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Will Keystone XL pipeline create 42,000 ‘new’ jobs?

A depot used to store already-manufactured pipes for TransCanada Corp’s planned Keystone XL oil pipeline is seen in Gascoyne, N.D. (REUTERS/Andrew Cullen)

“It’s going to be a bellwether decision by the president whether to go with jobs and the economy. His own State Department said it’s 42,000 new jobs — this is a good infrastructure project to support it widely across the United States.”

— Sen. John Barrasso (R-Wyo.), on NBC’s “Meet the Press,” Jan. 4, 2015

Senate Republicans soon plan to bring a vote on the Keystone XL pipeline as one of the first acts of their new majority status, and once again we find ourselves fact checking jobs claims related to the project. Over at CBS’s “Face the Nation,” Sen. Charles E. Schumer (D-N.Y.) said it “would create several thousand temporary construction jobs and only 35 permanent jobs.” And Barrasso said it would result in “42,000 new jobs.”

That’s not quite as wide a range as in Jon Stewart’s spoof of the Keystone jobs debate — “somewhere between millions of jobs and 35” — but it’s still enough of a range to give a viewer of the Sunday shows whiplash.

We’ve delved into various facets of the job debate before; for instance, President Obama has wrongly dismissed it as “maybe 2,000 jobs.” Here’s an explanation of the 42,000 figure — and why that’s also misleading.

The Facts

First, let’s start with the basics. The Keystone XL pipeline is a construction project, and so the most direct jobs are related to construction. These are basically short-term jobs, lasting on average 19.5 weeks, to assemble the pipeline that would help carry heavy crude oil from Canada’s Alberta province to the Gulf Coast. Over two construction seasons, the main beneficiaries of the project would be Montana, South Dakota and Nebraska — each would need to hire between 2,700 and 4,000 construction workers — though Kansas would also hire about 200.

Because of the difficulty in determining whether the project would last one or two years, the State Department decided to express all of the jobs as an annual figure. So those 4,000 construction workers in Montana who work for 19 weeks were turned into nearly 1,500 jobs on annual basis. All told, 10,400 construction workers, engaged for four- or eight-month periods, are expressed in the State Department report as 3,900 jobs — one position that is filled one full year — even though none of the jobs actually last a year.

Schumer thus sticks close to the essence of the report, when he says the pipeline would create “several thousand temporary construction jobs,” though he lards it on a bit by adding “only 35 permanent jobs.” That number is in the report, but how many construction projects result in very many permanent jobs?

Barrasso, meanwhile, plucks out another figure in the report to claim “42,000 new jobs.” What’s that about?

This stems from the fact that the project will involve about $3.3 billion in construction contracts and materials, including about $200 million on construction camps. That money would reverberate through the U.S. economy, especially in the states with the construction. About 16,000 jobs (including the nearly 4,000 in construction jobs) would stem from direct spending. For instance, workers in Arkansas have already built about half of the high-strength line pipe needed for the project, some 333,000 tons. (The rest would come from Canada, Italy and India.) Those are clearly jobs that can be attributed to the project, though in the case of the pipe, the work is already done, according to a TransCanada spokesman, Mark Cooper. (See the photo above.)

But the other 26,000 jobs are even more fuzzy — what are termed “indirect and induced spending.” Some of that could be goods and services purchased by contractors, but it also means spending by employees working for a supplier of goods and services.

An appendix to the State Department report, for instance, says that 634 people would be employed in the “arts, entertainment and recreation services” in the United States as a result of Keystone — and only 138 of those jobs would be in the construction states. No single dancer in New York City is going to get a job because of Keystone, but just as the part-time work of the construction workers adds up to jobs expressed in annual terms, the economic model assumes some of that spending reverberates through the economy and eventually lands in the pockets of people across the country, thus contributing to a portion of their annual wage.

That’s why the State Department report carefully says the spending during the construction period “would support a combined total of approximately 42,100 average annual jobs.” It’s not really “42,000 new jobs,” as Barrasso expressed it. In fact, as we noted, some of those jobs have already been completed in anticipation of the project.

The State Department report adds an important bit of context — this represents just 0.02 percent of annual economic activity across the nation. Indeed, even the 42,000 figure, inflated though it may be, does not seem very large when compared to the 321,000 jobs added to the economy just in November.

“There’s no question that the Keystone XL pipeline will create thousands of jobs for out-of-work Americans who have suffered in the Obama economy,” said Barrasso spokesman Emily Schillinger. “In fact, the president’s own State Department has confirmed that the Keystone XL pipeline will support over 42,000 jobs. While Washington Democrats champion endless delay and dissect the precise wording of every positive jobs projection, unemployed Americans are demanding action. Instead of ridiculing these good jobs, President Obama and Democrats in Congress should support this project and help more Americans get back to work.”

The Pinocchio Test

Yes, that 42,000 figure is in the report, but the number requires more context, especially if supporters want to pitch Keystone XL as an infrastructure project that will bring new jobs to the economy. Using the State Department math, it’s safe to say nearly 4,000 construction jobs will be created, at least temporarily. One could even say that 16,000 jobs would be or have been supported from direct spending on the project, such as those pipe makers in Arkansas.

But “42,000 new jobs” is going too far. Most of those jobs are far from the construction site, and it’s hard to argue they are new. Moreover, under State’s accounting, they only last for a year. For some workers, it would be a good but brief payday. In the context of the U.S. economy, the impact is barely a ripple.

Two Pinocchios

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