Jobless rate unchanged by billions in stimulus spending

Money for roads, bridges doesn't ease unemployment on local level, analysis finds

WASHINGTON: A federal spending surge of more than $20 billion for roads and bridges in President Barack Obama's first stimulus has had no effect on local unemployment rates, raising questions about his argument for billions more to address an ''urgent need to accelerate job growth.''

An Associated Press analysis of stimulus spending found that it didn't matter if a lot of money was spent on highways or none at all: Local unemployment rates rose and fell regardless. And the stimulus spending only barely helped the beleaguered construction industry, the analysis showed.

With the nation's unemployment rate at 10 percent and expected to rise, Obama wants a second stimulus bill from Congress including billions of additional dollars for roads and bridges — projects the president says are ''at the heart of our effort to accelerate job growth.''

Transportation Secretary Ray LaHood defended the administration's recovery program Monday, writing on his blog that ''[Department of Transportation]-administered stimulus spending is the only thing propping up the transportation construction industry.''

Road spending would total nearly $28 billion of the Jobs for Main Street Act, a $75 billion second stimulus to help lower the unemployment rate and improve the dismal job market for construction workers. The Senate is expected to consider the House-approved bill this month.

Strategy questioned

But AP's analysis, which was reviewed by independent economists at five universities, showed the strategy of pumping transportation money into counties hasn't affected local unemployment rates so far.

''There seems to me to be very little evidence that it's making a difference,'' said Todd Steen, an economics professor at Hope College in Michigan who reviewed the AP analysis.

And there's concern about relying on transportation spending a second time.

''My bottom line is, I'd be skeptical about putting too much more money into a second stimulus until we've seen broader effects from the first stimulus,'' said Aaron Jackson, a Bentley University economist who also reviewed AP's analysis.

For the analysis, the AP reviewed Transportation Department data on more than $21 billion in stimulus projects in every state and Washington, D.C., and the Labor Department's monthly unemployment data to assess the effects of road and bridge spending on local unemployment and construction employment. The analysis did not try to measure results of the broader aid that also was in the first stimulus such as tax cuts, unemployment benefits or money for states.

Even within the construction industry, which stood to benefit most from transportation money, the AP's analysis found there was nearly no connection between stimulus money and the number of construction workers hired or fired since Congress passed the recovery program. The effect was so small, one economist compared it to trying to move the Empire State Building by pushing against it.

''As a policy tool for creating jobs, this doesn't seem to have much bite,'' said Emory University economist Thomas Smith, who supported the stimulus and reviewed AP's analysis. ''In terms of creating jobs, it doesn't seem like it's created very many. It may well be employing lots of people but those two things are very different.''

Trying again

Despite the disconnect, Congress is moving quickly to give Obama the additional road money he requested.

''We have a ton of need for repairing our national infrastructure and a ton of unemployed workers to do it. Marrying those two concepts strikes me as good stimulus and good policy,'' White House economic adviser Jared Bernstein said. ''When you invest in this kind of infrastructure, you're creating good jobs for people who need them.''

Even so, transportation spending is too small of a pebble to create waves in the nation's $14 trillion economy. And starting a road project, even one considered ''shovel ready,'' can take many months, meaning any modest effects of a second burst of transportation spending are unlikely to be felt for some time.

''It would be unlikely that even $20 billion spent all at once would be enough to move the needle of the huge decline we've seen, even in construction, much less the economy. The job destruction is way too big,'' said Kenneth D. Simonson, chief economist for the Associated General Contractors of America.

County still reeling

Few counties received more road money per capita than Marshall County, Tenn., about 90 minutes south of Nashville.

Obama's stimulus is paying the salaries of dozens of workers there, but local officials said the unemployment rate continues to rise and is expected to top 20 percent soon. The new money for road projects isn't enough to offset the thousands of local jobs lost from the closing of manufacturing plants and automotive parts suppliers.

''The stimulus has not benefited the working-class people of Marshall County at all,'' said Isaac Zimmerle, a local contractor who has seen his construction business slowly dry up since 2008.

The stimulus has produced some jobs. And economic evidence suggests that government programs, including a $700 billion bank bailout program and the $787 billion stimulus, have helped ease the recession.