As required by law, the Congressional Budget Office (CBO) prepares regular reports on its estimate of the number of jobs created by the American Recovery and Reinvestment Act of 2009 (ARRA), which is often referred to as the economic stimulus package. In its latest report, issued on May 25, 2011, CBO provides estimates of ARRA’s overall impact on employment and economic output in the first quarter of calendar year 2011, which differ only slightly from those presented in its previous report (issued in February 2011).
CBO’s Estimates of ARRA’s Impact on Employment and Economic Output
Looking at recorded spending to date along with estimates of the other effects of ARRA on spending and revenues, CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy. Because those sources indicate a wide range of possible effects, CBO provides high and low estimates of the likely impact, aiming to encompass most economists’ views about the effects of different policies. On that basis, CBO estimates that ARRA’s policies had the following effects in the first quarter of calendar year 2011:
- They raised real (inflation-adjusted) gross domestic product by between 1.1 percent and 3.1 percent,
- Lowered the unemployment rate by between 0.6 percentage points and 1.8 percentage points,
- Increased the number of people employed by between 1.2 million and 3.3 million, and
- Increased the number of full-time-equivalent (FTE) jobs by 1.6 million to 4.6 million compared with what would have occurred otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers).
CBO estimates that the employment effects began to wane at the end of 2010 and continued to do so in the first quarter of 2011. CBO projects that the number of FTE jobs resulting from ARRA will drop by about half between the first and fourth quarters of 2011. During 2012, CBO estimates that the impact on employment and economic output of ARRA will be small.
CBO’s current estimates reflect small revisions to its earlier projections of the timing and magnitude of changes to federal revenues and spending under ARRA. CBO now estimates that ARRA will increase budget deficits over the 2009–2019 period by $830 billion, slightly more than what we estimated in our February report. By CBO’s estimate, close to half of that total impact occurred in fiscal year 2010, and about 70 percent of ARRA’s budgetary impact was realized by the close of that fiscal year.
Comparison With Recipients’ Estimates
CBO’s estimates differ substantially from the reports filed by recipients of ARRA funding. During the first quarter of 2011, recipients reported, ARRA funded more than 571,000 FTE jobs. Those reports, however, do not provide a comprehensive estimate of the law’s impact on U.S. employment, which could be higher or lower than the number of FTE jobs reported for several reasons.
This report was prepared by Felix Reichling of CBO’s Macroeconomic Analysis Division.