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Recovery Act Jobs Still Critical to Our Economy

Government Action in 2009 Underpins Our Labor Market

SOURCE: AP/Amy Sancetta

President Barack Obama delivers remarks at the groundbreaking of a road project funded by the American Recovery and Reinvestment Act, Friday, June 18, 2010, in Columbus, Ohio. The Recovery Act was responsible for 2.4 million jobs each quarter from the months after its passage in February 2009 to the present.

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Numerous nonpartisan economic and academic studies credit government economic spending between 2009 and 2011 for pulling our economy out of the deep, two-and-a-half-year Great Recession, which ended in June 2009, and the subsequently uneven economic recovery. The principal vehicle for that spending, the American Recovery and Reinvestment Act of 2009, was responsible for 2.4 million jobs each quarter from the months after its passage in February 2009 to the present—jobs that would not otherwise have existed. Even though nearly 85 percent of the total Recovery Act funds have now been spent, those dollars are continuing to flow through the economy and mitigate the effects of the continuing drags on economic recovery.

When Congress debated the Recovery Act legislation in the winter of 2008-09, the private sector was shedding a record 700,000 to 800,000 jobs per month. The bursting of the housing bubble and the ensuing financial crisis threw the U.S. economy into a free fall—a collapse that has since partially reversed itself thanks to the effects of the Recovery Act.

As the president and Congress consider further measures to help grow the economy and create jobs, it is worth noting that evidence shows specific policies within the Recovery Act created specific jobs in America. Aid to states and local governments kept teachers in schools and police officers on their beats, even as tax revenues fell. An extension of unemployment benefits put money into the pockets of the long-term unemployed, which in turn not only helped those individual families hardest hit by the Great Recession but also helped keep dollars flowing into their local communities.

Similarly, the extension of so-called COBRA health benefits for workers who lost their jobs helped the unemployed access health care, undoubtedly mitigating the well-documented negative health effects of unemployment. And money directed to the U.S. Department of Agriculture provided unique aid to rural America by creating jobs that worked to upgrade public utilities and community facilities and provide broadband connections to businesses and homes.

The nonpartisan Congressional Budget Office credits the Recovery Act with increasing employment in the second quarter of 2011 by 1.4 million to 4 million jobs and reducing unemployment by between 0.5 percent and 1.6 percent. Economists Alan Blinder and Mark Zandi estimate that the Recovery Act and other fiscal policies will result in almost 2.7 million more jobs through the end of 2011. And without them the two economists estimate that unemployment would stand at 11.4 percent and job losses would have totaled 10 million.

The accompanying chart demonstrates the overall employment effects of the Recovery Act as estimated by both CBO and Blinder and Zandi in millions of full-time equivalent jobs, a measure that makes part-time and full-time employment comparable regardless of the number of hours worked. At its peak, the Recovery Act is credited with an average of 3.4 million jobs that would not otherwise have existed, a number that today stands at about 2.3 million American jobs.

Chart

Matt Separa is a Research Assistant with the Economic Policy team at the Center for American Progress. Adam Hersh is an Economist at the Center.

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