“Saved or created” explained

posted at 5:15 pm on June 11, 2009 by Ed Morrissey
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Earlier today, I posted Chris Muir’s hypothesis of how the administration calculates its “saved or created” numbers, and I wondered why Barack Obama didn’t just claim to have saved all 130 million-plus jobs in the US.  We’d ask Joe Biden, but economics is above his pay grade, even thought he’s in charge of the $800 billion Porkulus project, because … er … nobody messes with Joe.  Or his pay grade.

Instead, I turned to an actual economist for an explanation of “saved or created” jobs, and why the number remains stuck at 150,000 even as Biden spends more and more Porkulus bucks.  King Banaian, chair of economics at St. Cloud State University and a man who laughs in the face of pay grades, breaks it down:

The calculation is from CEA chair Prof. Christina Romer’s testimony:

I have been told by the Office of Management and Budget that approximately $75 billion in spending under the ARRA has been obligated and almost $14 billion in outlays have already occurred. During the first 100 days in office, which the Administration marked yesterday, we estimate that the ARRA has already saved or created 150,000 jobs.That comes out to $93,333.33 in outlays per job created. Since the Administration has since spent another $32 billion (and obligated another $71 billion), why are they stuck on 150,000 jobs saved or created? If they believed the methodology Prof. Romer testified in April, the number should be significantly higher. This is the nature of Ed Morrissey’s first paragraph here this morning.

This is where it gets complicated, or in other words, above Biden’s pay grade:

Let’s then tie this to the unemployment rate: How can they claim this “created or saved” figure as the unemployment rate continues to rise as the new “hockey stick” graph says? People making that tie in either direction — to support or refute the claims of the Obama Administration — should treat the data with care. Unemployment rates come from a household survey which first has to establish who is in the labor force and who is not. You could be creating jobs and have more people unemployed (and a higher rate) because that nascent job growth got a lot of people off the couch and into job search. For example, last month the payroll survey says 345,000 fewer people were on U.S. payrolls, but the household survey says 787,000 more people were looking for work. Some of that is differences in surveys, but part of that is the household survey’s finding that 350,000 more people were looking for work in May than April. Make that last number zero, and the unemployment rate only goes up to 9.1% rather than 9.4%. You could claim that last 0.3% is the ‘hope’ that stimulus created. …

On the other side, though, 150,000 in a total employment pool of 140,000,000 is barely more than 0.1%, which is the relative sampling error of the employment survey. (See technical notes.) I don’t see how the Administration could prove in a statistical sense that job levels are higher than where they’d be in the absence of the stimulus.

This is, I believe, a critical point to remember when listening to the administration spin yarns about “saved or created” jobs.  The amount used is nothing more than statistical noise, disprovable either way, and therefore a safe claim to make, and for the media to repeat.

At some point, though, the White House will have to find another number.  They probably believe that the overall unemployment numbers will start to drop soon, and that they can focus on those numbers instead.  If the unemployment numbers continue to rise, that 150,000 number will get very old very quickly, and more people than just Jake Tapper and Major Garrett will start asking them to show their data.

Be sure to read all of King’s post, which contains a warning for Obama’s critics, too.

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