Does the stimulus plan hit the target for job creation?

One of the features of fiscal policy initiatives is that they can be targeted to industries and geographic areas in greatest need. The American Recovery and Reinvestment Act (the "stimulus plan") is aimed at construction, energy alternatives, health care, education, and a number of infrastructure categories thought to not only create jobs but build a foundation for future growth. These industries have been listed in some detail in the actual wording of the Act. However, the geographic targeting is less precise, writes research Economist Lee McPheters, editor of Economy@W. P. Carey.

One of the features of fiscal policy initiatives is that they can be targeted to industries and geographic areas in greatest need. The American Recovery and Reinvestment Act (the "stimulus plan") is aimed at construction, energy alternatives, health care, education, and a number of infrastructure categories thought to not only create jobs but build a foundation for future growth. These industries have been listed in some detail in the actual wording of the Act.

However, the geographic targeting is less precise. Since a key objective of the stimulus plan is to preserve and create jobs, initial estimates have been provided by the administration in Washington showing the number of jobs expected by each state through 2010 (see recovery.gov).

The initial estimates are sure to be refined, and as funds are distributed under the Act, it is likely that the employment effects will differ from the initial estimates now available. The table sets out the employment growth expected from the stimulus plan, and provides a comparison with jobs lost in each Western state from December 2007, when the recession began, to January 2009 (data are seasonally adjusted).

As an approximation, each state's share of jobs from the stimulus plan is similar to the state's share of population and overall national employment. Thus, Arizona is slated to receive 1.9 percent of all 3.6 million stimulus jobs, similar to the state's share of employment. However, as may be seen from the table, Arizona accounts for 4.5 percent of all 3.7 million jobs lost in the nation between December 2007 and January 2009.

Moreover, the table shows that Arizona is already "behind the curve," in that the jobs to be stimulated through 2010 by the Act (70,000) are eclipsed by the actual jobs lost in the recession to date (166,700). Other states in a similar jobs deficit are Idaho, Oregon, Nevada, and especially California. In California, 541,200 jobs have been lost so far in the recession, or 14.5 percent of the national total, but the Golden State is estimated to receive 11.0 percent of stimulus jobs.

Several other Western states seem to be on track to receive disproportionately larger shares of stimulus jobs compared to actual job losses. Those are Colorado, New Mexico, Utah and Washington. Two states, Wyoming and Texas, are still adding jobs but are expected to benefit from the plan anyway. The current estimate is that Texas will see 269,000 new jobs from the plan, and has already added 43,100 since the recession began.

One of the requirements of the Act is that recipient states and agencies must file quarterly reports of the number of jobs created with the stimulus funds. Analysts will be watching closely to determine whether these funds are going not only to favored spending categories, but also to those parts of the country most in need of economic support.