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With unemployment at 7.6%, pressure to pass stimulus rises

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This morning's announcement that the unemployment rate rose from 7.2% in December to 7.6% in January, increases the pressure to get some sort of economic stimulus plan into effect. There is much work to be done to reconcile the House and Senate versions of the bill, and big questions about whether and how much the final bill will actually create new jobs to offset the ones being cut.

Last month, those jobs were being eliminated at a ferocious pace. The 598,000 jobs employers shed in January exceed by 14% the 524,000 that economists had expected. Those economists had underestimated the job cut damage in the previous two months as well. Since the recession started in December 2007, 3.6 million jobs have evaporated, 50% of them in the past three months.

President Obama claims that his stimulus bill can save or create 3 million jobs. But to get something passed, Washington will need to reconcile the Senate's $920 billion plan -- which includes more money for unemployment benefits - with the House's $819 billion package. I regret that it will take another one of those "heaven help us" sales pitches to get this done.

To me, it would be much better to see a fact-based explanation that connects the stimulus spending to the three million new jobs. I have no doubt that something will be passed, but it will probably include $275 billion in tax cuts, which will be saved and not spent, and therefore will just pile more debt on our grandchildren without contributing to those new jobs.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.

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Last updated: November 24, 2009: 08:01 PM

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