As compensation professionals, part of our job is to analyze, interpret and understand statistics. So it was with interest that I read the White House's job creation statistics released at the end of this year's third quarter.
The White House announced that about 640,000 jobs have been created using $159 billion dollars of the total $787 billion stimulus package. The WSJ reported that this announcement didn't do much to ease concerns about growing unemployment in their related article, "Stimulus Created 640,000 Jobs, White House Says".
The report was met with skepticism and criticism by a wide range of different interests, including ABC News, economists, Republicans, and more than 15 million unemployed Americans. New unemployment rates will be announced later this week, with the expectation that they will exceed 10% nationwide for the first time since the Great Depression.
The report rekindled a running quarrel with some members of Congress and economists concerning how the job creation numbers are calculated to show reported employment gains. The larger issue is that far more people have lost jobs during this recession than have become employed through the most expansive job stimulus program in U.S. history.
Economists contend that is it impossible to count "jobs saved." Recovery Act fund recipients were asked to report how many jobs were created directly from receiving Federal funds. ABC News reported that even the Recovery Act board, who has been reviewing all of the numbers, acknowledged that many inaccuracies exist.
One case in point is California's San Joaquin Regional Rail Commission, which received $5 million in stimulus funds to build an additional train track for the Union Pacific Railroad in an economically challenged part of the state.
Brian Schmidt, director of planning and programming for the commission said that his staff first reported to the Obama administration that the stimulus money saved 250 jobs. Realizing that they had mistakenly double counted the jobs, they changed the number to 125. Last Tuesday, they updated the reported number to 74 jobs.
When ABC News challenged the administration on the cost per saved job as being $160,000 per job, Jared Bernstein, chief economist and senior economic adviser to the vice president countered that as "calculator abuse." He said that the correct cost per job was closer to $92,000 per job, but acknowledged that this estimate was for the entire stimulus package as of the end of next year.
Bernstein was not able to break down the difference between jobs saved versus jobs created for the reported 640,329 jobs. White House officials said that 80,000 jobs were in the construction sector, and more than half, i.e. 325,000 jobs, were in education. In January, President Obama predicted that 90% of the stimulus jobs would be in the private sector.
Net labor figures do exist, according to Edward Lazear, chairman of the President's Council of Economic Advisers from 2006-2009, and a professor at Stanford University's Graduate School of Business. In a separate WSJ editorial, "Stimulus and the Jobless Recovery", he contends that the government is reporting skewed data because they're reporting the gross positive figures, not the relevant net figures.
Mr. Lazear explained that the government wants us to believe that the new hires were previously unemployed, but the data doesn't tally workers who left their current jobs to fill government-sponsored jobs. The vacancies that are left are not taken into account when these employees leave their old jobs to take the government-sponsored jobs. These transitions must be tracked in order to arrive at a net figure that represents a credible statistic.
Because these numbers don't tell us where the workers came from and what happened to the jobs they left, there is no answer for how many net jobs were created.
A better example of the government's reporting on job creation was shown in the Department of Labor's report for August, 2009. The Job Openings and Labor Turnover Survey (Jolts) revealed that more than 4 million workers were hired. But it also reported that 4.3 million employees lost their jobs in the same month, resulting in the net effect of several hundred thousand jobs lost in that month.
There are lots of numbers and statistics to digest from many sources, to be sure. It can be confusing to know which reported statistics are credible unless we know what they represent. Many times it's necessary to dig deeper to learn how the reported numbers are calculated to understand what the numbers mean. Once we sort through the data, we get a clearer picture of what the real story is....from both a "big picture" and trend line perspective.
Becky Regan is the founder and President of Regan HR, Inc., a human resources consulting firm specializing in compensation consulting for California employers and purveyor of online HR products. A former Corporate Human Resources Director (10,000+ employees) with more than 25 years of HR work experience in many industries, her team works with private, public and non-profit clients. Becky is passionate about designing HR programs and compensation plans that build organizations.
Flickr photo courtesy of "Tim in Times Square"
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