Did the Stimulus Create Jobs?

The government's own job creation data reveal the dangers of a second stimulus

Last week the White House held a jobs summit with academics and lawmakers to come up with a strategy for job creation. The result of their cogitation was presented by President Barack Obama on Tuesday during a speech at the Brookings Institution. The plan includes a wide-ranging new jobs program focused on infrastructure investment, small-business initiatives, and aid to state and local governments.

Sound familiar? It should, because this new plan is nothing more than a repeat of the first job creation program—the so-called stimulus plan—signed into law by the administration back in February.

Back then, the White House claimed that if we passed the $789 billion American Recovery and Reinvestment Act, unemployment would be contained and jobs would be created immediately.

The chart below illustrates how well, or not, that job creation program has worked so far. Using the most recent data from the Bureau of Labor Statistics and data from the Administration's website Recovery.gov, it shows the number of jobs lost and the number of jobs "created or saved" between February and October 2009 by state. This chart also assumes, for the sake of argument, that the concept of a "created or saved" job is not a completely fictitious and unverifiable metric of the effectiveness of the stimulus.

As we can see here, with only the exceptions of Minnesota and Vermont, the number of jobs lost outpaces the number of jobs "created or saved." Since February, the economy has shed 3,179,328 jobs while the Administration claims to have "created or saved" 638,825 jobs. This means that, on average, for each job created or saved, over 6 jobs were lost.

A deeper look into the job creation data reveals that most of the jobs were "created or saved" in the public sector. Based on data from Stimulus Watch, we find that of the jobs the administration claims to have created with stimulus funds, only some 140,765 of them were private jobs.  

Furthermore, according the Bureau of Labor Statistics, since the passage of the American Recovery and Reinvestment Act private industry has suffered a net loss of 2,610,000 employees (or 2.3 percent of total private employment), while the government has only lost 46,000 employees from its payroll (or 0.2 percent of total government employment). In other words, most of the job losses occurred in the private sector rather than in the public sector. This means that on average, the number of private jobs lost for every private job created is far greater than 6.

This chart provides some evidence that the first stimulus has failed to deliver on the promises made by the administration—namely, to stop unemployment growth and promote job creation. Finally, consider the Congressional Budget Office's statement on page 9 of its report, Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output as of September 2009, that "it is impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package." It seems clear that for the sake of taxpayers and for the sake of job creation, a second stimulus is absolutely the wrong idea.

Veronique de Rugy, Ph.D., is a senior research fellow at the Mercatus Center at George Mason University and a monthly columnist for the print edition of Reason.