Smith Faculty Opinion Article

Peter Morici By Dr. Peter Morici, Professor of International Business
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June 10, 2009

President Obama’s Flawed Jobs Claims

Despite Administration claims, the stimulus package has created or saved few jobs. This is best seen in the absolute absence of growth in state and local government employment.

From December 2007 to February 2009, or the first 14 months of the recession, state and local government employment increased 128,000. From February through May 2009, which closely approximates President Obama’s first 100 days of stimulus spending, state and local employment decreased 2,000. I simply can’t find progress in those numbers. Private construction employment, of all kinds, continued to fall.

The employment situation is improving in the sense that the rate of loss in the private sector, overall, is slowing. But that is the natural process of the economy correcting and bracing for a recovering. GDP will bottom out sometime this summer but unemployment will continue to rise into 2010.

Simply, the economy will not grow fast enough to absorb all the new entrants into the labor force—jobs creation will not equal the natural increase in the number of workers

The stimulus package will help raise growth in 2010 and 2011 and add 2.5 to 3 million jobs. Those will hardly offset the 7 or 8 million that will be lost once the carnage is over, and those jobs will be temporary, only lasting an average of two years each.

The stimulus package was poorly conceived. Not enough is devoted to hard projects, and little of the spending will stimulate permanent growth.

The Obama administration would do well to stop the wild claims of having created or saved 150,000 jobs in the first 100 days and promising another 600,000 over the next 100 days.

This is not a campaign any more. At some point, the promise must turn into prosperity. Campaign slogans, polemics and political spending that rewards supporters won’t resurrect growth or prosperity.

Quarterly Forecasts

Here are my quarterly forecasts. Growth in 2010 and 2011 will hardly be stellar given the recent steep decline. 

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.