… that both of the following stories are true?
First we heard this (reported less than 24 hours ago):
“According to the data, 49 States and the District of Columbia have lost jobs since the stimulus was enacted. Only North Dakota has seen net job creation following the February 2009 stimulus. . . . “While President Obama claimed the result of his stimulus bill would be the creation of 3.5 million jobs, the US has already lost a total of 2.7 million – a difference of 6.2 million jobs. To see how the stimulus has impacted each state, see the table below.” (Spero News Service). Note: I believe similar data was presented by theWSJ today.
Then today we hear via The Associated Press that an Obama Administration official (Christina Romer) is reporting:
WASHINGTON — A top White House economist says spending from the $787 billion economic stimulus has already had its biggest impact on economic growth and will likely not contribute to significant expansion next year. Christina Romer, the chair of President Barack Obama’s Council of Economic Advisers, said Thursday that the $194 billion already spent gave a jolt to the economy that contributed to growth in the second and third quarters of the year. She told a congressional panel that by the middle of next year, the impact of the stimulus will level off. Romer said spending so far has saved or created 600,000 to 1.5 million jobs but warned that unemployment will remain high, above 9.5 percent, through the end of 2010.
What sort of slight of hand is going on here? Does the U.S. Census Bureau show “jobs saved” as a measure of the impact of a government induced inflation program, euphemistically referred to as an “economic stimulus plan.” Well, to answer these questions we need to take a quick look at the data to see who is fooling whom.
First, the official statistics on the U.S. Labor force can be located at the U.S. Department of Labor, Bureau of Labor Statistics. There, one finds the following statement based on the most recent survey data(Sept 09):
“Nonfarm payroll employment continued to decline in September (-263,000), and the unemployment rate (9.8 percent) continued to trend up, the U.S. Bureau of Labor Statistics reported today. The largest job losses were in construction, manufacturing, retail trade, and government.
Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8 percent. (See table A-1.)”
The report goes on to indicate the following regarding the health care industry (the only sector I found in my brief review that showed an increase in employment):
Employment in health care continued to increase in September (19,000), with the largest gain occurring in ambulatory health care services (15,000). Health care has added 559,000 jobs since the beginning of the recession, although the average monthly job gain thus far in 2009 (22,000) is down from the average monthly gain during 2008 (30,000).
Taken alone, Ms Romer’s comments appear to be not just unsubstantiated, but very misleading – especially in light of data illustrated by the graph1 at left. On the other hand, it is true that the health care sector did add employment. But to imply from the data this idea that between “600,000 and 1.5 million” jobs have either been saved or created by virtue of the effects of inflating the money supply, bailing out insurance companies, and nationalizing part of the auto industry is simply unsubstantiated. I say this because we cannot know what the situation would have been right now had the U.S. Government not engaged in such prolific interventionism. What we do know is what the government has published as statistics on unemployment – and those statistics do not mention jobs saved; a firm either adds employment, engages in downsizing, or maintains the status quo. To imply an effect from their intervention presumes their policy of inflation was the cause. This is tenuous at best, better described as a logical fallacy.
The flip side of the intervention would have been non-intervention, including no additional inflation by the Fed. The result would have been a stronger dollar, lower consumption (more savings), and a more rapid capital formation process implying lower commodity pricing, including lower oil pricing. Some companies would have gone under including, AIG; however, in the marketplace the truly valuable pieces would have been gobbled up in arms length transactions and put to use relative to real market demand… Moreover, in the case of the auto industry the unions would have had to fully capitulate. All of these effects, while not all easy or painless, would have clearly set the stage for a strong economic base without rapid re-inflation. What we have now, instead, is just the opposite – government policy is in full re-inflation mode.
As for jobs created by virtue of the stimulus, again, Ms Romer is engaging here in speculation that a sizable portion of the job additions, 559,000 in health care alone since the beginning of the recession, were attributable to the so-called stimulus plan. This is very misleading; for example, in the case of health care jobs she is making the obvious assumption that the mere fact that the so-called stimulus bill was passed resulted in health care sector employment to maintain the pace it had prior to the so-called stimulus plan, but after the commencement of the recession. This is simply not tenable, she gave no rational data or explanation to support this contention, and one simply does not know what the situation would have been sans the intervention/inflation infusion. Note: Bloomberg has a piece on this matter as well..
What we do know, as the graph at left from the BLS aptly illustrates, is that we have continued to lose jobs, month over month, since the recession commenced as well as since the intervention known as the stimulus was passed. Beyond that, we are in a realm of speculation to a significant extent.
Oh, and by the way, just for fun I went to the BLS home page and did a system wide search using the phrase, “jobs saved.” Results did not reveal what the White House official was intimating..
1Graph Source: (Bureau of Labor Statistics, Unemployment Rate Graph Data)