Plan will help, but how much?

WASHINGTON — No, the big stimulus plan won't "save or create 3.5 million jobs," as the president and congressional Democrats claim — at least not this year.

The economy will remain feeble through 2009, analysts warn, and businesses will keep shedding jobs, though not as many as they would have without the $789 billion boost.

The stimulus agreement, heading for final votes in the next day or so, goes to the heart of President Obama's strategy to revive the economy and will go far in shaping how Americans view his economic leadership.

What it won't do is quickly snap the country out of the painful recession, now in its second year. It should provide some relief, economists say, though some argue it won't plow enough money into the economy to prop it up.

Tax cuts will spur at least some spending by consumers and businesses, and that should help save or create jobs. Aid flowing to cash-squeezed states will prevent some layoffs.

And money for big public works projects, such as bridge and road repairs, and longer-term ventures, such as networks for more high-speed Internet connections, will eventually generate jobs and stir economic activity.

But even with the stimulus, many economists predict a net loss of 2 million, 3 million or even more jobs this year. The recession already had cost 3.6 million through January. The unemployment rate, now at 7.6 percent, highest in more than 16 years, will probably hit at least 9 percent by next year.

"The stimulus package is not going to turn the economy around right now," said William Gale, director of economic studies at the Brookings Institution.

"The best-case scenario is that it mitigates the depth and the severity of the downturn. That's not a bad thing. It's just not the magic bullet that fixes everything."

Some analysts say the job market won't return to normal health — with unemployment hovering around 5 percent — until as late as 2013.

And the broader economy? No sudden revival there either.

The economy is expected to slide backward for all of 2009 — a decline in gross domestic product of more than 1 percent. That may not sound like much, but it would be the first yearly decline since 1991.

"Congress put the minimum charge into the stimulus battery," said Brian Bethune, economist at IHS Global Insight. "We're taking this big chance, turning the key and praying there is enough juice to turn over the economy. We should have juiced it up so much that we are guaranteed that this engine will start" through a bigger package of tax reductions.

What clues should people be looking for to judge whether a turnaround is near?

Companies will start easing up on their cost cutting. That would mean fewer pay freezes or cuts. Companies will start boosting workers' hours. And demand for temporary workers will rise. After that, companies eventually will call back workers.

"When you hear that friends and others you know are getting hired again — that's the best sign," said John Challenger, chief of Challenger, Gray & Christmas, a placement firm.

This recession has proved especially stubborn and dangerous. The root causes — housing, credit and financial crises — are the worst since the 1930s and don't lend themselves to quick fixes.

Plan will help, but how much? 02/12/09 [Last modified: Friday, February 13, 2009 9:41am]

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