Don’t Forget the Downstream Jobs

Will the work created by Washington’s infrastructure and industrial policy programs take the edge off the forecast economic downturn?

We’re watching manufacturing activity and hiring slow down, partly because of rising interest rates, which appear at least to be doing the work of bringing down economic inflation. And so far, despite the cooling economy, the rate hikes haven’t caused a ton of layoffs, either in manufacturing or the other corners of the economy. That might be because the employment numbers are getting a boost from the infrastructure spending and industrial policy passed in the past two years.

There’s a good story in The New York Times today that lays that out. From the article:

The primary purpose of the three laws isn’t to stimulate the economy; they are mainly intended to combat climate change, rebuild infrastructure and reduce dependence on foreign semiconductors. But they will affect the labor market, including a reallocation of workers across sectors.

Also from the article:

Dr. Zandi’s analysis of the infrastructure law found that it would add nearly 360,000 jobs by the end of this year, and 660,000 jobs at its peak employment impact at the end of 2025. He does not expect the Inflation Reduction Act to affect employment significantly, given its lower public expenditure.

A group at the University of Massachusetts Amherst disagreed, forecasting the Inflation Reduction Act’s impact at 900,000 additional people employed on average each year for a decade. Betony Jones, director of energy jobs at the Department of Energy, thinks the number could be even higher because the bill includes incentives for domestic sourcing of materials that may create more jobs along the supply chain than traditional economic models account for.  

There are plenty of mitigating factors to consider, which the article also lays out, and it describes what the jobs created by this industrial policy will look like: Not only steelworker and construction jobs for those who are actually making and assembling the physical infrastructure buildout, but all of the multiplier effect jobs, like dry cleaners, auto mechanics, and all of the million other jobs that spring up when local people are working and spend their money in their communities. All of those count, too. It’s the multiplier effect.

It can’t go without noting, too, that all three of these programs are heavy with domestic procurement rules and domestic content requirements, so that the companies and workers to get the first shot at the contracts this federal spending will generate will be American. Policymakers should make sure we actually stick to them when the government’s many bureaucracies issue guidance on how to adhere to these clearly intended rules. It’s not always a sure thing that they will!

Anyway. An informative New York Times article. Read it here.