Friday's data covers only a sliver of the Economic Recovery Act's impact

Data to be released on Friday, October 30, about jobs created by the American Recovery and Reinvestment Act (ARRA) will only cover a small portion of the economic activity generated by that legislation. It’s important to understand what’s included in that report and what is left out. Here’s some of what I learned from the Center on Budget and Policy Priorities’ extremely helpful paper on the topic.

What’s in: About 16 percent of Recovery Act funds spent through September 30 are covered under the reporting system that will generate this jobs data. But only a portion of the jobs created through this portion of spending will be counted. The data will include jobs created or retained by recipients of ARRA grants and loans, but not the indirect impact of these dollars, such as the jobs created by subcontractors or suppliers involved in those projects.

What’s left out: About 84 percent of Recovery Act funds through September 30 are not included in the job reporting requirements. These include important areas of the act that have had a positive economic impact, such as:

  • Unemployment Insurance and other direct aid to individuals hurt by the economic downturn. By the end of August, more than $30 billion had been spent on unemployment benefits for laid-off workers and an increase in Food Stamps. These provisions have a great “bang for the buck” as the struggling families who receive them spend those dollars in local grocery stories and businesses. Economist Mark Zandi finds that every $1 spent on unemployment insurance generates $1.63 in economic activity and each $1 spent on additional Food Stamps generates $1.73 in activity. The jobs created or retained through this additional activity are not included in the jobs data. Minnesotans have received an estimated $356 million in additional unemployment insurance benefits and $42 million in Food Stamps through September from the Recovery Act.
  • Additional Medicaid funds to the states. About $31 billion by the end of September has gone for additional Medicaid for the states – Minnesota’s share is $782 million. We’ve written repeatedly about how crucial these dollars were in preventing thousands of Minnesotans from losing health care in the 2009 Legislative Session and by preventing other painful cuts to balance the state’s budget shortfall. These Medicaid dollars are used to pay health care providers of various kinds. But those health care jobs, and the impact of those health care workers’ spending in the economy, is not included in the jobs data.

More complete estimates will come later this year or early next year. The President’s Council of Economic Advisors is required to make comprehensive quarterly estimates about the full impact of the Economic Recovery Act on jobs. The report they released last month estimated that between 600,000 and 1.1 million jobs were created or retained in the third quarter of this year from the Recovery Act. In Minnesota, 20,100 jobs were estimated to be created or retained in the third quarter. (In contrast, 3,300 to 4,700 jobs are estimated to be lost through June 2011 due to state spending cuts under unallotment.)

-Nan Madden

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About Nan Madden

Nan Madden is director of the Minnesota Budget Project.
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