Job Market Stimulus

Economic Stimulus Package: What will it do to the Job Market?

We've all seen allot of news on the economic stimulus packages that are being put together by the Canadian and U.S. government. With so many people facing uncertainty in the job market, the actual impact is of great interest to job searchers and people trying to manage their career during the turbulent economy.

News media and political rhetoric aside, what can you expect the "real" outcome to be? Here are some of the intentions of the packages:

Widespread growth amongst business sectors:
Jared Bernstein and Christina Romer are the U.S. economists who came up with and estimate that 3 to 4 million jobs that would be created or maintained by the U.S. stimulus. Their report on economic stimulus said:

"Certain industries, such as construction and manufacturing, are likely to experience particularly strong job growth under a recovery package that includes an emphasis on infrastructure, energy, and school repair. But, the more general stimulative measures, such as a middle class tax cut and fiscal relief to the states, as well as the feedback effects of greater employment in key industries, mean that jobs are likely to be created in all sectors of the economy."

the idea behind the stimulus in all sectors is the infrastructure and health care jobs (ie. the government created jobs) will have a trickle down effect. The construction workers and health care workers will go out to spend, the businesses etc. that are catering to these workers will have more money and in turn they will hire and spend. By their calculations a 1 percent jump in GDP would correspond to a 1 million jobs jump in employment. The principle is the jobs created in the public sector will multiple and create many more jobs in the private sector.

Relief for the Unemployed:
The stimulus will extend unemployment benefits and boost benefit payments. It also offers a tax deduction. Again the same trickle down effect is intended, as the unemployment is spent it is pumped right back into the economy. The sooner people start spending again the sooner the whole economy will get healthy. Consumer spending is key to getting company revenues up and retaining jobs.

The economists expect it to take two years for the stimulus to fully work its way through the economy. No one can fully predict what the outcome will be, however the stimulus can't do anything until the words become action. The planning stage appears to be over, now it's time to put the money in and see what happens. If the economists are right we should see the job market start to turn around as soon as the money starts to get into the system. The Bottom line is the economy really needs less talk and more action.