The Recovery Act at 200 Days
Both Goldman Sachs and Mark Zandi of Economy.com have estimated that GDP growth in the second quarter was given a significant boost due to the Recovery Act. In particular, official estimates are that the economy contracted by an annualized rate of 1 percent in the second quarter. The Goldman and Zandi estimates suggest that the economy would instead have shrunk by 3 percent to 4 percent in the second quarter, if the Recovery Act had not been enacted. These analysts also project an even more significant boost to the economy in the third quarter (see chart below) before beginning to trail off afterward.
In addition, although the unemployment rate remains elevated (for some of the reasons, see here), the economy is losing jobs at a slower pace – from 2 million jobs lost in the first quarter to 1.3 million jobs lost in the second quarter of 2009. This is far from a full recovery, but private forecasters are crediting the Recovery Act for staunching the job loss associated with the recession and thereby protecting hundreds of thousands of jobs. Mark Zandi, for example, estimates that job loss in the second quarter would have been about 500,000 higher without the Recovery Act, and Josh Bivens of the Economic Policy Institute estimates that job loss would have been greater by approximately 720,000.
These various analyses thus echo the assessment of the Recovery Act offered by Alan Blinder, former Vice Chairman of the Federal Reserve (and a former professor of mine): "[W]hat six months ago looked like an economy plunging into an abyss is now an economy on the mend. And the stimulus deserves some of the credit."
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