White House defends stimulus despite rising unemployment


White House press secretary Robert Gibbs said the 216,000 jobs the economy lost in August is less than a third of those lost in January, which he said is proof that the $787 billion stimulus is working.

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“We're making progress in slowing down the number of jobs lost,” said Gibbs, who also pointed to a report released this week that showed growth in the manufacturing sector for the first time in more than a year.

Gibbs said the stimulus “is in many ways doing more than we thought it would do in terms of softening the blow” of the recession.

Speaker Nancy Pelosi (D-Calif.) echoed Gibbs in a statement that said the report from the Labor Department, which showed the unemployment rate jumping from 9.4 percent in July, is a “clear indicator” of declining job losses.

She said economists agree that the stimulus played a key role in preventing a severe economic collapse.

“We have a long way to go; but fortunately, President Obama and congressional Democrats acted decisively earlier this year, and the results are beginning to show,” Pelosi said.

Polls show public ambivalence over whether the stimulus has helped the economy. Republicans have hammered it for contributing to record deficits, and have criticized the administration for statements earlier this year that predicted unemployment would top off at 8 percent.

The stakes are high for both parties in this debate, as the economy and the impact of the stimulus are expected to be issues in the 2010 midterm elections.

Republican National Committee Chairman Michael Steele seized on the unemployment report Friday to criticize Vice President Joe Biden, who touted the benefits of the stimulus in a Thursday speech.

“Yesterday Vice President Biden gave yet another speech to try to convince the American people that President Obama’s stimulus bill is creating the jobs he promised," Steele said in a statement. "Today’s unemployment report proves that this administration is ignoring reality."

“Where are the jobs?” asked House Minority Leader John Boehner (R-Ohio) in a statement.

“It is increasingly clear that as a consequence of this administration’s misguided policies, any economic recovery that lies ahead will be a jobless one hampered by massive new debt,” he said.

Many economists say it is clear that the stimulus is having an impact, particularly as more of its programs hit the economy. The stimulus was designed so that more of it will be spent in the second half of 2009 than the first half.

But it is difficult to measure that impact. Biden on Thursday said 750,000 jobs had been saved by the stimulus.

U.S. Chamber of Commerce Chief Economist Martin Regalia gave credit to the stimulus Thursday for helping to turn the economy around, though he said he would have preferred a more “concise” package. Regalia also said the $700 billion effort to bail out financial institutions and a number of unprecedented interventions by the Federal Reserve had helped end the economic downturn.

The Chamber said the recession is ending and predicted the economy will grow in the third and fourth quarters. But the business lobby’s chief economist also said labor markets will lag, and that it could take years for the unemployment rate to drop back to where it was before the recession began.

The increase in the unemployment rate in August was larger than some anticipated, but continued to show a decline in the number of monthly job losses. Average monthly job losses between November 2008 and April, when the downturn was at its worst, were 645,000.

In July, the unemployment rate dropped slightly, from 9.5 percent to 9.4 percent, but many economists attributed the decline to workers opting not to look for jobs.

The increase in the unemployment rate hints at the difficulty the economy will have in gearing up to create jobs for those who lost employment during the recession. Many expect unemployment could hit double digits later this fall.

Gibbs reiterated Obama's belief that the national rate will “exceed” 10 percent at some point this year.

“We're losing more than we're creating, but we're moving in the right direction,” Gibbs said.