When recipients of Recovery funds report on how they used the funds, they must include data on the number of jobs created or saved by the Recovery project. Below is a description of how recipients calculate the number of jobs created and saved.
Recipients divide the total number of Recovery Act funded hours worked in a quarter by the number of hours of a full-time schedule in a quarter as defined by the recipient. For example, if three of the recipient’s employees worked on a Recovery funded project for a total of 1300 hours in a given quarter, and the recipient defines a full-time schedule as 520 hours per quarter (40 hours a week for 13 weeks), the recipient reports the “full-time equivalent” (FTE) of 2.5 jobs created or retained. (1300/520 = 2.5)
The number of jobs created or saved is cumulative. For the second reporting period, which begins January 1, 2010, recipients will be reporting on jobs created or saved during the period of Oct. 1, 2009 to December 31, 2009. The recipients will calculate the total number of hours worked over both quarters divided by the total number of hours of a full-time schedule for the two quarters.
If the same three employees reported by the recipient in the first quarter work the same 1300 hours, the recipient will divide 2600 by 1040 (520x2), to get an FTE of 2.5 jobs over both quarters. However, if the total number of hours worked changes in the second quarter from 1300 to 1560 (2860 hours for both quarters), the recipient would report 2.75 jobs created or retained (2860 divided by 1040).
The Council of Economic Advisers (CEA) also estimates how jobs are created or saved.
In April 2009, the CEA - a group of three who provides economic analysis to the President - issued a report detailing one of the ways that the CEA uses to estimate how many jobs will be created or saved under the Recovery Act.
The CEA formula is based on the economic concept of multipliers. It attempts to measure the effect that increased spending has on increases in the money supply that, in turn, results in increases in the number of jobs. The CEA has identified three types of jobs that are created or saved by the multiplier effect: direct, indirect, and induced.
- Direct Jobs: The Department of Transportation awards a Recovery contract to XYZ company to repave a highway in Colorado. As a result of this contract, XYZ hires a construction foreman (direct job).
- Indirect Jobs: In order to fulfill the contract, XYZ purchases cement from ZZZ Cement Company. To fill this large order, ZZZ hires 5 additional workers (indirect jobs).
- Induced Jobs: As a result of the Recovery funds, XYZ and ZZZ companies are able to buy new equipment and machinery. The newly hired construction foreman at XYZ and the 5 new workers at ZZZ have salaries to spend on goods and services in their communities. The combined spending by the XYZ and ZZZ companies and the workers they hired to complete the Recovery contract leads to other jobs created or saved throughout the local economy (induced jobs).
The CEA’s formula assumes that an increase in spending of 1 percent of the gross national product (GDP) and a decrease in 1 percent of the GDP with the multiplier effect will lead to 3.5 million jobs created or saved by the fourth quarter of 2010.
View the CEA Report (58Kb)