Under the American Recovery and Reinvestment Act of 2009 (ARRA), also known as the economic stimulus package, certain recipients of funds appropriated in ARRA (most grant and loan recipients, contractors, and subcontractors) are required to report the number of jobs funded through the law after the end of each calendar quarter. ARRA also requires CBO to comment on those reported numbers. In its latest report, issued today, CBO provides estimates of ARRAs overall impact on employment and economic output in the third quarter of calendar year 2010. CBOs current estimates differ slightly from those presented in its previous report (issued in August 2010), reflecting small revisions to its earlier projections of the timing and magnitude of changes to federal revenues and spending under ARRA.
When ARRA was being considered, CBO and the staff of the Joint Committee on Taxation estimated that it would increase budget deficits by $787 billion between fiscal years 2009 and 2019. CBO now estimates that the total impact over the 20092019 period will amount to $814 billion. By CBOs estimate, close to half of that impact occurred in fiscal year 2010, and about 70 percent of ARRAs budgetary impact was realized by the close of that fiscal year.
CBOs Estimates of ARRAs Impact on Employment and Economic Output
Looking at recorded spending to date along with estimates of the other effects of ARRA on spending and revenues, CBO has estimated the laws impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy. Because those sources indicate a wide range of possible effects, CBO provides high and low estimates of the likely impact, aiming to encompass most economists views about the effects of different policies. On that basis, CBO estimates that ARRAs policies had the following effects in the third quarter of calendar year 2010:
The effects of ARRA on output peaked in the first half of 2010 and are now diminishing, CBO estimates. The effects of ARRA on employment and unemployment are estimated to lag slightly behind the effects on output; they are expected to wane gradually beginning in the fourth quarter. CBO projects that the number of FTE jobs resulting from ARRA will drop to between 1.2 million and 3.6 million, on average, during 2011.
Limitations of Recipients Estimates
CBOs estimates differ substantially from the reports filed by recipients of ARRA funding. During the third quarter of 2010, recipients reported, ARRA funded more than 670,000 full-time-equivalent (FTE) jobs. Those reports, however, do not provide a comprehensive estimate of the laws impact on U.S. employment, which could be higher or lower than the number of FTE jobs reported, for several reasons (in addition to any issues concerning the quality of the reports data):
Consequently, estimating the laws overall effects on employment requires a more comprehensive analysis than the recipients reports provide.
The report was prepared by Ben Page of CBOs Macroeconomic Analysis Division.