The U.S. Bureau of Labor Statistics released its September employment data today and the nation’s unemployment rate hit 9.8 percent. Non-farm payroll fell by 263,000 jobs, more than the consensus forecast among private forecasters of around 175,000. Many economists expect unemployment rates to crest somewhere at 10 percent by the end of the year or early 2010 before falling.
This is a far cry from the 8 percent maximum unemployment rate (now) Obama Administration economists forecast in their report “The Job Impact of the American Recovery and Investment Plan” in January 2009 and when they used the same econometric models to stump for the stimulus plan last February. Unemployment rates were supposed to peak in September and then fall steadily until they reached about 5 percent in 2014.
Of course, the failure to accurately forecast the effect of the stimulus plan makes sense. The federal spending wasn’t really targeted toward short term economic pump priming (despite the political rhetoric) and focused on longer-term government program expansion. Even if the spending was focused on short-term pump priming, much of the spending was mistargeted anyway by going into projects that were marginally beneficial to economic growth in the short and long run.
Reason’s work on the stimulus can be found here. Yesterday’s brief blog post by Anthony Randazzo is also a useful reminder of the folly of fiscal stimulus.