Job Loss and Infrastructure Job Creation Spending During the Recession

Congressional research reportJul 19, 2010

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Job Loss and Infrastructure Job Creation

Spending During the Recession

(name redacted)

Specialist in Labor Economics

July 19, 2010

Congressional Research Service

7-....

www.crs.gov

R40080

CRS Report for Congress

Prepared for Members and Committees of Congress

Job Loss and Infrastructure Job Creation Spending During the Recession

Summary

After the long economic expansion that characterized much of the current decade, the nation

entered its 11th postwar recession in December 2007. The size of job losses and the comparison to

the Great Depression intensified congressional interest in passing legislation early in 2009 aimed

at encouraging job creation and warding off further cuts in employment.

To mitigate all but one recession since the 1960s, Congress chose to increase federal spending on

public works (i.e., infrastructure). Public works expenditures traditionally have gone to certain

types of construction activities (e.g., building highways and bridges, dams and flood control

structures), which indirectly increase demand in industries that supply their products to

construction firms (e.g., sand and gravel mines, heavy equipment manufacturers). Today, the

definition of infrastructure has been expanded to include green economic activities (commonly

referred to as green jobs), which include industries that utilize renewable resources (e.g.,

electricity generated by wind), produce energy-efficient goods and services (e.g., mass transit),

and install energy-conserving products (e.g., retrofitting buildings with thermal-pane windows).

A question that typically arises during congressional consideration of economic stimulus

legislation is which approach produces the most bang for the buck. In the instant case, this means

how many jobs might be supported by federal expenditures on traditional and green infrastructure

projects. Once stimulus legislation is signed into law, the focus of Congress customarily turns to

estimates of the number of jobs that result as federal funds are allocated to specific activities.

Therefore, after briefly examining the trend in employment since the recession’s onset, the report

turns to an in-depth look at estimates of job creation, including the limitations of the methodology

often used to derive them and the difficulties associated with developing job estimates for green

infrastructure in particular.

The report closes with a review of what is known to date about the number of jobs supported by

infrastructure spending and other provisions in the American Recovery and Reinvestment Act

(ARRA, P.L. 111-5). Section 1512 requires entities that receive ARRA appropriations from

federal agencies, totaling approximately $271 billion, to include in quarterly reports to the

agencies the number of direct jobs created or maintained as a result. Section 1513 requires the

Council of Economic Advisers (CEA) to report quarterly on the effect of ARRA provisions on

employment and other economic indicators. The CEA’s reports are the most comprehensive

because they contain estimates of not only jobs supported by ARRA appropriations but also of

jobs associated with other parts of the act (e.g., unemployment and health insurance benefits, state

fiscal relief, and tax provisions). The CEA has estimated that ARRA might have increased

aggregate employment above what it otherwise would have been by 1.0-1.1 million jobs in the

third quarter of 2009, 1.7-1.9 million jobs in the fourth quarter of 2009, 2.2-2.8 million jobs in the

first quarter of 2010, and 2.5-3.6 million jobs in the second quarter of 2010.

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Job Loss and Infrastructure Job Creation Spending During the Recession

Contents

Net Job Loss ...............................................................................................................................1

Infrastructure Spending and Job Creation Estimates ....................................................................2

Job Creation Estimates: What Are They?...............................................................................3

Some Caveats .................................................................................................................4

The Multiplier Effect.......................................................................................................4

Job Estimates and Construction Spending .............................................................................5

The Federal Highway Administration ..............................................................................5

BLS Employment Requirements Table............................................................................6

BEA’s Regional Input-Output Modeling System (RIMS II) .............................................7

Job Estimates and Green Infrastructure Spending ..................................................................8

Measuring Jobs Supported by Spending Provisions in the American Recovery and

Reinvestment Act ................................................................................................................... 10

Job Reporting by Recipients of ARRA Appropriations......................................................... 10

Job Estimation by the Council of Economic Advisers .......................................................... 11

Tables

Table 1. Number of Direct and Indirect Jobs by State Dependent on an Expenditure of $1

Billion in the Construction Industry..........................................................................................7

Contacts

Author Contact Information ...................................................................................................... 12

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Job Loss and Infrastructure Job Creation Spending During the Recession

fter the long economic expansion that characterized much of the current decade, the

nation entered its 11th postwar recession in December 2007. It was not until November

2008, however, that the Business Cycle Dating Committee of the National Bureau of

Economic Research announced that a substantial and widespread decline in economic activity had

begun a year earlier. As part of its announcement, the committee noted that it “views the payroll

employment measure, which is based on a large survey of employers, as the most reliable

comprehensive estimate of employment. This series [the CES] reached a peak in December

2007.”

The committee’s announcement intensified congressional interest in passage of legislation aimed

at encouraging creation of new jobs and warding off further loss of jobs. So, too, did comments

equating the recession to the Great Depression. (See CRS Report R40655, The Labor Market

During the Great Depression and the Current Recession.) This, in turn, sparked the interest of

some policymakers in the job creation programs of the Depression period. (See CRS Report

R41017, Job Creation Programs of the Great Depression: the WPA and the CCC.)

To mitigate all but one recession since the 1960s, Congress chose to increase federal expenditures

on infrastructure (public works), thereby directly raising demand for goods and services to offset

the reduced demand of consumers. (See CRS Report 92-939, Countercyclical Job Creation

Programs.) But, there are a number of issues associated with using spending on public works to

quickly create jobs during a recession. (See CRS Report R40107, The Role of Public Works

Infrastructure in Economic Stimulus.)

When Congress considers spending on infrastructure to help stimulate a flagging economy, “how

many jobs are created” is a commonly asked question. After first briefly examining trends in

employment since the latest recession began, this report focuses on job creation estimates

available in late 2008 associated with increased spending on traditional and so-called green

infrastructure, placing a heavy emphasis on explaining the methodology often used to derive them

and the difficulties associated with developing estimates for green economic activities in

particular.

Once stimulus legislation is signed into law, the focus of Congress customarily turns to estimates

of the number of jobs that result as federal funds are allocated to specific activities. In the case of

the American Recovery and Reinvestment Act (ARRA, P.L. 111-5), which was enacted in early

2009, Congress included language requiring entities that receive ARRA appropriations from

federal agencies to report the number of jobs created or maintained as a result and requiring the

Council of Economic Advisers to report on the employment and other economic effects of ARRA

provisions. The report closes with a review of what is known to date about the number of jobs

associated with the stimulus act.

Net Job Loss

Total nonfarm employment declined steadily between December 2007 and October 2009, falling

from 137,951,000 to 129,633,000. The great majority of this 8,318,000 job loss occurred after

November 2008. Despite a small uptick in employment from October to November 2009, the

number of jobs on employer payrolls fell the following month. Private and public employers

typically have increased aggregate employment since then, however, with the number of jobs in

July 2010 preliminarily rising to 130,470,000.

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Job Loss and Infrastructure Job Creation Spending During the Recession

As is typical during economic downturns, employees in the goods-producing sector (mining,

construction, manufacturing) have been the most adversely affected. Workers in the sector’s

construction industry began experiencing job losses even before the economy-wide downturn

began.

Employment in the service-providing sector most recently peaked in December 2007, when the

recession began. Some service-providing industries—education and health services—have

continued to add workers. But, job losses elsewhere in the sector have far outweighed their gains.

The financial activities industry began to lose jobs before the advent of the economy-wide

downturn. This mirrors the above-mentioned trend in construction employment in part because

real estate is a component of financial activities and it, like construction, has been hurt by the

collapse of the housing market. Other components of financial activities, such as brokerage firms

that packaged high-risk mortgages and the investors (e.g., banks) that purchased them, have been

negatively affected by the housing market downturn as well.

Despite the widely expressed belief that the recession ended sometime in the third quarter of

2009, the pattern following the end of the prior 10 postwar recessions suggests that an

uninterrupted rebound in jobs will not be immediate. According to a CRS analysis, in all but one

of these recessions,

the number of jobs on employer payrolls fluctuated for months.... Sustained job growth

occurred within three to five months of the start of seven recoveries. In sharp contrast, steady

job growth did not commence until March 1992—12 months after the July 1990–March

1991 recession ended—and not until September 2003—22 months after the March–

November 2001 recession ended.1

Infrastructure Spending and Job Creation Estimates

When in response to a recession Congress has acted to create jobs by raising demand for goods

and services through increased federal spending, it often has chosen to direct the funds to

infrastructure (public works) activities. Other means of direct countercyclical job creation—

public service employment, fiscal relief to state governments, and employment tax credits—have

been relied on much less often.2

Historically, public works has been synonymous with heavy and civil construction activities (e.g.,

road and bridge building, flood control structures and dam building). Today, it includes green

economic activities or so-called green jobs. Although numerous studies on the emerging green

economy have been released in the last several years, no consistent definition of green jobs exists

at present. Green jobs seemingly are those in and related to industries that utilize renewable

resources to produce their outputs (e.g., energy generated by wind, solar, and geothermal

technologies) and jobs in and related to industries that produce energy-efficient goods (e.g.,

Energy Star appliances) and services (e.g., mass transit).3 For this reason, the following

CRS Report R40798, Unemployment and Employment Trends Before and After the End of Recessions, by (name

redacted).

CRS Report 92-939, Countercyclical Job Creation Programs, by (name redacted).

Related jobs include, for example, those in industries that manufacture wind turbines and install thermal-pane

windows.

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discussion focuses on what is known about the job-generating impact of infrastructure spending

broadly defined.

The section below begins with an in-depth examination of how job creation estimates usually are

developed. The focus then narrows to look at two models that can be used to calculate the number

of jobs nationwide dependent upon demand in the construction industry among others, and one

model that can be used to calculate the number of jobs by state dependent on the construction

industry among other industries. The section ends by reviewing the difficulties that researchers

encounter in estimating the number of jobs supported by expenditures on green economic

activities and the consequent caution that should be taken when utilizing these estimates in

particular.

Job Creation Estimates: What Are They?

Interest in how many jobs are created by a particular type of economic activity has surfaced when

the economy is in a downturn and policymakers seek to compare the relative advantages of

different stimulus options. It also has arisen when policymakers want to know the impact of

shifting expenditures from one federal budget category to another (e.g., away from defense and

towards social services programs). Unless there is an increase in total spending, however, the

number of jobs in the labor market would remain largely unchanged.4

Although there are other bases upon which to develop estimates of the number of jobs created by

a given economic activity, an input-output (I-O) model of the economy often is utilized due to its

cost-effectiveness.5 An I-O model describes the interrelationships between industries in the

production process, showing how the dollar value of a sale is distributed across industries at a

particular point in time. It thus reflects how much of the purchased product comes from final and

supplier industries. An I-O table might show, for example, the dollar value of roof trusses

produced by the veneer, plywood, and engineered wood products manufacturing industry and the

dollar value of bricks produced by the clay product and refractory manufacturing industry used by

the construction industry to erect residential buildings.

The output requirements from each industry must then be converted to employment requirements.

Employment requirements are derived from productivity estimates for each industry at a

particular point in time. The total employment requirement associated with a given type of final

demand (e.g., a water reuse program) is the employment in the industry producing the final

product or service and in the supplier industries. In other words, it is an approximation of both the

direct and indirect employment dependent upon/supported by the economic activity. It commonly

is expressed as the number of jobs per billion dollars of expenditures valued in a particular year’s

dollars.

Like an I-O table, an employment requirements table is a matrix of hundreds of columns and

rows. Each column displays the number of jobs supported in each of the industry rows by an

expenditure of one billion dollars in the column industry. For example, one billion dollars spent in

Small differences in the total number of jobs could occur at the same spending levels if the economic activities to

(from) which funds were being shifted were more (less) capital-intensive, for example.

Another basis for estimating the impact of policy and other changes on the economy is conducting surveys. According

to the U.S. Bureau of Economic Analysis (BEA), the advantage of the I-O approach to making impact estimates is the

accessibility of the data sources required to develop the I-O model.

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the construction industry supports (direct) employment in the various components of that industry

(e.g., residential and commercial building, highway and bridge building) and (indirect)

employment in the many industries that supply their goods and services to the construction

industry (e.g., asphalt shingle manufacturing, fabricated metal bridge section manufacturing). An

employment requirements table thus permits estimation of the varying impact of an expenditure

on different industries and the varying impact of different kinds of expenditures.

Some Caveats

I-O models freeze technology and productivity at a particular point in time. Thus, the jobgenerating potential of an economic activity undertaken today could differ from that of an earlier

period if there were technological and productivity improvements in the intervening years.

Similarly, the estimates often are stated in terms of the number of jobs created for every billion

dollars of expenditures, but a billion dollars spent in one year could buy less (or more) than a

billion dollars spent in another year depending on changes in price levels over time.

There also could be differences in estimated versus actual job creation because I-O models

assume that resources are unlimited. If, for example, the economy was performing at a fairly high

level with plants operating near full capacity and with fairly few workers unemployed, the actual

number of new jobs might fall short of the estimate due to capital and labor constraints. This is

less likely to matter during a broad-based economic downturn.

Further, I-O tables do not necessarily differentiate between imported and domestically produced

goods. As a consequence, the domestic employment impact of expenditures might be overstated

to the extent that inputs are imported. Similarly, I-O tables typically do not express employment

in terms of full-time equivalents (i.e., both full-time and part-time jobs are counted equally).

Thus, programs which draw upon industries that rely relatively more on part-time workers (e.g.,

retail trade) might appear to create more jobs than programs that draw to a greater extent on

industries employing relatively more full-time workers (e.g., manufacturing).

The Multiplier Effect

A more comprehensive estimate of the number of jobs created by a particular type of economic

activity has three components:

•

the number of jobs directly attributable to the activity,

•

the number of jobs indirectly attributable to the activity, and

•

the number of jobs induced throughout the economy as a result of the activity.

Induced jobs are those dependent upon the purchases of persons in direct and indirect jobs. For

example, workers who are directly or indirectly employed as the result of a highway construction

program might spend some portion of their wages in their communities at grocery stores, auto

repair shops, and movie theaters.

Estimates of induced jobs or the multiplier are considered tenuous. To calculate the multiplier

effect, one must estimate how much of the additional money earned by directly and indirectly

employed workers will likely be spent versus saved. The actual number of jobs created by this

added spending will further depend on economic conditions (e.g., the availability of labor, the

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inflation rate). As a result, there are widely varying estimates of the multiplier effect and those job

creation studies that include induced employment utilize different multipliers.

Job Estimates and Construction Spending

The Federal Highway Administration

Perhaps the most widely known estimate of the employment impact of federal spending on our

nation’s roads comes from the Federal Highway Administration (FHWA). Although the FHWA

twice updated its 1997 analysis, which estimated that $1 billion of federal-aid highway

expenditures plus a $250 million state match supported 47,575 jobs, some proponents of

stimulating job growth through increased federal spending on infrastructure continue to use this

figure. The most recent update by the FHWA to 2007 indicates that a $1.25 billion expenditure on

highway construction consisting of $1 billion from the federal government and $250 million from

state government could support 34,779 jobs. If a state match is not required, “then $1 billion in

Federal funds supports 27,800 jobs.”6 The jobs number has decreased over time in part because of

increases in the price of inputs, such as asphalt and diesel fuel.

The FHWA breaks down the estimate of 27,822 jobs per billion dollars of federal spending on

highways as follows:

•

9,536 construction-oriented jobs (i.e., jobs at construction companies working on

the projects and at businesses that provide direct inputs to the projects such as

asphalt, concrete, and guard rails);

•

4,324 jobs in supporting industries (i.e., employment at firms that provide inputs

to the industries directly providing the materials and equipment utilized in

highway construction such as producers of sheet metal who supply the

manufacturers of guard rails); and

•

13,962 induced jobs (i.e., jobs throughout the economy dependent upon

consumer expenditures from the wages of workers in “construction-oriented” and

“industry-supporting” jobs).

Thus, induced jobs account for one-half of the total estimate.

The FHWA notes one caveat about I-O analysis in addition to those mentioned above; that is, the

job estimate “utilizes the national average mix of construction materials and labor inputs. Specific

projects and local utilization ratios will alter the estimated number of jobs supported.”7 For

example, a different combination of materials and number of workers might be required for road

resurfacing projects compared to bridge building or commuter rail projects.

The FHWA also states that

[t]he employment figures have recently been used as a justification for including highway

spending in an economic stimulus package. But with the exception of short-term resurfacing

U.S. Department of Transportation, Federal Highway Administration, Employment Impacts of Highway Infrastructure

Investment. Available from author upon request.

Ibid.

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and preservation projects, highway funds spend out slowly, with only 27% of a project, on

average, outlaying in the first year.8

BLS Employment Requirements Table

In recognition of the fact that “people want to assess the impact on employment of different

policies or actions,” the U.S. Bureau of Labor Statistics (BLS) makes available electronically

free-of-charge to the public the employment requirements tables it develops as part of its

employment projections program.9 I-O and employment requirements tables developed and

utilized by others often are proprietary and not made widely available.

The employment requirements tables are based on the official I-O tables for the nation that the

U.S. Bureau of Economic Analysis (BEA) develops every five years. BLS takes the latest

national I-O table available from BEA—in this case, 1997—and updates it to reflect more recent

production and distribution technologies. It then utilizes the updated I-O table and recent labor

productivity data to develop an employment requirements table. The employment requirements

table referenced in this report reflects 2006 technologies of production and distribution as well as

labor productivity. It is the table that was available in late 2008 when this report was first

released. 10

The BLS employment requirements table provides information for the construction industry as a

whole. The construction industry, according to the North American Industry Classification

System, is composed of three major subdivisions:

•

construction of buildings (residential and nonresidential),

•

heavy and civil engineering construction (highway, street, and bridge

construction; utility system construction; construction of flood control structures,

dams, and hydroelectric power generation facilities), and

•

specialty trade contractors (foundation, structure, and building exterior

contractors; building equipment contractors; building finishing contractors).

Some 11,768 jobs are directly and indirectly dependent upon $1 billion of spending on

construction. A majority of the jobs are in the construction industry itself (i.e., 6,925 direct jobs).

The figure from the BLS employment requirements table for construction expenditures (11,768)

is somewhat lower than the direct and indirect jobs figure for highway expenditures from the

FHWA (13,860). Potential explanations for the disparity include differences in industry definition,

data sources, method of updating the model, and time period.

The employment requirements available from BLS do not break out other types of construction

that have been discussed as part of a federal job creation package (e.g., public school

construction). BLS formerly conducted surveys to estimate full-time year-long employment

Ibid.

U.S. Bureau of Labor Statistics, Layout and Description for 201-order Employment Requirements Tables,

Washington, DC, December 2007, p. 3, http://stats.bls.gov/emp/empind4.htm.

BLS in late 2009 released an employment requirements table updated to reflect 2008 technologies of production and

distribution as well as labor productivity. It is available at http://stats.bls.gov/emp/ep_data_emp_requirements.htm.

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associated with a variety of different construction activities, including new schools, hospitals,

water and sewer facilities, roads, mass transit, and maintenance and repair construction. The

survey information was last updated a few decades ago, however.

BEA’s Regional Input-Output Modeling System (RIMS II)

From its Regional Input-Output Modeling System (RIMS II), the BEA produces estimates by

geographic area of the employment, earnings, and output dependent on additional spending in

hundreds of different industries. 11 For a fee to most parties, BEA utilizes either the 1997

benchmark I-O for the nation or the 2006 annual I-O for the nation adjusted by 2006 data from its

regional economic accounts to provide these estimates at the subnational level. 12

As shown in Table 1, the number of jobs directly and indirectly supported by an expenditure of

$1 billion in the construction industry in a given state ranges widely. The main reason for the

disparity in job creation estimates is that each state has a different mix of industries within its

borders. As a consequence, one state varies from the next in its capacity to supply all the

intermediate goods needed to carry out construction projects. A secondary explanation is that

earnings vary by state.

Table 1. Number of Direct and Indirect Jobs by State Dependent on an Expenditure

of $1 Billion in the Construction Industry

State

Number of Jobs

State

Number of Jobs

Alabama

15,851

Montana

16,127

Alaska

11,009

Nebraska

13,946

Arizona

12,238

Nevada

11,459

Arkansas

15,306

New Hampshire

12,374

California

12,289

New Jersey

11,118

Colorado

12,575

New Mexico

14,279

Connecticut

10,709

New York

10,106

Delaware

9,518

North Carolina

15,555

District of Columbia

1,874

North Dakota

13,500

Florida

13,127

Ohio

14,391

Georgia

14,224

Oklahoma

16,232

Hawaii

11,614

Oregon

13,184

Idaho

15,860

Pennsylvania

12,390

Illinois

11,916

Rhode Island

10,767

For additional information on RIMS II see BEA, Regional Multipliers: A User Handbook for the Regional InputOutput Modeling System, http://www.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf.

More specific detail by industry is available from the 1997 benchmark I-O than from the annual I-O. Therefore,

Table 1 (Number of Direct and Indirect Jobs Per $1 Million of Output Produced by the Water, Sewage and Other

Systems Industry) in CRS Report R40107, The Role of Public Works Infrastructure in Economic Stimulus, was drawn

from the 1997 benchmark I-O because the 2006 annual I-O provides data only for the utilities industry as a whole.

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State

Number of Jobs

State

Number of Jobs

Indiana

13,747

South Carolina

15,319

Iowa

14,330

South Dakota

15,316

Kansas

13,625

Tennessee

14,556

Kentucky

15,039

Texas

12,985

Louisiana

13,731

Utah

14,692

Maine

15,988

Vermont

14,883

Maryland

10,687

Virginia

12,085

Massachusetts

10,714

Washington

12,171

Michigan

13,354

West Virginia

13,834

Minnesota

12,998

Wisconsin

13,673

Mississippi

15,357

Wyoming

13,091

Missouri

13,241

United States

14,315

Source: Prepared by CRS from RIMS II estimates supplied by the BEA Regional Product Division in 2008.

Job Estimates and Green Infrastructure Spending

Estimating the number of jobs dependent upon green infrastructure activities presents a greater

challenge than estimates related to infrastructure projects as traditionally defined. The basis for

most data collection by U.S. statistical agencies is the North American Industry Classification

System (NAICS). It currently does not identify separately so-called green industries (e.g., those

that utilize renewable resources to produce their outputs, those that manufacture goods which

minimize energy use). For example, the NAICS disaggregates the electric utility industry into

hydroelectric, fossil fuel, nuclear, and other power generation, transmission, and distribution.

Such renewable sources of energy production as wind, solar, and biomass are not uniquely

recognized; they are included in the “other” category. If harnessing the wind to produce

electricity and plant material to produce biofuel requires a substantially different mix of inputs

than relying on coal and gasoline, for example, the conventional I-O model does not seem wellsuited as a basis for estimating the number of jobs supported by these green activities. Similarly,

within NAICS, the construction industry does not have a unique category for retrofitting (e.g.,

installing additional insulation, fluorescent lighting, or energy-efficient heating and airconditioning systems). Retrofitting likely requires a combination of inputs from supplier

industries that differs from the mix for the top-to-bottom construction of buildings, once again

making use of conventional I-O models problematic.

This recognized difficulty generally is either not mentioned, or how it is dealt with is not

described, in the analyses of green job creation. One study, commissioned by the Center for

American Progress and discussed in more detail below, does address the problem. The researchers

explain that because “the U.S. government surveys and accounts that are used to construct the

input-output tables do not specifically recognize wind, solar, biomass, building retrofitting, or

new mass transit as industries in their own right,” they created synthetic industries by combining

parts of industries for which data are available. The researchers provided an example in the case

of the biomass “industry:” they constructed it by combining farming, forestry, wood products, and

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refining industries; then they “assigned relative weights to each of these industries in terms of

their contributions to producing biomass products.”13

Further complicating the matter is the context and manner in which estimates of green jobs

generally are presented. Studies often develop employment projections based on differing sets of

assumptions and time horizons. For example, the number of direct and indirect jobs some 10 or

more years in the future supported by an assumed increase in the demand for energy that is met

by an assumed shift during the projection period from coal to wind and geothermal power

generation. Some reports also include induced employment, but this is not always made clear. In

addition, some analyses relate to a particular state. Their results may not be generalizeable to

other areas because state economy’s have different mixes of industries and may not be able to

provide any or all of the inputs for a particular green output. Additionally, the assumptions and

methodologies underlying the job creation estimates often are not clearly articulated, which

makes thoughtful review of the results very difficult.

It should be noted that many of the studies by green economy proponents that were available

when Congress was crafting stimulus legislation had not been conceived for the purpose of

quickly stabilizing or increasing the number of jobs in the nation or in industries particularly hard

hit by the recession. Job creation estimates from two organizations that proposed broad-based

green economy strategies intended in part to stimulate the deteriorating labor market are briefly

described below.

•

The September 2008 report, Green Recovery: A Program to Create Jobs and

Start Building a Low-Carbon Economy, was commissioned by the Center for

American Progress (a research and educational institute). It represents an

acceleration of a 10-year program included in a 2007 report (Capturing the

Energy Opportunity: Creating a Low-Carbon Economy). The 2008 report’s

authors at the Department of Economics and Political Economy Research

Institute (University of Massachusetts-Amherst), who relied on I-O analysis,

estimate that almost 2 million jobs (935,200 direct jobs, 586,000 indirect jobs,

and 496,000 induced jobs) could be created or preserved by a two-year $100

billion “green economic recovery program.” Of the $100 billion total, $46 billion

would be in the form of federal spending for such activities as public building

retrofits, mass transit and freight rail expansion, and smart electrical grid

development. Much of the remainder would be in the form of tax credits to

encourage businesses and homeowners to retrofit commercial and residential

buildings. The authors acknowledge that not all of the green activities

can contribute equally to a short-term green economic recovery program. Some ... strategies

are clearly capable of delivering within a year, while others will require as long as two years

to be implemented.14

•

In December 2008, the Apollo Alliance (a coalition of labor, environmental,

business and community leaders) proposed The Apollo Economic Recovery Act.

Robert Pollin, Heidi Garrett-Peltier, and James Heintz, et al., Green Recovery: A Program to Create Good Jobs and

Start Building a Low-Carbon Economy, Center for American Progress, Washington, DC, September 2008, p. 20,

http://www.americanprogress.org.

Robert Pollin, Heidi Garrett-Peltier, and James Heintz, et al., Green Recovery: A Program to Create Good Jobs and

Start Building a Low-Carbon Economy, Center for American Progress, Washington, DC, September 2008, p. 5,

http://www.americanprogress.org.

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It is an initial step toward achievement of a 10-year $500 billion program to

create 5 million green-collar jobs, which had been released in September 2008.

The new initiative calls for federal spending of about $50 billion to create or

maintain more than 650,000 direct jobs and 1.3 million indirect jobs. The

derivation of these job creation figures is not always clear, appearing to rely

much of the time on spending-to-jobs relationships estimated by other

organizations. The proposed allocation of federal funds and associated job

estimates include $10 billion to improve the efficiency and reliability of the

electric transmission grid (131,000 direct and indirect jobs), $8 billion to repair

roads and bridges (278,000 direct and indirect jobs), and $8 billion to encourage

localities to replace aging buses and trains with U.S.-made clean-energy vehicles

(37,600 direct jobs in vehicle manufacturing and 167,000 indirect jobs).

Measuring Jobs Supported by Spending Provisions

in the American Recovery and Reinvestment Act

While crafting the American Recovery and Reinvestment Act (ARRA), Congress was concerned

about timely tracking of the number of jobs whose creation or maintenance results from the

legislation. The 111th Congress therefore addressed this matter in bill language much more than

prior Congresses had in countercyclical job creation legislation.

Job Reporting by Recipients of ARRA Appropriations

At Title XV—Accountability and Transparency of Division A—Appropriations Provisions, P.L.

111-5 requires entities that receive ARRA appropriations from federal agencies (e.g., grant, loan,

or contract recipients; states) to include in their quarterly reports to the agencies estimates of the

number of direct jobs created and retained by infrastructure projects, for example. 15 Recipients of

recovery funds were required to make their first submission of the required information in

October 2009. Federal agencies are required to post the contents of these and subsequent reports

on websites 30 days after the end of each calendar quarter. The Office of Management and

Budget (OMB) was directed to provide guidance to help recipients prepare the reports, including

the development of job estimates. The act further charged the Congressional Budget Office

(CBO) and the Government Accountability Office (GAO) with commenting on the job estimates

contained in the reports within 45 days after their submission to federal agencies.

Based on the self-reporting of recipients of ARRA appropriations, 633,342 jobs were saved or

retained through September 30, 2009. Because the notion of a retained (saved) job caused

consternation in some quarters, OMB revised its guidance issued in June 2009. According to that

guidance, upon which the aforementioned job figure was based, Congress’ reference in ARRA to

a job retained meant “an existing position that would not have been continued to be filled were it

not for Recovery Act funding.”16 In response to feedback from GAO, among others, OMB revised

Recipients of ARRA funds awarded to the Department of Transportation (DOT) are subject to Section 1512’s job

reporting requirement. Separately, at Section 1201, Congress required the DOT to estimate the direct, indirect, and total

jobs created by transportation projects funded under ARRA. The DOT estimates thus are akin to the estimates for the

entire bill that the CEA produces.

OMB, Implementing Guidance for the Reports on Use of Funds Pursuant to the American Recovery and

(continued...)

Congressional Research Service

Job Loss and Infrastructure Job Creation Spending During the Recession

its guidance on jobs saved so that recipients no longer will have “to make a subjective judgment

on whether a given job would have existed were it not for the Recovery Act. The updated

guidance [issued in December 2009] ... defines jobs created or retained as those funded ... by the

Recovery Act.”17 Based on this definition, recipients reported that 608,311 jobs were funded by

ARRA in the fourth quarter of 2009. Another 682,370 jobs were created or saved at ARRA

recipients in the first quarter of 2010.18

Job Estimation by the Council of Economic Advisers

Title XV of P.L. 111-5 additionally tasked the Council of Economic Advisers (CEA) with

submitting quarterly reports to the Committees on Appropriations on the effect of ARRAprovisions on employment and other economic indicators. The CEA’s mandate thus extends well

beyond the above-described reporting requirements, which apply only to $271 billion in direct

government investment spending out of a total of $787 billion.19

The first quarterly report of the CEA was issued in September 2009. Based on two different

estimating procedures, it found that ARRA might have added some one million jobs to employer

payrolls in August 2009 compared to what employment would have been in the absence of the

legislation.20

As noted above, CBO was charged in ARRA with commenting on the number of jobs created or

saved as a result of direct government purchases of goods and services, grants and loans to

private entities, and grants to states and localities. Although it did so in Estimated Impact of the

American Recovery and Reinvestment Act on Employment and Economic Output as of September

2009, CBO went further to provide a broader estimate than can be gleaned from the reports of

primary and secondary recipients of more than $25,000 from appropriations in ARRA; it is an

estimate more comparable to that of the CEA. Based upon information provided by

macroeconomic models and historical relationships, CBO estimated that ARRA’s tax cuts and

outlay increases that occurred through September 2009 increased the number of people employed

by between 600,000 and 1.6 million compared to the employment level without the law. The

CEA’s estimate of 1.0-1.1 million additional jobs as of August 2009, discussed in the preceding

paragraph, falls within the range estimated by CBO.

In its second quarterly report, released in January 2010, the CEA estimated the effect of ARRA on

employment through December 2009. It found that the stimulus law might have raised year-end

(...continued)

Reinvestment Act, M-09-21, June 22, 2009, available at http://www.whitehouse.gov/omb/assets/memoranda_fy2009/

m09-21.pdf.

OMB, Updated Guidance on the American Recovery and Reinvestment Act—Data Quality, Non-Reporting

Recipients, and Reporting of Job Estimates, M-10-08, December 18, 2009. See Part 2 of http://www.recovery.gov/

FAQ/recipient/Documents/m10-08%20Updated%20Guidance%2012182009.pdf.

http://www.recovery.gov/Pages/home.aspx.

The remaining ARRA funds fall into five categories: individual income tax cuts, a patch for the alternative minimum

tax, investment incentives, aid to people directly hurt by the recession (e.g., unemployment insurance), and fiscal relief

for state governments.

Council of Economic Advisers, The Economic Impact of the American Recovery and Reinvestment Act of 2009, First

Quarterly Report, September 10, 2009.

Congressional Research Service

Job Loss and Infrastructure Job Creation Spending During the Recession

employment by about 1.7–1.9 million jobs above what it otherwise would have been.21 Similarly,

CBO estimated in its report covering the fourth quarter of 2009 that ARRA’s policies might have

increased the number of people employed by 1.0–2.1 million.22

The CEA’s third quarterly report, released in April 2010, showed ARRA’s employment effect

through March 2010. It estimated that the law might have raised employment by 2.2–2.8 million

jobs above what it otherwise would have been as of the first quarter of 2010.23 Similarly, CBO

estimated in its report covering the first quarter of 2010 that ARRA’s policies might have

increased the number of people employed by 1.2–2.8 million.24

The fourth quarterly ARRA jobs report of the CEA covering the second quarter of 2010 was

released on July 14. Based on the two methods utilized by the CEA, ARRA might have increased

employment compared to what it otherwise would have been in the quarter by between 2.5

million and 3.6 million jobs. Using its macroeconomic model, the CEA further estimated the

effect on aggregate employment of public investment outlays under ARRA, which include clean

energy generation and efficiency; human capital (e.g., Pell grants, K-12 schools excluding the

State Fiscal Stabilization Fund); transportation infrastructure (air, sea, highway) and transit;

health care delivery and technology; and building construction. Public investment outlays might

have increased total employment by over 627,000 jobs in the first quarter of 2010, and by over

800,000 jobs in the second quarter of the year.25

Author Contact Information

(name redacted)

Specialist in Labor Economics

[redacted]@crs.loc.gov, 7-....

Council of Economic Advisers, The Economic Impact of the American Recovery and Reinvestment Act of 2009,

Second Quarterly Report, January 13, 2010.

Congressional Budget Office, Estimated Impact of the American Recovery and Reinvestment Act on Employment and

Economic Output From October 2009 Through December 2009, February 2010.

Council of Economic Advisers, The Economic Impact of the American Recovery and Reinvestment Act of 2009,

Third Quarterly Report, April 14, 2010.

Congressional Budget Office, Estimated Impact of the American Recovery and Reinvestment Act on Employment and

Economic Output From January 2010 Through March 2010, May 2010.

Council of Economic Advisers, The Economic Impact of the American Recovery and Reinvestment Act of 2009,

Fourth Quarterly Report, July 14, 2010.

Congressional Research Service

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