A new government analysis says the stimulus act funded between 1 million and 2.1 million jobs as of December and kept the economy humming at a faster rate than it would otherwise, but consumer confidence has tumbled anyway - potentially hindering the continued recovery.
With the economy and the unemployment rate crowding out much of the rest of President Obama’s agenda, both the jobs figures and consumer confidence will become key pieces of evidence as Republicans and Democrats argue over last year’s stimulus and how much more spending is needed.
The Congressional Budget Office on Tuesday said the $862 billion American Recovery and Reinvestment Act, signed a little more than a year ago, was responsible for lowering the unemployment rate by between 0.5 percent and 1.1 percent in the final three months of 2009, and added 1.5 percent to 3.8 percent to the country’s gross domestic product.
“The policies that were enacted in the stimulus bill are increasing GDP and employment relative to what they otherwise would be,” said Douglas Elmendorf, director of the Congressional Budget Office.
Republicans, though, said the stimulus has been good for government but not for creating private-sector jobs.
“The fact is, if you are a government worker you probably got a pay raise from the stimulus; if you are a manufacturing or construction worker you got a pink slip,” said Rep. Kevin Brady, Texas Republican.
Stimulus contractors say they’ve created about 600,000 jobs directly from spending, but CBO uses economic modeling to reach its conclusions. That accounts for the wide range of potential job creation.
Going forward, CBO said, the effects of the stimulus on GDP will peak next quarter, and its effects on job creation will peak over the next six months before diminishing.
At the same time, consumer confidence is already dipping, according to the Conference Board Consumer Research Center, a private group that surveys consumer confidence.
The board, in a survey released Tuesday, recorded a giant drop in confidence from January to February and said its “present situation” index, which measures confidence in the economy as it stands now, is at its lowest point in 27 years. The expectations index, which measures optimism about the future economy, also dropped after three months of improvement.
“Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending,” said Lynn Franco, director of the center.
A spending drop could start a dangerous spiral.
A survey of small businesses taken by M Booth & Associates for American Express OPEN found that those companies say the biggest hurdle to hiring more workers is lax customer demand.
While more than half of businesses said they’d take advantage of tax breaks, just 11 percent said high rates are keeping them from hiring more workers, and 42 percent said the lack of customers is holding them back.
Aware of the unease, Congress is pushing to pass something lawmakers can tout as pushing jobs creation.