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Monday, August 2, 2010

Job Loss and Infrastructure Job Creation Spending During the Recession

Linda Levine
Specialist in Labor Economics

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.

Date of Report: July 19, 2010
Number of Pages: 15
Order Number: R40080
Price: $29.95

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