White House defends job estimates of 3.5 mn

The Barack Obama administration has reiterated that the $787-billion economic stimulus package will create or save 3.5 million jobs by 2010 end.

According to a report by the White House Council of Economic Advisers released on Monday, "American Recovery and Reinvestment Act (ARRA) will save or create about 3.5 million jobs as of the fourth quarter of 2010".

The report said it has used the "relatively conservative rule of thumb that a 1 per cent increase in GDP corresponds to an increase in employment of approximately 1 million jobs, or about three-quarters of a per cent".

However, the report pointed out that not all of the increased output reflects increased employment  some comes from increases in hours of work among employed workers and some comes from higher productivity.

Thus, a second way to look at the employment effects of the programme is to estimate the number of job-years the programme would create over the President’s first term. A job-year means one job for one year.

The report said, "The Act will save or create about 6.8 million job-years by the end of 2012." The estimate is obtained by simply adding the estimates of the amount the programme would increase average employment in each of 2009, 2010, 2011, and 2012.