The Obama administration's chief economist, Christina Romer, says that the stimulus is working. She provided her economic outlook (.pdf) today before the Joint Economic Committee, and the stimulus report card was a central focus. According to Romer, the stimulus has created or saved somewhere between 2.5 million and 3.6 million jobs through the second quarter of 2010. That's right around the 2.6 million the White House hoped for by now. So it was a slam dunk, right? Not necessarily.
First, the employment picture is far worse than Romer and her team expected when the stimulus was signed in February 2009. Here's a chart she provided on expected unemployment rates with and without the stimulus. It has been enhanced to show actual unemployment levels through June, represented by the red dots:
As you can see, the dark blue line is rather far off from the red dots. Indeed, they thought employment would be more than 2% lower by now than it was by the end of June.
Of course, the Obama economists will just argue that things were worse than they realized, but the number of jobs they expected to be created or saved wasn't necessarily wrong. That's a fair point. It's interesting to note, however, that if the stimulus really created or saved the number of jobs they estimate, then the unemployment rate would have been between 11.1% and 11.9% at the end of June without it, instead of at 9.5%.
Speaking of those estimates, how do they work? They provide two versions. The first utilizes multipliers. These tools estimate how different kinds of stimulus spending add to GDP, and consequently, create jobs. They're also highly controversial. Different economists may believe that different multipliers values should be used. Here's how those used by the President's economists say the stimulus helped:
This makes for the low-end estimate. The high end estimate takes a different approach. This alternative method compares the change in GDP to the statistical baseline without stimulus, given various economic conditions. It shows:
In her report Romer notes the problem with this method:
The disadvantage of this approach is that the comparison will reflect not just the impact of fiscal policy, but all other unusual influences on the economy following passage of the Act. Most obviously, other policy actions, such as the Financial Stability Plan, monetary policy, and the Federal Reserve's program of buying agency debt and long-term U.S. government bonds, contributed to the economic turnaround.
Given the unprecedented action by the Fed, it's pretty plausible that this method overestimates things.
There's another sort of strange fact to consider. Although these economists expected far lower unemployment through the stimulus, they expected GDP to rise by approximately the amounts it did. In fact, Romer even bragged about the accuracy of their GDP projections before the JEC today. If they got GDP right, how were they so off with unemployment? Perhaps that additional GDP didn't actually translate into more jobs as they believe. Even though corporate profits and revenues increased, that money may not have been used to hire or retain more workers. If that's the case, then the numbers above are probably vast overestimates.
Ultimately, these estimates are all just that -- estimates. It's really impossible to know how many jobs were created or saved by the stimulus. The number is probably somewhere between zero and a couple million.
But no matter how the stimulus actually did, the current job market creates a pretty significant political problem for Democrats, because "jobs saved" is much harder for people to wrap their heads around. Meanwhile, the unemployment reports each month show strikingly few net jobs created while the unemployment rate remains much higher than Democrats said it would. So even if the stimulus has saved Americans from a much worse fate, voters might not find that argument convincing, because it's harder to imagine what might have been versus what actually is.