…Mark Zandi must have been up late feeding the American Jobs Act into his macromodel, because after too little rest, I wake up to find his analysis of the jobs plan in my inbox.
Here’s his projected impact of GDP and jobs:
“–President Obama’s jobs proposal would help stabilize confidence and keep the U.S. from sliding back into recession.
–The plan would add 2 percentage points to GDP growth next year, add 1.9 million jobs, and cut the unemployment rate by a percentage point.”
Here’s the punchline in a graph. As I’ve stressed, if we, and by “we” at this point, I mean Congress, we should expect unemployment to be where it is a year from now if not worse. If we enact the AJA, it will be something like a point lower than that.
Source: Zandi, Moody’s Analytics
I’m afraid it’s really that simple. The Recovery Act along with monetary stimulus helped move the economy from sharp reverse to slow growth. But the depth of the downturn, the persistent job and paycheck weakness, the still depressed housing market, and the ongoing deleveraging of household and bank balance sheets, meant that as the Recovery Act and assorted Fed actions fade, slow growth downshifted to neutral.
It is not that these measures have not worked. It is that they stopped to soon. The AJA keeps them going and that’s extremely important right now.