About Those Recovery Act Job Numbers

11/10/2009

Prominently displayed in a large, green font on the front page of Recovery.gov is the number 640,329. That is the number of jobs created or saved as reported by the recipients of some $150 billion in Recovery Act funds. The placement, font size, and accompanying press release from the White House have drawn immense attention and copious media reports. However, questions about the number's accuracy degrade the count's usefulness as a gauge of the economic impact of the Recovery Act. The figure itself remains only a fragment of the information that describes how the act is improving the economy and helping unemployed workers.

Although media reports are quick to glom on to a few egregious overreporting errors, such as a 4,000-job overcount by one recipient in Colorado, a systematic analysis of the more than 150,000 recipient reports reveals not only hundreds of instances of potential overcounts, but also hundreds of instances of potential undercounts:

  • 421 reports of zero job creation/retention for awards of more than $100,000 where the project was marked as "completed"
  • 36 reports of less than two jobs created or retained for awards of more than $1 million where the project was marked as "completed"
  • 2,691 reports of jobs created or retained where the project was marked as "not started"

Within the data, there are substantial inconsistencies in what recipients report as a job created or saved. A close reading of recipient reports makes it apparent that many recipients have not received clear instructions on how to count jobs created or saved, as several recipients wrote in narrative descriptions of Recovery Act project employment that differed from the reported number of jobs created or saved. For example, one recipient wrote that "[a]lthough no new jobs were created, employees were kept from being placed on lay off." Yet, the recipient reported zero jobs created or saved.

In another instance, the Denver Post noted that one recipient, the town of Frisco, CO, said its grant to purchase two laptop computers for the police “did not create any jobs. But it did make it easier for the existing officers to do their jobs properly." However, the town listed two jobs created or saved.

These inconsistencies and suspect reports indicate that there is great confusion among recipients about what they should be counting as a job created or saved by the Recovery Act. However, confusion about the definition of a "job created or saved" is not limited to those tasked with calculating and reporting the data.

Within hours of the latest release of Recovery Act recipient reporting data on Oct. 30, CNN's Wolf Blitzer was puzzled by a description of some of the jobs saved by the act.

TOM FOREMAN, CNN CORRESPONDENT: It was a place called Wood Product Signs. They had a contract to create jobs -- to create signs for the Forest Service.… They said, they would have normally had to lay people off this summer because it's seasonal work. As it was, they were able to keep three of their regular employees and add two more, for a total of five employees for six weeks.

[…]

BLITZER: Yes. I assume, when they talk about jobs, they mean permanent jobs that people are going to have for a while, not just a temporary job.

Blitzer's assumption, while not uncommon, betrays unfamiliarity with the methodology by which job counts are to be calculated by recipients. According to Office of Management and Budget (OMB) guidance on calculating the number of jobs created or saved, recipients must report the information as "full-time equivalents," or FTEs. FTEs are calculated by dividing the total number of hours worked on a Recovery Act project by the number of hours a full-time employee would work in a single quarter. For example, there are 520 hours in a forty-hour-per-week job in a single quarter. If a recipient paid two employees to work a total of 1,040 hours from July 1 to Sept. 30, the recipient would report two FTEs. If a recipient paid two part-time employees to work a total of 520 hours in that same time period, the recipient would report one FTE. Not included in reported data are the number of hours worked or the number of hours considered by the recipient to be full time, leaving the news media and the public to erroneously conclude that an FTE reported by one recipient is comparable to an FTE reported by another. Differing conceptions of what a "job" is, among recipients and the public, is only one factor obscuring the act's impact on the economy.

The information that OMB and the act require recipients to report does not describe the quality of the jobs created or saved or who is being employed by Recovery Act funds. As noted above, job counts are reported as full-time equivalents; that is, two half-time jobs would appear as one full-time job. Neither information on benefits nor wage data accompanies job counts, clouding the degree to which the act is creating employment sufficient to fully sustain families.

Additionally, skill levels of employed workers remain unknown. Nuclear waste cleanup jobs require more training and experience than custodial work, yet in the eyes of Recovery Act reporting, jobs created in both fields are equal. Also absent from reported employment is information on the race, income, geographic location, and previous employment status of employed workers.

Equally striking is that OMB advises recipients of Recovery Act funds to only count jobs saved if those employees were to be laid off. In other words, if an entity used Recovery Act money to continue employing existing workers, then no jobs would be created or saved, according to OMB. These myriad dimensions of the employment data are critical to understanding the Recovery Act's ultimate impact on the employment picture.

Facile dollars-per-job calculations ignore these elements of employment, and, crucially, neglect to account for jobs created or saved beyond the first-level subrecipient. Existing reporting guidelines require that only entities that receive funds directly from the federal government (prime recipients) and the entities who receive Recovery Act funds directly from those prime recipients (first-tier subrecipients) report job counts. Yet, it is probable that in many projects, those first-tier subrecipients will subcontract work and obtain goods and services to execute their projects.

For example, the Texas Department of Transportation (TxDOT) may receive road repair funds from the federal Department of Transportation (DOT) and subsequently re-grant those funds to the City of Dallas. Dallas will likely employ contractors to conduct road repairs. In this scenario, TxDOT (the prime recipient) will report the number of jobs it created or saved and the number of jobs created by the City of Dallas (first-tier subrecipient). Jobs created or saved by the contractors hired by Dallas will not be counted.

In addition to the jobs created or saved by Recovery Act fund recipients (direct jobs), the enhanced buying power of the directly employed will spur job growth in other sectors of the economy (indirect jobs). For example, a construction worker who was not laid off because his company received an award will have money to repair his car, buy a new pair of work boots, and maybe take his family out to dinner. The auto mechanic, shoe salesman, and waiters in the restaurant will be less likely to lose their jobs, yet those jobs are not included on the Recovery.gov homepage.1

The bottom-line jobs count is an unreliable indicator of the Recovery Act's success, not only because its calculation is less than scientific, but also because it is just one component of the act's impact on employment and lives of people in need. Excluded by the number are the hundreds of thousands of workers who are receiving unemployment insurance and can continue to provide for their families; the tens of thousands of individuals who can see a doctor because states have increased Medicaid funds; and the countless children who will have enough food to eat because of increased nutrition assistance funding. Also embedded in the economic effects of the act beyond employment and short-term ameliorations are the investments in infrastructure, green energy, and health care information technology that will enable decades of increased economic growth capacity.

The eye-catching number on Recovery.gov has clouded these important features of the Recovery Act, but it is just one indicator (and a rough one at that) of the ultimate impact of the act on the economy, and ultimately the families it was created to help.


1They are, however, counted by the president's Council of Economic Advisors (CEA) and are reported on a quarterly basis. According to the Oct. 30 White House press release, the CEA estimates that one million jobs have been created to date by the Recovery Act. This total includes direct and indirect jobs created by Recovery Act contracts, grants, loans, and jobs created by tax cuts and direct aid to individuals such as unemployment insurance, Medicaid, and Food Stamps.