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

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 $833 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 September 2012.

The effects of ARRA on output peaked in the first half of 2010 and have since diminished, CBO estimates. The effects 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 third quarter of 2012.

In this report, CBO provides estimates of ARRA’s impact on employment and economic output in the third quarter of calendar year 2012 (July 2012 through September 2012), as well as over the entire period since February 2009. CBO’s estimates of the economic effects of ARRA for 2009 through 2013 in this report are identical to those the agency published in August 2012. Although estimates of the quarterly budgetary effects of ARRA have changed slightly, the differences are not significant enough to change CBO’s estimates of the effects of ARRA on real GDP, unemployment, and employment.

Estimates of ARRA’s Impact in the Third 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 third 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 0.7 percent,
• They lowered the unemployment rate by between 0.1 percentage points and 0.5 percentage points,
• They increased the number of people employed by between 0.2 million and 0.9 million, and
• They increased the number of full-time-equivalent (FTE) jobs by 0.2 million to 1.0 million. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)

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 135,000 FTE jobs during the third 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 previous blog post.

Projected Effects of ARRA in Calendar Year 2012

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

• Raise real GDP by between 0.1 percent and 0.8 percent,
• Lower the unemployment rate by between 0.1 and 0.6 percentage points,
• Increase the number of people employed by between 0.2 million and 1.1 million, and
• Increase the number of FTE jobs by between 0.2 million and 1.2 million.