Stimulus Job Creation: Here Comes a Reality Check

Thursday, October 8th 2009, 11:30 pm
By: News On 6

By Alex Cameron, Oklahoma Impact Team

OKLAHOMA CITY -- On October 10, state governments are required to send Washington their first comprehensive, quarterly reports of stimulus spending.  The reports are expected to provide the first realistic picture of job creation under the American Reinvestment and Recovery Act.

When the $787 billion package was passed into law last February, the Obama Administration predicted it would save or create 3.5 million jobs. That number, and employment numbers on the whole, quickly became the most high-profile measurement of ARRA's success or failure. The problem of determining just how many jobs the stimulus has created or saved has seemed more guesswork than science and more political than practical.

Out on the stimulus job sites, though, predictions give way to reality.  And the reality for the Haskell Lemon Construction Company and its President, Jay Lemon, is that they've been contracted to work on seven stimulus projects forcing them to make several new hires.

"We did hire between 20 and 25 employees to come and assist and ramp up and allow us to expedite some of the projects," Lemon said.

But, perhaps surprisingly, Lemon's numbers are not the kinds of data that are being reported to Washington. The Feds don't want tales of new jobs. They want reports of hours worked.

The Oklahoma Department of Transportation has plenty to report, and a freshly customized Web site, through which to do their reporting. Tim Gatz, ODOT's director of capital programs, said the reporting process is really quite simple. He said it's a matter of capturing total hours worked by each contractor on each job. 

"We capture that in a cumulative manner, so beginning when the first contractor went to work back in about April, we started capturing hours," Gatz said.

After six months of work, Gatz said, ODOT had tallied 593,370 total hours worked on stimulus projects.  In Washington, they'll take that number and divide it by 1,040, the number of hours the government said a full-time employee would work over two quarters. The yield is 570 full-time equivalents (FTEs), or 570 full-time jobs associated with ODOT's stimulus spending so far.

Gatz said, since not everyone working on these projects is there full-time, the true number of people it took to rack up those hours, and thus the actual number of jobs associated with their stimulus outlays, is somewhat higher.

Still, it may not be as high as the number produced by the Federal Highway Administration's formula, which says that every $1 billion in infrastructure spending produces 28,000 jobs. Using that formula, the stimulus funds spent so far by ODOT, $139,009,477 would be responsible for 3,892 jobs.

Local CPA and stimulus critic, Steve Anderson, said if those numbers are to be believed, then these are low-paying jobs.

"If every dollar went to jobs, it'd be less than $36,000 per job if that was spent in one year. However, according to their own stats, the bulk of [the stimulus money] will not be spent until 2010. So we spread it over two years, we're talking about $18,000 a job, and that is if every penny went to labor," Anderson said.

Steve Agee, a professor of economics at Oklahoma City University, said the administration's job estimates are based on accepted multipliers and are not unreasonable, just a bit premature.

"I just think that their original estimate of three and a half million jobs was predicated on the whole package being implemented, and we have to realize that this is taking a lot of time. It wasn't designed to take effect in 2009, entirely," Agee said.

A report last month from the White House Council of Economic Advisors stated that, as of the end of August, the stimulus was responsible for 11,800 jobs in Oklahoma and just over a million jobs nationwide. Those numbers are based on reported spending, not on actual hours worked. 

Read the White House Council of Economic Advisors' full report

Of course, another important measure of the stimulus is the unemployment rate.  The administration predicted it would level off at just over eight percent this year, when in actuality, it now sits at 9.8 percent.  Administration officials have since acknowledged they underestimated the severity of the recession.