On Thursday, the president’s Council of Economic Advisers released its first quarterly report on the economic impact of the stimulus. The next day’s headlines seized on a single number in the report: one million, the council’s estimate of how many jobs the stimulus had created or saved. But how solid is that number?
According to the report itself, not very. “Any estimates of the impact of the ARRA at this early stage must be regarded as preliminary,” noted the report, “and understood to be subject to substantial uncertainty.”
Why is that? First, as we’ve reported before, gauging the jobs impact of the stimulus means comparing it against a hypothetical, stimulus-free scenario—a “baseline” that can be projected but by definition never known. Such economic projections are always difficult: in January, Christina Romer, now the council’s chair, predicted that without the stimulus, unemployment would peak at 9 percent in 2010. The fact that unemployment has already passed that level only demonstrates the difficulty of estimating unknowable scenarios. (Indeed, the council itself calls its baseline “plausible”—hardly a rousing endorsement.)
Second, even assuming the baseline is accurate, the report points out that not much time has passed since the stimulus was enacted, which makes it hard to measure actual economic performance with great certainty. “It is important to acknowledge that six months is a short period of time for macroeconomic analysis,” the authors write. “The only official GDP data that we have under the program is for the second quarter of 2009,” add the authors, and “one observation obviously does not constitute a trend.”