Unexpectedly Intriguing!
October 21, 2009

President Obama and the OMBFinally! Thanks to President Barack Obama's Office of Management and Budget, we can now calculate the number of jobs directly created by the American Recovery and Reinvestment Act of 2009, or as everybody likes to call it, "The Stimulus Package".

Here's how, as described by Orville B. Fitch, the director of New Hampshire's Office of Economic Stimulus in his recent report to that state's governor, John H. Lynch (HT: Ed Morrissey):


The federal government calculates a Job Full-Time Equivalent ("FTE") for ARRA purposes as the total hours worked during the reporting period divided by the total hours one full-time employee would have worked had he or she worked for the entire reporting period.

You know what comes next, right? Here's our tool with New Hampshire's estimate of the number of labor hours directly paid for through its portion of the $787 billion (787,000,000,000 USD) from 17 February 2009 through 30 September 2009 (for those of you looking at your states or the U.S. as a whole, you're more than welcome to substitute the values that apply for your situation!):

Stimulus Spending Labor Data
Input Data Values
Hours of Work Compensated for with Stimulus Package Funds Over a Period of Time
Hours One Full Time Employee Would Work During the Same Time Period

How Many Jobs Were Directly Created Through Government Stimulus Spending?
Calculated Results Values
Number of Equivalent Full Time Workers (Jobs Created or Saved by Stimulus Spending Over the Period of Time)

At 3007 jobs created or saved, that seems like a pretty healthy number. But, Fitch cautions that New Hampshire's share of the stimulus package is nearly shot, which means that many of those jobs will disappear:

The Federal Jobs FTE statistic is a cumulative statistic. At each quarter it reports job creation and retention since February 17, 2009. This continues until the last dollar is spend and reported. For example, the State Fiscal Stabilization Fund - Government Services grant has expended over 90% of its funds. The remaining funds will be expended over the recovery period. We, therefore, expect the number of FTEs attributed to that program by the Federal Jobs FTE statistic to decrease in each future quarterly report.

We can illustrate this inevitable outcome with an example that Fitch provided earlier in his report, which shows what will happen to the calculated number of jobs created or saved when the number of labor hours being directly funded by stimulus bill spending stops growing because the funds to pay them have run out:

For example, one might consider a job FTE as full-time work for one person for one year. using this approach to calculate the "FTE-Full-Time Job for a Year" statistic one would divide the total hours, 3,872,686 by 2080, the number of hours worked in a full year by a person working 40 hours per week. This "FTE - Full-Time Job for a Year" statistic for this reporting period would be 1862. In other words, if the estimated hours paid for, so far, by ARRA had been paid out only to people working full-time at 40 hours per week and had been paid out to them over the course of one full year, 1862 full-time, full-year jobs would have been paid for by ARRA.

1862 jobs saved or created is quite a reduction from the 3007 calculated for just the limited period of time required to be reported by the President Obama's Office of Management and Budget.

Both figures, by the way, are a far cry from the 16,000 jobs the President's administration predicted would be "created or saved" in New Hampshire.

As for the composition of New Hampshire's "created or saved" jobs, NowHampshire reports that of the 3007 estimated positions "created or saved" between 17 February 2009 and 30 September 2009, just 221 were in the private sector, or 7.3% of the total.

Of course, this analysis is just looking at the number of jobs "created or saved" directly from the stimulus spending. As our Keynsian fans out there might ask, isn't there some kind of multiplier effect for this government spending?

That depends upon who you ask. If you ask President Obama's administration, they'll tell you the Keynsian multiplier is equal to 4, as the people paid through the government spending program interact with the larger economy. Applied to the estimated number of jobs directly "created or saved" over the period in question, that would suggest that 12,028 jobs have been "created or saved" through the stimulus spending in New Hampshire.

If you go by academic economists Robert Barro or Valerie Ramey however, evidence indicates that it's really somewhere between 0.8 and 1.2. Which if we split the difference would put the estimated number of "created or saved" jobs back at 3007.

There is, of course, a relatively easy way to get the answer to the question of how effective the stimulus spending was in creating or saving jobs - by comparing the amount of income tax revenue actually collected with how much would have been if the stimulus package wasn't enacted. But don't look for anyone in the Obama administration to bring that up anytime soon.

Previously on Political Calculations

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