Job Loss and Infrastructure Job Creation Spending During the Recession
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[Excerpt] After the long economic expansion that characterized much of the current decade, the nation entered its eleventh postwar recession in December 2007. The unemployment rate, which is a lagging economic indicator, did not start to rise until May 2008 when it jumped 0.5 percentage points to 5.5%. By December 2008, the unemployment rate exceeded 7.0% and well over 600,000 jobs were lost—the biggest monthly decrease since December 1974, when another deep recession was taking place. These labor market indicators and comments equating the latest recession to the Great Depression intensified congressional interest in passage of legislation early in 2009 aimed at encouraging creation of new jobs and warding off further loss of jobs. (See CRS Report R40655, The Labor Market During the Great Depression and the Current Recession.) To mitigate all but one recession since the 1960s, Congress chose to increase federal spending on infrastructure. (See CRS Report 92-939, Countercyclical Job Creation Programs.) But, there are a number of issues associated with using expenditures on public works to quickly create jobs in times of recession. (See CRS Report R40107, The Role of Public Works Infrastructure in Economic Stimulus.) Public works expenditures traditionally have gone chiefly to construction activities (e.g., building highways and bridges, dams and flood control structures) which indirectly increase demand in industries that supply their products to construction firms (e.g., manufacturing). Today, the definition of infrastructure has been expanded to include green jobs, which include those in industries that utilize renewable resources (e.g., electricity generated by wind), produce energy-efficient goods and services (e.g., mass transit), and install energy-conserving products (e.g., retrofitting buildings with thermal-pane windows). A question that typically arises during congressional consideration of economic stimulus legislation is which approach produces the most bang for the buck. In the instant case, this means how many jobs might be supported by federal expenditures on traditional and green infrastructure projects. Once stimulus legislation is signed into law, the focus of Congress customarily turns to estimates of the number of jobs that result as federal funds are allocated to specific activities. Therefore, after briefly examining the trend in employment and unemployment since the recession’s onset, the report turns to an in-depth look at estimates of job creation, including the limitations of the methodology often used to derive them and the difficulties associated with developing job estimates for green infrastructure in particular. The report closes with a review of what is known to date about the number of jobs supported by infrastructure spending among other provisions in the American Recovery and Reinvestment Act (ARRA, P.L. 111-5). Section 1512 requires entities that receive ARRA appropriations from federal agencies, totaling approximately $271 billion, to include in quarterly reports the number of jobs created or maintained as a result. Section 1513 requires the Council of Economic Advisors to report quarterly on the effect of ARRA provisions on employment and other economic indicators.
job loss; job creation; infrastructure; economic stimulus; Congress; legislation; publich policy; economic growth