News: CJ Exclusives

Misleading Counting Method Inflates Rail Jobs

White House invented ‘job-years’ metric to help sell stimulus

Backers of a $545-million, federally funded high-speed rail project in North Carolina got a valuable public-relations assist from the Obama administration in the form of a misleading counting technique that inflates potential job numbers by more than 300 percent.

Gov. Bev Perdue, N.C. Department of Transportation Secretary Gene Conti, and other supporters of the project claim that the rail endeavor would create 4,800 jobs, when, in reality, the real projection is closer to 1,200 jobs.

What has not been specified in all the press releases and official announcements is that the 4,800-job figure is measured in “job-years,” a metric invented by the Obama administration’s transition team to sell the American public on the incoming president’s controversial $787 billion stimulus plan.

For instance, if a single job is created for a project with a three-year duration, this, in the Obama-Perdue method of calculating jobs, would be three jobs, not just one. This method of counting has the obvious effect of inflating job projections in the minds of voters if the difference is not spelled out to the public when used.

The 4,800-job number has driven the debate over rail funding in North Carolina — among supportive politicians, business leaders, and newspaper editorial boards — even though the notion of “job-years” is not recognized by the federal Bureau of Labor Statistics, the North Carolina Employment Security Commission, or any other impartial job-market analysts.

The Obama administration has refused to defend the concept publicly. And Perdue has been a steadfast user of the higher figure, which measures “job-years” instead of actual jobs.

In a Feb. 16, 2010, press release, Perdue claimed that the high-speed rail grant would “create or maintain as many as 4,800 private sector jobs in North Carolina over the next four years, with 1,000 of those expected this year alone as ready-to-go projects get under way.”

But Perdue misstated the projections of her own Department of Transportation. In a report issued Jan. 28, 2010, NCDOT estimated the funding would “create or preserve” as many as 5,700 “job-years” in North Carolina, with annual employment peaking at 1,800 in the third year of the project. The 4,800 tally was said to have come from a “conservative estimate” by NCDOT.

Until recently, the governor appeared unfamiliar with the job-years concept. During her April 7 press conference on jobs, a Carolina Journal reporter informed her that DOT estimated the rail project would average only 1,200 jobs a year for the four-year duration of the project. When asked whether she was familiar with the method used for estimating the jobs, she said:

“You know, what I’m aware of on rail is that the money would help us do what we need to do in this state, and what we need to do in the country, from my perspective as somebody who’s had a chance to visit other countries and see their transportation system, that we need to focus on some type of transportation possibilities other than cars and buses. If it’s 1,200 or 12,000 in this economy, they are important jobs. I watched the recovery dollars for roads come into North Carolina, and I saw companies go back to work. I saw projects getting built. I’m watching the Yadkin River Bridge with great expectation. And so if the job estimates are right or wrong, the bottom line is it’s jobs for our people.”

A political strategy

Obama economic advisers Christina Romer and Jared Bernstein used the job-years concept in a report they released 10 days before Obama was inaugurated Jan. 20, 2009. Romer was the designated chairwoman of the president’s Council of Economic Advisers, and Bernstein was chief economist for Vice President-elect Joe Biden.

President–elect Obama already had declared that his stimulus plan should save or create 3 million jobs by the end of 2010. The transition team evaluated three main types of fiscal stimulus: government spending, tax cuts, and direct aid to help states balance their budgets. Their research became the basis for the stimulus bill, which became law Feb. 17, 2009.

A May 2009 report from the Council of Economic Advisers, titled “Estimates of Job Creation from the American Recovery and Reinvestment Act of 2009,” revealed more detail on how jobs would be counted based on the earlier Romer/Bernstein report.

“For some purposes, looking at the effects at a single point in time is not the most useful approach. Since the economy is likely to be operating below capacity for several years, job creation any time over the next several years is valuable. Thus a second way to look at the employment effects of the program is to estimate the number of job-years the program will create over the President’s first term. A job-year means simply one job for one year.”

The report estimated the amount of spending needed to create one job-year for the three different types of fiscal stimulus. They were:

• Government spending: $92,136 per job-year;
• State fiscal relief: $116,603 per job-year; and
• Tax cuts: $145,351 per job-year

The Obama team’s model concluded that the cheapest way to create a job-year was with direct government subsidies. The next-most costly method would come through federal assistance to state governments. Finally, the most expensive job-year-creation program would be by cutting taxes.

“In estimating the job-years created by direct government spending, agencies will be asked to use the simple rule that $92,000 creates one job-year,” the report stated.

DOT and other grant recipients are required to use the job-years concept in the grant application process, but after a project receives funding, the job-years method seems to vanish.

Why the term “job-year”? Why not “job-month” (one person holding the same job for 12 months = 12 job-months), “job-week,” or “job-day”? The executive director and other staff at the Council of Economic Advisers refused to discuss the job-years concept with CJ. White House Regional Media Director Hannah August also refused to take or return phone calls from CJ.

The architects of the job-years concept are no longer in the administration. Romer returned to her position on the University of California economics faculty in September 2010. Bernstein is leaving Biden’s staff at the end of April to join the liberal Center for Budget and Policy Priorities.

The rail jobs estimate

Dividing the $545 million in federal spending on a high-speed rail project by $92,000 per job yields 5,924 total job-years for the project. But also as noted in this table (PDF), DOT decided to use a “conservative estimate using only the construction and professional jobs,” and rounded the figure down to 4,800 job-years.

The stimulus act does impose specific reporting requirements for grant recipients. Every recipient of at least $25,000 must report quarterly to www.federalreporting.gov. The reports must include information on the use of funding and project status, and document any jobs funded with recovery dollars.

The job-years concept is dropped in the actual reporting to avoid multiple counting of the same job. A March 30 report issued by former Rep. Bob Etheridge, director of North Carolina’s Office of Economic Recovery and Investment, stated that the direct impact of the stimulus in the state was “approximately 25,000 jobs created or saved.” The report also stated that as of the end of 2010, “public and private entities and individuals in North Carolina have received approximately $16.5 billion in total ARRA impact (not including tax cuts).”

The official job counters

According to its mission statement, the Bureau of Labor Statistics within the U.S. Department of Labor is the principal federal agency responsible for “measuring labor market activity, working conditions, and price changes in the economy. Its mission is to collect, analyze, and disseminate essential economic information to support public and private decision-making. As an independent statistical agency, BLS serves its diverse user communities by providing products and services that are objective, timely, accurate, and relevant.”

A CJ review of the information available from BLS revealed that the agency does not use the job-years concept, and the term “job-years” as used by the Obama administration does not appear in any articles in the agency publication Monthly Labor Review.

CJ contacted the BLS press office and explained how N.C. officials were using it to count jobs. Information Specialist Stacey Standish was unable to offer any insight. “We are focused on total jobs in a month,” she said. “Our expertise is not in that area. We don’t comment on other people’s data.”

The N.C. Employment Security Commission’s Labor Market Information Division is the North Carolina contractor for some of the BLS programs, including the monthly establishment survey, the method used most to measure jobs at any point in time.

ESC spokesman Larry Parker said the seasonally adjusted non-farm employment in North Carolina was 4,177,400 in February 2008, reached a low of 3,848,800 in February 2010, and was 3,894,700 when last measured in March. The state has lost 282,700 jobs from the onset of the recession.

CJ discussed the job-years concept with Parker, but he said he couldn’t comment. “We unfortunately cannot comment because that is data we do not calculate, he said.

Don Carrington is executive editor of Carolina Journal.