Stimulus Scorecard: Some Jobs Saved, But Few Created
If you want good news on the U.S. job market, don't talk to a noted economist.
We spoke with three of the best, and even though they diverge on several economic issues, they all agree on one thing: Substantive job growth isn't going to happen anytime soon.
"We will continue to lose jobs into early next year. By next February, March, April, the job market will go flat," says Mark Zandi of Moody's Economy.com.
But Zandi adds "Not until this time next year will we see substantive jobgrowth — the kind that would bring down unemployment."
Brian Bethune of IHS Global Insight says, "There is too much uncertainty about the outlook in 2010 for there to be much inclination to do net hiring that year. I really see Fortune 500 companies (acting) steady as she goes."
Steady as she goes does not bode well for either economic recovery or the success of the Recovery Act, which is scheduled to pump a total of $787 billion into the U.S. economy —with some $107 billion of that in direct spending in 2010 alone.
Diane Swonk, chief economist with Mesirow Financial, says it just depends on what kind of recovery — and what kind of impact — you expect.
"You can restore real GDP growth to its previous peaks of 3.5-percent in the second half of this year and 3-percent in 2010," she says. "You can get your GDP back, your output back, but it doesn't get your jobs back."
As for the Recovery Act, Zandi says the $787 billion package was a necessary evil. "Without the stimulus, we would still be in recession," says Zandi. "We'd be losing a lot more jobs, and we'd be in much worse shape."
It's a point Zandi knows he cannot prove — there's no way to know where we'd be without the Recovery Act. And the view does have its critics.
"Without stimulus, we probably would be a little better off," says Dan Mitchell of the CatoInstitute, arguing that the stimulus was little more than wasteful spending. Mitchell does admit, however, that the current jobs picture isn't due to things done by the Obama Administration. "I suspect higher unemployment would have happened anyway, Mitchell says."
Zandi counters that any critic of the Recovery Act should simply ask a state governor if it's made a difference, but that doesn't mean there aren't negative consequences.
"Look at what it's doing to our fiscal situation: Deficits in the trillions," Zandi says. "It's right (as a criticism). It's a correct argument, but my retort is that deficits would be even larger without it."
Speaking of the Recovery Act, money that went directly to the states has to be accounted for. Zandi cites the unprecedented disclosure mandates as a major reason the spending has been slower than many would have liked.
All 50 states have started the reporting process to the federal government, and many are releasing data already, even though the reports are preliminary. (They are expected to be finalized by 31st.)
There are a few things to keep in mind with this data. First off, these reports are only for money given directly to the states. They do notinclude money to cities, towns, tribes, as well as federal agencies doling out funds across the country.
The impact of tax cuts, unemployment benefits and Medicaid payments are not included either. Even with those caveats, the numbers provide substantial insight into what's going on.
In general, the lessons learned about jobs "saved or created" is that a majority of the numbers you see involve the "saved" part. The money has plugged budgets and staved off serious layoffs, especially in education.
Perhaps most important when viewing the overall employment numbers from these reports, it's easy to see that the private sector isn't hiring, which validates the comments from Zandi, Swonk and Bethune.
Here are some examples of what states are saying.
The number given in California by the state's Recovery Task Force: 100,000 jobs. The state has spent more than $5 billion of the $12.7 billion it was awarded in the Recovery Act. Because of its size, California shows the complexity of the process: The state submitted 747 separate preliminary reports, and there were 5,000 reports from what the state calls a "sub-recipient" category.
Michigan is less complicated but no less severe. It has the highest unemployment of any state in the country. According to the state, approximately, 19,500 jobs have been saved or created thus far — on 620-million in spending. To further the point about it being more "saved" than "created", almost 75-percent of the jobs were in education.
- New Mexico
With only $370 million out the door, the numbers are smaller in New Mexico. Governor Bill Richardson's office estimates that 4,000 full-time jobs were created. The state says, under a more liberal metric — including part-time hires and not just total hours worked — the number is double. To give perspective on what the overall budget reprieve can look like, the federal help with Medicaid has saved 133-million in the state budget.
"State and local governments are losing payroll but would be slashing it without stimulus," says Zandi.
The hope is that when the stimulus money runs through the system, the economy can start to, once again, fund itself and fund new jobs. But the transition to the "new normal" will be painful and long, according to Swonk.
"The kind of jobs that we're generating now don't match the skills that people have," she says. "Jobs that exist today didn't exist 20 years ago. My own work doesn't have the unemployment rate dropping back below 6-percent until 2014."
CNBC's Molly Mazilu contributed to this report.Let us know your thoughts:email@example.com)