Stanford economist Edward Lazear describes the jobless recovery this time around. He makes two skeptical points that I will highlight (but read the whole thing).
After reporting GDP, the government released new numbers claiming that the stimulus programs have "created or saved" over a million jobs. These data were collected from responses by government agencies that received federal funds under the American Recovery and Reinvestment Act of 2009. Agencies were required to report "an estimate of the number of jobs created and the number of jobs retained by the project or activity." This report is required of all recipients (generally private contractors) of agency funds.
Unfortunately, these data are not reliable indicators of job creation nor of the even vaguer notion of job retention. There are two major problems. The first and most obvious is reporting bias. Recipients have strong incentives to inflate their reported numbers. In a race for federal dollars, contractors may assume that the programs that show the most job creation may be favored by the government when it allocates additional stimulus funds.
Point number 2 invokes the broken windows fallacy.
Another subtle but important point: During the cash-for-clunkers program, sales of small cars like Honda Civics went up while sales of large SUVs like the Ford Expedition went down. To discern the net effect of the program on auto sales, it is necessary to take into account not only the addition to sales of subsidized models but also the reduction in sales of discouraged models. Reporting the positives without the negatives would be misleading and would complicate attempts to objectively evaluate the success of the program.
Yet this type of gains-only reporting is precisely what the government is doing with respect to the figures on stimulus-induced new hires. When the government reports this figure, it wants us to believe that the new hires came from the pool of the unemployed and that they are net additions to the stock of employed workers. But the data do not speak to the number of workers who left their current jobs to fill government-sponsored jobs.
Taking a longer-term view and using some of Professor Lazear's wording, the data do not speak to the number of workers who would have eventually gotten a job in the future had they not gotten government-sponsored jobs. I realize that part of the logic of the stimulus is to put people in jobs now. But economies have business cycles, they grow and retract . It's important to at least acknowledge that a person with a government-sponsored stimulus job would likely have had a different job sometime in the future.
In any case, the real answer to "how many jobs were created or saved" is the difference between employment that an economy would have with and without the stimulus. In a perfect research world, we'd be able to observe the economy without the stimulus and with the stimulus while holding everything else the same. This would allow us to count the difference in employment.
But the world is less than perfect and the data we have is less than perfect. For instance, how do we entangle the effects of the stimulus with the myriad other effects that also affect employment? At this point, there hasn't been enough time to collect and analyze the data that is available to put even rough, believable estimates on job creation. The administration is tooting its own horn as we'd expect any adminstration to do, and it is collecting and reporting data to this end.
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