Today, the latest data from the Bureau of Labor Statistics showed that the unemployment rate unexpectedly fell to 9.4 percent in July, and “businesses cut a much-less-severe 247,000 jobs from their payrolls.” Analysts had anticipated something to the tune of 325,000 jobs lost and a 9.7 percent unemployment rate.
As the New York Times reported, an analysis of the stimulus plan offered by economists “suggests that the punch from increased government spending has helped the economy begin to bottom out faster than it would have otherwise.” However, the Wall Street Journal’s Stephen Moore appeared on Fox News this morning and said that, despite the report, he is “ready to declare the economic stimulus plan a failure.” Watch it:
Moore is right that this is by no means a “good” report overall, but declaring the stimulus a failure at this junction is to ignore the effect that it has already had. “The signs of the stimulus are there,” Allen L. Sinai, chief economist at Decision Economics, told the New York Times. “Government — federal, state and local — is helping take the economy from recession to recovery. I think it’s the primary contributor.” This graph, from a report by the Council of Economic Advisers, shows the impact on job loss that the stimulus has had.
Due to the stimulus, the actual loss has been much less than the projected. So as Tim Fernholz put it, “I hope that these arguments will dispel the ignorant discussion over whether or not the stimulus is ‘working.’ It is doing exactly what economists thought it would, even if the policy wound up being executed in an economic environment that was much worse than expected.”
David Leonhardt noted that the jobs report also shows that “the average hourly pay of rank-and-file workers, which had been flat in June, rose 3 cents in July, to $18.56 an hour. That wage is up 2.5 percent over the past year, while inflation has been roughly zero.” These are encouraging signs. To be sure, the economy is still in a very weak state, and it remains the case that finding a new job is extremely challenging for those who have lost theirs. But that’s precisely why the stimulus dollars need to keep flowing into the economy, boosting demand and stimulating spending as the economy starts to slowly turn around.