Oh, Joi And Rapture Unforeseen!

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The recovery has been full of surprises that have left economists befuddled, albeit not at a loss for words.

As 1983 came to an end, for example, government economists were startled to issue a report saying that unemployment had dipped to nearly 8% -- some two percentage points lower than they had been projecting. As they scratched their collective head, another economist, Martin Lefkowitz of the Chamber of Commerce of the U.S., announced that he had discovered the reason for this mysterious shortfall: small business.

Lefkowitz offered up research indicating that fully a third of the increase in employment was attributable to newly formed companies, which tend to be underrepresented in government employment surveys.

"The Department of Labor is a bit laggard in picking up on this," he says. "They rely on a sampling of old businesses for employment figures."

To cope with this, Lefkowitz has devised an index for projecting employment growth, which incorporates a projection for new business hirings based on the rate of business formations. He calls his tool the Job Opportunities Index, or JOI (pronounced "joy"). Lefkowitz explains that the index tracks the net sum of new business formations and the percent of businesses hiring.

Lefkowitz says back in 1982 he saw a turnaround in the percentage of businesses hiring. That percentage has increased steadily from 29% in October of that year to about 70% in November 1983.

"A significant part of that employment activity comes from small businesses," asserts Lefkowitz. He predicts the upward swing will continue for several years, and he credits personal computers with fueling increased employment by taking business out of offices and into homes. "I see a lot of service firms springing up in homes," he says. "Services lend themselves to cottage industries."