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Study sees small lift from stimulus

$20 billion failed to cut jobless rate

Isaac Zimmerle stood near his truck Saturday in front of a home on which he was forced to halt construction in Chapel Hill, Tenn., after unsuccessful attempts to find a buyer. Isaac Zimmerle stood near his truck Saturday in front of a home on which he was forced to halt construction in Chapel Hill, Tenn., after unsuccessful attempts to find a buyer. (Josh Anderson/Associated Press)
By Matt Apuzzo and Brett J. Blackledge
Associated Press / January 12, 2010

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WASHINGTON - A federal spending surge of more than $20 billion for roads and bridges in President 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 said are “at the heart of our effort to accelerate job growth.’’

Transportation Secretary Ray LaHood defended the administration’s recovery program yesterday, writing on his blog that “DOT-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.

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 that one economist compared it to trying to move the Empire State Building by pushing against it.

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.

“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,’’ said Kenneth D. Simonson, chief economist for the Associated General Contractors of America.