Chairman's Corner
Counting Jobs
by Don Elliman, Chairman of the Colorado Economic Recovery and Accountability Board
In the last seven months, I have seen an amazing process unfold. The American Recovery and Reinvestment Act, signed into law in February here in Denver by President Obama, is pushing government to change how it does business. Government is moving faster and showing in greater detail how it spends money. The process hasn't been perfect. When you're dealing with this magnitude of money across scores of programs, there are going to be bumps in the road. But there is no doubt that the Recovery Act has helped to create and save jobs in Colorado.
In the next few weeks, the public will gain access to a mountain of information about how Recovery Act dollars are being spent. This data will be posted on the official Recovery Act website. For the first time, key job-creating projects that used Recovery Act dollars will include a direct job impact number.
But there are some things you should know about that number. First, the job figures are not just a simple head count. In order to ensure that we don't over-count short or part-time jobs, the numbers will be a precise accounting of what is known as 'full-time equivalent' positions or "FTEs" -- a mathematical calculation based on hours worked. They will be produced according to rules set by the Congress in section 1512 of the Recovery Act. Tens of thousands of government agencies, businesses and non-profits are submitting data as part of the 1512 process, which will be done every three months. But the 1512 reports won't show exactly how many people were hired with the funds. Instead, the formula is like saying your money paid for a 5.3 pound box of apples. You know the exact weight of the box but you don't know how many apples were in it.
Second, the job numbers will reflect the impact of only about $143 billion committed so far to projects like highway construction, advanced battery research, and education improvements. The numbers won't reflect the benefits of the larger portions of spending -- tax cuts, state fiscal relief, and direct benefits to people hurt by the recession, such as the millions of dollars in unemployment checks going to laid-off workers.
Third, the job figures will not -- and are not designed to -- match estimates released by the White House when the Recovery Act was signed. That report estimated that 59,000 jobs would be created in Colorado because of the Recovery Act. Where did this number come from? It was created by the federal Council of Economic Advisors, a panel that provides economic policy advice to the President. This group used a statistical process which combines a number of estimates based on accepted economic theories. They looked at the total amount of money to be spent and then applied multipliers to come up with figures that include direct, indirect and induced jobs. In other words, the 59,000 job figure includes:
- People hired to work on a project -- like the crew repaving I-25. These are direct jobs.
- Jobs created or retained at suppliers to the project -- like the people who made the concrete that goes on the highway. These are indirect jobs.
- Jobs created when people spend money they earned or received as benefits -- like the people working in the electronics store where the construction worker buys a television he wouldn't have purchased if he didn't have the job. These are induced jobs.
So when you look at the job figures submitted through the 1512 process, remember that they cannot be compared to the estimates created by the Council of Economic Advisors. They are different indicators of job impact, The bottom line is this: the jobs figures established through the 1512 process of the Recovery Act serve an important purpose. They are an accurate measure of direct job impact. But they reflect only a portion of the impact of the law. The rest of the picture will become clearer as we continue down this road. And my office is committed to showing that through updated maps, charts and reports on our website.