Defense industry, military exaggerate sequester job loss numbers - WBTV 3 News, Weather, Sports, and Traffic for Charlotte, NC

Job loss numbers in military, defense industry vary by source

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The U.S. Army claims more than 300,000 jobs will be directly lost as a result of sequestration. (Source: U.S. Army/Wikimedia) The U.S. Army claims more than 300,000 jobs will be directly lost as a result of sequestration. (Source: U.S. Army/Wikimedia)

(RNN) -The defense industry and the military are the two groups complaining the loudest about job losses that will be caused by sequestration, but they also happen to be the two that profit most from defense spending remaining high. Some sources claim their numbers are skewed.

A 2012 study by George Mason University funded by a lobby group for several defense contractors is one of the most commonly cited sources predicting sequestration's impacts on the defense industry.  

The study, paid for by Aerospace Industries Association,  claims that more than 1 million defense jobs will be lost. That estimate includes direct job losses, such as those in shipbuilding factories, as well as indirect job losses, which come as a result of less money spent in communities where defense is an important industry.

For example, fewer defense workers going to lunch in Newport News, VA, as a result of sequestration cuts could mean a restaurant would have to lay off workers.

"For every $1 in DOD spending reductions for military equipment, an additional $2.64 in sales losses will be experienced by other businesses with 71 percent of these lost sales occurring as a result of decreased consumer spending by workers directly and indirectly affected these DOD spending reductions," the study claims.

The AIA study claims indirect job losses will be nearly twice as much as direct job losses: 654,315 vs. 352,000.

The U.S. Army's study also attempts to demonstrate the impact of job losses, but concentrates mainly on direct job losses, including civilian DOD employees and contractors.

However, their defense job loss numbers are similar to the AIA's, predicting 302,626 more people in the unemployment line creating a total economic impact of about $15 billion.

The numbers sound dire and have been widely repeated by pundits and politicians from both parties as well as the president.

On Feb. 26, President Barack Obama gave a speech at a shipbuilding factory in Virginia, one of the states whose economy relies most on defense spending.

"The sequester will weaken America's economic recovery," Obama told thousands of workers, adding that the sequester would mean choosing between "This Navy shipyard or some other one."

And while many of Obama's Republican foes might agree with that statement, some experts say the numbers are just wrong.

AIA's numbers an 'extreme projection'

Deloitte, a financial and consulting firm, released a study in 2012 on the defense and aerospace industry and found that there are approximately 3.53 million jobs - direct, indirect, and induced - attached to the defense industry.

But the AIA's claims of more than a million jobs lost because of sequestration sounds too high to Peter W. Singer, Director of the 21st Century Defense Initiative at the Brookings Institute.

"If 1.09 million direct, indirect, and induced jobs were lost from the 10 percent cut of sequestration, that would mean nearly a third of the overall jobs sustained by the industry would evaporate - an extreme projection to say the least," he wrote.

Singer compared the AIA numbers to congressional testimony by Bob Stevens, the CEO of Lockheed, which is the largest defense contractor in the world. Stevens said sequester cuts would force his firm to lay off up to 10,000 workers.

And according to Singer, that's a better estimate of how many jobs will be lost to sequestration.

"Stevens' estimate was a far more sensible projection, as that is approximately 8.3 percent of his workforce, not a third, far more in line with the scale of the potential cuts," Singer wrote.

As for the ripple effects of indirect job losses as a result of sequestration, Singer pointed out that the AIA's estimates vary wildly from defense companies and the government.

For every $1 million the government cuts on defense spending, 24 jobs are lost, the AIA claims.

The projection doesn't jibe with similar presentations showing jobs created per $1 million spent submitted by companies attempting to win defense contracts.

But in a 2011 competition to win a $35 billion contract from the DOD, Boeing and Northrop Grumman/EADS each claimed they would create about 48,000 jobs, which comes out to 1.37 jobs for every $1 million spent.

And the Department of Commerce's numbers were even lower, claiming the contract would have created 25,000 jobs, less than one job for every $1 million spent.

Of course, these are just projections that do not take into account several other necessary factors to get accurate estimates. But going by what two major defense companies and the Department of Commerce went by, defense job losses caused by sequestration total fewer than 50,000.

That's a big number and the impact would be devastating to those who are personally affected, but far fewer than the 1 million job losses projected by the defense industry and the military.

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