U.S. stimulus boosted jobs, output in Q3: CBO

U.S. President Barack Obama delivers a statement about General Motors' first day re-listing in the stock market, from the Brady Press Briefing Room of the White House in Washington, November 18, 2010.

WASHINGTON (Reuters) - The massive U.S. stimulus package, widely panned by voters, injected life into the otherwise-sluggish economy between July and September, the nonpartisan Congressional Budget Office said on Wednesday.

The American Recovery and Reinvestment Act put between 1.4 million and 3.6 million to work in the third quarter of this year, a time when more than 15 million Americans were unemployed, CBO said.

It also boosted national output by between 1.4 percent and 4.1 percent during that time, the CBO said.

During the third quarter, the economy grew by an annual rate of 2.5 percent. Economists say a rate faster than 3 percent is needed to make any noticeable dent in unemployment.

The CBO's estimates have consistently shown that the $814 billion package of tax cuts, state aid, construction spending and enhanced safety-net provisions has blunted the impact of the worst U.S. recession since the 1930s.

But it has failed to prevent the unemployment rate from rising above 8 percent, as the Obama administration promised when it was crafted in 2009.

The unemployment rate, currently 9.6 percent, would have been between 10.4 percent and 11.6 percent without the Recovery Act, the CBO said.

The stimulus created the equivalent of 2 million to 5.8 million jobs during the third quarter as part-time workers shifted to full-time work, or employers offered more overtime work.

Voters by wide margins say the stimulus has been ineffective, and they handed a big victory to the Republicans who opposed it in the November 2 elections.

Republicans have proposed rescinding the $12 billion that remains unspent when they take control of the House of Representatives in January.

The Recovery Act has already had its greatest impact on the economy and its effects will continue to wane into 2011, CBO said.

Federal Reserve Chairman Ben Bernanke has called on Congress to take additional measures to stimulate the economy, but analysts say his plea will probably go unanswered as Republicans eye sharp spending cuts for next year.

Not all elements of the Recovery Act got the same bang for the buck, the CBO said.

Direct spending on highway construction, water-system upgrades and energy efficiency were among the most effective, the CBO said, while tax breaks for businesses and higher-income people cost more in lost revenues than they made up for in increased economic activity.

(Reporting by Andy Sullivan; editing by Mohammad Zargham)