Jan. 10 (Bloomberg) -- President-elect Barack Obama said his two-year plan to boost the U.S. economy will generate as many as 4 million jobs, higher than his previous estimates, the biggest portion of them in construction, manufacturing and retail.

The plan would also result in the U.S. gross domestic product increasing by 3.7 percent more by the end of 2010 than it would without the stimulus, according to a study compiled by Obama’s economic advisers. The study gives a forecast based on a package of spending and tax cuts totaling “slightly over” the $775 billion that has been discussed by the transition team with members of Congress.

“The jobs we create will be in businesses large and small across a wide range of industries,” Obama said in his weekly radio address today. “And they’ll be the kind of jobs that don’t just put people to work in the short term, but position our economy to lead the world in the long term.”

The address and the forecast are being released together a day after the government reported that the nation lost 2.6 million jobs in 2008, just shy of the 2.75 million decline at the end of World War II. The unemployment rate hit 7.2 percent in December, the highest since January 1993. Even with the stimulus plan, Obama’s advisers say the jobless rate will remain at about 7 percent by the end of 2010.

Companies Cut Jobs

Yesterday, companies including Boeing Co., the world’s second-largest commercial-plane maker, CSX Corp., the third- largest U.S. railroad, and General Dynamics Corp., the second- largest shipbuilder for the U.S. Navy, announced job cuts.

The Standard and Poor’s 500 Index has lost 37 percent in the past 12 months and the Dow Jones Industrial Average fell 33 percent.

Obama’s report is part of a campaign by him and his transition team to build support for his stimulus plans with Congress and the public. While his advisers have been meeting with lawmakers, Obama every day this past week has spoken about the economy and warned that the U.S. faces a deep and prolonged recession unless action is taken.

“It’s not too late to change course -- but only if we take immediate and dramatic action,” Obama said today. “Our first job is to put people back to work and get our economy working again.”

Unemployment

Even with the GDP improvement forecast in the report, the unemployment rate is forecast to be about 7 percent, according to its authors Christina Romer, the President-elect’s pick to head the White House Council of Economic Advisers, and Jared Bernstein, economic policy director for Vice President-elect Joe Biden.

The single biggest job gains would be in construction, according to the report, with 678,000 created by the fourth quarter of 2010. Another 604,000 jobs would be created or saved in the retail sector and 408,000 in manufacturing.

Most of the jobs created by government spending on infrastructure, education, health and energy would come in 2010 and 2011 because of the time it would take to carry out programs in those areas, the report said.

Construction Jobs

Thirty percent of non-residential construction workers could lose their jobs this year without the stimulus investment, the Associated General Contractors trade association said two days ago. About two thirds of U.S. non-residential construction companies plan to cut jobs this year, the Arlington, Virginia- based group said, citing a survey of its members.

Romer and Bernstein stress that their study’s estimates are based on the broad outlines of the Obama plan and may change based on the final legislation passed by Congress. They add that “uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity.”

Obama reiterated some of the details that he originally provided in a speech earlier in the week, saying he would aim to double the production of alternative energy in the next three years, modernize 75 percent of federal buildings, and improve the energy efficiency of two million homes.

He also promised that the investments would go toward making all medical records computerized within five years. As part of infrastructure spending, Obama would expand broadband lines across the country, and he has called for a “smart grid” that would allow users and producers of electricity to communicate with an eye toward reducing energy use.

Criticism of Plan

The stimulus plan already has drawn some criticism in Congress from lawmakers of both parties. Some Democrats in Congress, including North Dakota Senator Kent Conrad, chairman of the Budget Committee, have expressed doubt about whether the tax cuts for individuals and businesses would do enough to boost the economy. Republicans have voiced concern about the size of the proposal and its effect on the deficit.

Obama has said his plan will widen the federal budget deficit, which the Congressional Budget Office this week forecast would hit $1.18 trillion this year. Obama said today “it’s likely that things will get worse before they get better.”

In addition to spending to create jobs, Obama is promising aid to states and assistance to those hit hardest by the recession.

“That means bipartisan extensions of unemployment insurance and health care coverage; a $1,000 tax cut for 95 percent of working families; and assistance to help states avoid harmful budget cuts in essential services like police, fire, education and health care,” he said.

The report says the tax cut portion of Obama’s plan, while doing less to spur employment than direct government spending, is “crucial” because there is a limit to how much money the government can spend efficiently in a short period.

While construction and manufacturing industries are likely to experience “particularly strong job growth” under the recovery package, it says, the “more general stimulative measures, such as a middle class tax cut and fiscal relief to the states,” will help job creation throughout all the sectors of the economy.

To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net

Last Updated: January 10, 2009 10:40 EST