to plans funded by stimulus. Therefore, at the very best, the number of jobs that can be tied to stimulus does not represent growth in the economy, but merely bandages to stop the bleeding. Of course recovery needs to start somewhere, and stopping the flow of layoffs is a start, but this type of statistical analysis is sure to leave the White House open to attack and will once again shift focus away from the real problems and toward arguing by the parties over whose numbers make more sense to use. Ultimately, the economy will recover as it always has after disaster. However, predicting what will cause this upswing in the business cycle is nearly impossible, and in my opinion, the stimulus will ironically not likely be in the form of a government plan named as such.