By promising to pave roads and lay railroad tracks, the massive economic stimulus raises a multibillion-dollar question: How many new jobs will it create?
President Obama offers one answer. Speaking to a joint session of Congress last night, he promised that the $787 billion American Recovery and Reinvestment Act he signed into law last week would save or create 3.5 million jobs during the next two years.
"More than 90 percent of these jobs will be in the private sector: jobs rebuilding our roads and bridges, constructing wind turbines and solar panels, laying broadband and expanding mass transit," he said.
According to a 2007 federal formula applied widely by transportation interest groups, $45 billion or so earmarked in the stimulus for transportation would create about 1.3 million direct and indirect jobs. But some veteran players caution that the money will initially save more jobs than it creates as the United States struggles out of a recession.
"A lot of this money, at least from the highway side in every state, is going to go toward resurfacing because these projects are shovel-ready," predicted Terry Neimeyer, who runs the Sparks, Md.-based engineering firm KCI Technologies Inc.
His rationale: The lion's share of the transportation funding, $27.5 billion, is reserved for road and bridge construction. Most "shovel-ready" projects involve repaving, and workers who do such work were unlikely to keep their jobs without Uncle Sam's help.
"Are all of these jobs going to be created?" Neimeyer pondered yesterday during a U.S. Chamber of Commerce panel on the stimulus. "More than likely, they'll be saved jobs."
There were 39,000 fewer highway contractor jobs in December 2008 compared to 12 months earlier, according to American Road & Transportation Builders Association data. The volume of construction has also decreased significantly during the past year, noted William Buechner, the builders association's vice president for economics.
"The number of our [unemployed] contractors -- we're seeing that they're operating at less than 75 percent capacity -- is at an all-time high," Buechner said.
The steel industry, which provides the backbone materials for road and rail projects, is also feeling the recession's pinch. U.S. mills are operating at less than half of their capacity. Domestic producers shipped about 4.6 million tons of steel in December 2008, down almost 46 percent from a year earlier, according to the American Iron & Steel Institute, which represents U.S steel companies.
Nancy Gravatt, a spokeswoman for the industry group, estimated that stimulus dollars could increase domestic steel shipments by 3 million to 3.5 million tons, the bulk of which would go toward roads and bridges. A production increase on that scale would generate about 4,500 to 5,200 jobs.
The steel producers and the United Steelworkers union pressed hard for the stimulus' "Buy American" rule, which requires publicly funded infrastructure projects to be built with U.S. iron and steel, so long as the rule complies with international trade agreements (Greenwire, Feb. 5).
United Steelworkers estimates that at least 25,000 industry workers have been furloughed or laid off amid the recession -- a figure steel producers' spokeswoman Gravatt did not dispute.
"We do hope that the Buy American provisions will generate demand and bring some of these jobs back," she said.
A recent study by the University of Massachusetts, Amherst, and the Alliance for American Manufacturing, which is allied with United Steelworkers, estimated that roughly 18,000 jobs would be created for every $1 billion of spending on transportation, energy, water and school infrastructure. Utilizing 100 percent domestically produced materials for such projects would yield 77,000 additional jobs nationally, according to the study.
Computing the multiplier effect
But some federal officials concede it is difficult to gauge the stimulus' multiplier effect.
A 2007 formula developed by the Federal Highway Administration estimated that $1 billion of federal highway expenditure will support 30,000 direct and indirect jobs. The Obama administration is reviewing the stimulus legislation to recalculate the formula, an agency spokesman said.
Jeffrey Sterner, president of High Steel Structures Inc., a Lancaster, Pa.-based steel fabricator, is equally cautious. He projects that the stimulus will increase his work force by 5-6 percent this year and a similar amount in 2010.
"Right now we have to be cautious about the diversity of jobs the stimulus will actually create when the states are deciding which projects to release," Sterner added. "The term 'shovel-ready' is what we've all been hearing about, but to help the economy, we need to create jobs at all levels."
"Bridges require a lot of work by a lot of people," Sterner continued. "But they're not necessarily the jobs that are visible to the public, which may give the states some hesitation."
The American Public Transportation Association estimates that the legislation's $8.4 billion earmark for public transportation will create about 235,000 jobs, based on the FHA formula. About $6.9 billion will be distributed to public transit systems; the remaining $1.5 billion is available for surface transportation project grants.
Rob Padgette, the association's policy development and research director, dubbed the stimulus a "short-term bill, but it doesn't address our long-term needs."
In order to double public transit ridership during the next 20 years, local, state and federal governments would need to pony up about $59.2 billion annually, he said.
Click here to read the full text of the stimulus bill (transportation funding is listed under Title VII).