Forecasting Unemployment: A Small Business-Survey Model
Small Business Plans And Expectations Provide Accurate and Timely Forecasts of National Employment
William C. Dunkelberg is professor of economics at the School of Business and
Management, Temple University, and chief economist of the National Federation
of Independent Business. He is a nationally known authority on small business,
entrepreneurship, consumer behavior and consumer credit, and government policy.
Previously he was with Purdue, Stanford, and the University of Michigan. He
is a fellow and past president of the National Association for Business Economics.
He has a BA, MA, and Ph.D. degrees from the University of Michigan.
Jonathan A. Scott is associate professor of finance at the Fox School of Business and Management, Temple University. His research over the past 25 years has focused on small firm access to credit markets. He was published in the Journal of Financial Economics and other scholarly journals and has received numerous teaching awards. Previously he was with Southern Methodist University and the Federal Home Loan Bank of Dallas. He received his BA from the University of Cincinnati and his Ph.D. from Purdue University.
William J. Dennis, Jr. is Senior Research Fellow, National Federation
of Independent Business. Prior to his affiliation with NFIB, he spent
six years as a professional staff member in the U.S. House of Representatives.
His research activities focus on small business and public policy.
He also speaks frequently on small business and entrepreneurship topics
both in the United States and abroad. He is the founder and editor of the
National Small Business Poll.
The National Federation of Independent Business (NFIB) has surveyed its membership (numbering over 600,000 member firms) since 1973 about economic decisions and expectations. In this paper, responses to questions about plans to create new jobs and hard-to-fill job openings are used to predict the national unemployment rate. Small firms account for the bulk of job creation in the economy, and the NFIB measures explain 80 percent of the variation in the unemployment rate. The NFIB data also indicate a substantial “overshoot” in hiring at the end of the 1990s expansion that helps to explain the period of employment loss and subsequent period of slow employment growth.