The Corner

Stimulus Spending and Unemployment Levels: Still No Correlation

I have a piece in Bloomberg News this morning looking (once again) at whether there is a correlation between unemployment rates and how much stimulus money (the shovel-ready-project side) is spent in each state. The answer is no.

Take Nevada. The state has a 14.3 percent unemployment rate, the highest in the country, and it has so far received $561.55 per person in stimulus funds. That’s a little more than half of the average stimulus per person received by the state with the lowest unemployment rate in the country: North Dakota has an unemployment rate of 3.6 percent, but it has received $1,059.95 per person in stimulus money. The District of Columbia has an unemployment rate of 9.8 percent, and has received $5,748.61 per person. That’s more than ten times the per person amount received by Nevada , which has higher unemployment.

After running a series of analyses (and controlling for the money going through state capitals), I find no correlation between unemployment levels and stimulus spending. (The data and regressions can be downloaded at Mercatus.org.) Basically, the unemployment rate isn’t one of the factors that explains how the stimulus money is spent.

The title of the piece, “Obama Stimulus Money Goes Where Needed Lease,” might make it sound like I think the stimulus money would have been better spent if it had gone to higher unemployment states. I really don’t. However, looking at the allocation of funds, I am starting to think that the administration doesn’t believe in its own theory either.

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