Commentary | Budget Taxes and Public Investment

Tomorrow’s Recovery.gov Numbers Won’t Tell Whole Job Creation Story

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On Saturday, the Recovery Accountability and Transparency Board will post additional data on the employment impact of the American Reinvestment and Recovery Act of 2009. These reports by recipients of Recovery Act funds will show the number of jobs directly supported by the Recovery Act in the final three months of 2009, and will be posted on Recovery.gov.

When interpreting the headline Recovery.gov estimate it is important to keep in mind that this number represents only a portion of the full jobs impact of the Recovery Act. The Recovery.gov measure includes only one part of the recovery package and measures only direct job creation. It does not measure, for example, jobs created from project suppliers, or consumer re-spending of recovery dollars. Specifically, the Recovery.gov estimate has the following limitations:

  • Grant, contract, and loan data are only part of Recovery Act funding. The recipient-level data will include reports from recipients of contracts, grants, and loans, representing only part of the overall recovery package. For example, tax reductions, increased unemployment insurance payments, greater nutritional assistance, and much of the assistance to state governments will not be included in the recipient-level jobs data. So far, these other sources of funding have far exceeded the outlays resulting in contracts, grants, or loans, and they can be highly effective at creating jobs.
  • Not all recipients are required to report. Reporting is currently limited to “prime” recipients and the first level of sub-recipients. For contracts directly awarded to private companies, for example, second-level sub-contractors will not be required to report. (Prime and next-tier recipients may report estimated jobs created by subsequent sub-contractors, but no direct reporting is required by the lower-tier companies.)
  • Only direct employees will be recorded. Recovery.gov’s recipient-level reports will only include the jobs created directly by the recipient. For example, a new construction worker hired to install a new roof will be included, but other factors will be omitted, including:
    • “Re-spending” jobs. When that construction worker spends money — for car repairs, at restaurants, etc. — this creates increased demand for goods and services. This increased demand leads businesses to retain or hire workers. The Recovery.gov data do not include jobs created or saved as a result of this ‘re-spending’.
    • “Upstream” jobs. Recovery Act investments will increase demand for business supplies and services, leading to greater employment in sectors that support directly-funded activities. However, these jobs will also not be included in recipient-level reporting. For example, the data will not include jobs at businesses that supply construction projects, such as companies that manufacture, transport, and sell roofing supplies at the retail or wholesale level.

By including the other elements of the Recovery Act and by capturing indirect jobs, EPI estimates that the Recovery package as a whole has created or saved about 2 million jobs since it was passed last year. This estimate is consistent with private-sector macroeconomic estimates of the impact of the recovery package on GDP growth.

Changes in Recovery.gov Methodology

There have also been a few changes to the process of collecting data for Recovery.gov that will result in these data being of a higher quality than the data from the last reporting cycle.

First, the Administration has clarified the recipient reporting guidelines. In the third quarter reporting, it was clear that the job reporting methodologies had been inconsistent across recipients (Irons 2009). This was due in part to confusing or unclear federal guidance — some recipients reported jobs saved and created, others reported only new jobs; some converted hours to full time equivalents (FTEs), others just counted heads. Furthermore, it was unclear to many recipients what criteria to use to define jobs “created or saved” due to the Recovery Act.

The new guidance directs recipients to just report total FTEs working on Recovery Act funded projects, which is not only a cleaner guideline but also easier to follow.

Second, now that the rules have been revised and clarified, the recipient reports from the third quarter will not necessarily use the same reporting methods for the fourth quarter; thus, this most recent data will not be comparable to prior recipient reports.

Overall, the recipient reports provided to Recovery.gov represent an increased level of transparency and accountability. While not perfect, they do serve as a reminder that each day Recovery Act funds are flowing into the economy and creating or saving jobs for working Americans across the country.


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