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Published: Monday, 5/11/2009

White House: Stimulus on pace for 3.5 million jobs


WASHINGTON The Obama administration is defending its claim that the $787 billion economic stimulus plan will save or create 3.5 million jobs before 2011 even while conceding that unemployment will likely continue to rise beyond its earlier predictions.

A report Monday by the White House Council of Economic Advisers said the projections were based on conservative estimates and widely accepted assumptions. The 3.5 million job estimate remains valid, the report said, now that stimulus money is starting to pay for various projects throughout the nation.

The assessment was the same as what Obama s economists forecast in January, when they predicted that the economic stimulus would prevent unemployment from rising above 8 percent. But unemployment reached 8.9 percent in April and the chairwoman of the Council of Economic Advisers, Christina Romer, said over the weekend that current predictions that unemployment would reach 9.5 percent were pretty realistic.

In an interview that aired Sunday on C-SPAN, Romer said that given the worsening economy, the unemployment rate without a stimulus would have been higher than initially believed.

Our forecast was made back in January and one of the things that happened is a lot of deterioration both in our economy and the world economy in January and February, she said. If you look at a lot of the private forecasts, they became a lot more pessimistic as the first quarter went on.

The report says the analysis is based on what the CEA considers the relatively conservative rule of thumb that a 1 percent increase in GDP corresponds to an increase in employment of approximately 1 million jobs.

However, it also notes that every increase in the GDP does not translate into new jobs. Existing workers absorb some of the increased economic activity by working longer hours and being more productive, it says.

Models that predict the number of U.S. jobs with and without the stimulus still conclude that the bill will create or save 3.5 million by the end of 2010, the report says.

Many economists say it is difficult to calculate how many jobs are saved by a spending package designed to pump up the economy.

Republican officials have criticized President Obama s projections, calling them unduly optimistic efforts to quantify something that is extremely difficult to quantify.

Monday s CEA report was seen in part as an effort to answer such criticisms.

It says job creation that can be attributed to the stimulus package rises over 2009 and 2010, as the stimulus increases, and then falls as the fiscal stimulus is withdrawn.

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