“By this estimate, the Recovery Act has met the president’s goal of saving or creating 3.5 million jobs — two quarters earlier than anticipated,” Romer said with a straight face. (More than 2.5 million non-farm jobs have been lost since ARRA was enacted in February 2009, all of them in the private sector, according to the Bureau of Labor Statistics.)
How does the CEA arrive at these numbers? It uses two methods, Romer said. The first is a standard macroeconomic forecasting model that estimates the multiplier effect of fiscal policy. (The government’s spending is someone else’s income.) The second method is statistical, using previous relationships between GDP and employment to project future behavior.
These numbers might just as well have been pulled out of a hat. Recall that it was the same model and method the administration used in January 2009 to predict an unemployment rate of 7 percent in the fourth quarter of 2010 with the enactment of the fiscal stimulus and 8.8 percent without. The unemployment rate now stands at 9.5 percent.
Update: Michael Boskin chimes in on the same theme, calling them Obama’s Economic Fish Stories.