1. The following quote is excerpted from The Wall Street Journal, Small Companies Slowly Build Momentum in the Job Market [December 4, 2003; p. A1].

After a long dry spell, hosts of small firms across the country are starting to take on workers again a significant step in an economic recovery that hasnt seen much job creation. The nations 23 million small businesses employ an estimated 57.1 million workers more than half of all private-sector employees and create more than half of the nonfarm private gross domestic product, according to the Small Business Administration.

A wave of small-business hiring could help sustain consumer confidence and tide the economy over until larger companies regain the will to significantly boost payrollsand begin restoring the 2.4 million jobs lost nationwide since the recession began in March 2001.

Some large companies, benefiting from rising orders for consumer products and stronger business spending, have added people as well. November payroll numbers, drawn mainly from bigger companies, and due out Friday ... dont detect the degree of activity by small businesses. Monthly employment data arent broken down by size; job-creation data specifically about smaller firms are available only annually. And employment data, drawn from surveys of established companies, often miss small start-ups. During the 20 months after the 1991 recession ended, the government said that the economy generated 303,000 jobs. The number was eventually bumped up to 663,000 because the initial surveys included only established companies.

The Bureau of Labor Statistics (BLS) publishes two main surveys on employment statistics. First, describe these two surveys and how they differ; explain the potential biases in the two surveys that could cause them to give divergent results on job growth during the beginning of an economic expansion. Second, the establishment survey data is used in computing labor productivity. There was a reported 9.4% year-to-year rise in output per worker per hour in the 3rd quarter 2003. How is labor productivity measured and why should you be suspicious that such a spectacular increase actually occurred? What factors could cause a rise in average labor productivity? Carefully explain.