Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from October 2012 Through December 2012

A subsequent version of this report was published in February 2014.

As required by law, CBO prepares regular reports on its estimate of the number of jobs created by the American Recovery and Reinvestment Act of 2009 (ARRA), which was enacted in response to significant weakness in the economy.

In total, CBO estimates that ARRA will increase budget deficits by about $830 billion over the 2009–2019 period. By CBO’s estimate, close to half of that impact occurred in fiscal year 2010, and more than 90 percent of ARRA’s budgetary impact was realized by the end of December 2012.

The effects of ARRA on output peaked in the first half of 2010 and have since diminished, CBO estimates. The effects of ARRA on employment are estimated to lag slightly behind the effects on output; CBO estimates that the employment effects began to wane at the end of 2010 and continued to do so through the fourth quarter of 2012.

In this report, CBO provides estimates of ARRA’s impact on employment and economic output in the fourth quarter of calendar year 2012 (October 2012 through December 2012), as well as over the entire period since February 2009. CBO’s estimates of the economic effects of ARRA are very similar to those the agency published in November 2012. Some of the current estimates of the impact of ARRA on output and employment for the period 2009 through 2011 are slightly different than those presented in November 2012 as a result of revised estimates of the effect ARRA had on tax revenues beginning in 2009. Changes to CBO’s estimates of the economic effects of ARRA in 2012 and 2013 reflect small revisions to its previous estimates of the timing and magnitude of changes to federal spending as a result of ARRA. Overall, CBO’s estimate of the budgetary impact of ARRA over the 2009–2013 period is about the same as it was last November.

Estimates of ARRA’s Impact in the Fourth Quarter of 2012

CBO develops estimates of ARRA’s effects on output and employment by looking at recorded spending to date along with estimates of the other effects of ARRA on spending and revenues, by using evidence about the effects of previous similar policies, and by drawing on various mathematical models that represent the workings of the economy. Using such analysis, CBO estimates that ARRA’s policies had the following effects in the fourth quarter of calendar year 2012 compared with what would have occurred otherwise:

• They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1 percent and 0.6 percent,
• They lowered the unemployment rate by between 0.1 percentage points and 0.4 percentage points,
• They increased the number of people employed by between 0.1 million and 0.8 million, and
• They increased the number of full-time-equivalent (FTE) jobs by between 0.1 million to 0.8 million.

Those ranges reflect the substantial uncertainty that surrounds the broad economic effects of such policies and a range of economists’ views about the magnitude of those effects.

In contrast, recipients of some ARRA funds reported that those sums supported about 113,000 FTE jobs during the fourth quarter of calendar year 2012. In CBO’s view, those reports do not provide a comprehensive estimate of the law’s impact on U.S. employment for several reasons, which are discussed in CBO’s report and in a blog post.

Estimated Effects of ARRA in Calendar Year 2012

CBO estimates that, compared with what would have occurred otherwise, for 2012 as a whole, ARRA:

• Raised real GDP by between 0.1 percent and 0.8 percent,
• Lowered the unemployment rate by between 0.1 and 0.6 percentage points,
• Increased the number of people employed by between 0.2 million and 1.1 million, and
• Increased the number of FTE jobs by between 0.2 million and 1.3 million.