Dividing one number by the other, that works out to $280,000 per job. What is going on here? Logically, it must be one of three possibilities: 1. The fiscal stimulus is going to be much smaller than is being reported. 2. The new administration is setting a low bar for itself when it comes to job creation. 3. The Obama team believes in very small fiscal policy multipliers.
Greg is reviewing to this:
Facing an increasingly ominous economic outlook, President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years ... Obama has set a goal of creating or preserving 2.5 million jobs by 2011.
To be fair, I praised the size of the proposed stimulus and I also wondered why there was such a low bar for job creation over the first two years.
But let me suggest an alternative explanation (as opposed to low multipliers) based on something the President-elect has said about things getting worse before they get better. Could it be that his economic team expects employment to fall even further before this proposed stimulus turns things around? For example – suppose we wake up in the New Year to an 8 percent unemployment rate which would translate into about 3.5 million jobs lost. To get a net increase of 2.5 million new jobs would mean we would have to see 6 million jobs created over the next two years. If the actual fiscal stimulus were $500 million, then we are talking about $83 thousand not $280 thousand. And the implied multiplier would be closer to 1.2 not 0.36.