The measure was signed in a sun-dappled ceremony with more than 40 House and Senate Democrats on hand to applaud. It exempts businesses from paying the 6.2 percent payroll tax on new employees who have been out of work for at least 60 days. And firms get an additional $1,000 credit if new hires stay on their payroll a full year.
The measure also injects funds into highway and transit programs.
“200,000 is my maximum estimate” for the number of jobs the legislation will create, says Timothy Bartik, senior economist at the nonpartisan W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich. And the number will “probably [be] less than that,” he says. An estimated 8.4 million jobs have been lost in the past two years or so.
Mr. Bartik cites two reasons the measure will have only a modest impact. “One, it is small. And two, it requires employers to jump through hoops, and complexity requirements will make it less attractive,” he says. One of the hoops he refers to is the need to ensure a worker has been jobless for at least 60 days.
“The impact on hiring will be small,” writes Augustine Faucher, director of macroeconomics for Moody's Economy.com. “Before business will really boost payrolls they need to be convinced that the recovery will strengthen.”
According to Moody’s prediction, America’s jobless rate will peak near 10.3 percent in the second half of 2010 – a forecast the firm said it did not change as a result of the legislation Mr. Obama signed Thursday. This is a worrisome prediction for politicians since it means unemployment rate would be in the double digits when voters go to the polls in November.
In his Rose Garden remarks, Obama acknowledged the limited potential impact of the measure. “Now, make no mistake,” he said. “While this jobs bill is absolutely necessary, it is by no means enough.” He also noted that the measure had attracted some Republican votes.
Democrats say the measure is the first of four they will try to enact before their party – which controls the House, Senate, and White House – has to face voters in November. At a Capitol Hill press conference on Wednesday, Debbie Stabenow of Michigan, chair of the Senate Democratic Steering and Outreach Committee, said the measure “is the first of many jobs initiatives that will put Michigan, and the country, back to work during this difficult time.”
New figures on initial unemployment claims, released Thursday morning, show how difficult the economic climate remains. New claims for jobless benefits declined by 5,000 in the week ending March 13, to a seasonally adjusted level of 457,000. Strong hiring usually does not take place until the number of new jobless claims has dropped to about 400,000, economists say.
The latest figures also show that the number of people continuing to claim unemployment rose slightly to 4.58 million. The number of people claiming emergency, extended jobless benefits jumped by more than 360,000 to 5.89 million.
“The economy is starting to recover, but the labor market lags the recovery,” economist Bartik says.