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Tracking America's Economy.

Tracking America's Economy. By Norman Frumkin. Armonk, NY, M. E. Sharpe, Inc., 1987. 250 pp. $28.50, cloth; $14.95, paper.

The purpose of this book is to provide the noneconomist with an understanding of how to use macroeconomic indicators to track and anticipate the course of the U.S. economy. The book's wide scope is reflected in the titles of the major chapters: Gross National Product; Industrial Production and Capacity Utilization; Unemployment, Employment, and Productivity; Consumer Price Index; Money Supply; and Leading, Coincident, and Lagging Indicators.

Tracking America's Economy has many strengths, and it is a generally laudable effort. The writing is clear and understandable and several dozen full-page charts further clarify the discussion. The book's coverage is excellent, extending well beyond the major macroindicators. For example, Norman Frumkin's discussion of the consumption component of GNP includes several pages on consumer-installment-credit data, and the section on employment provides an introduction to the Conference Board's series on help-wanted ads. The author does a thorough job of pointing out the weaknesses of the various indicators, and he alerts the reader to the dangers of overreacting to short-term movements in the indicators.

Unfortunately, the book has two disturbing flaws. First, it contains a large number of inaccuracies and omissions. On page 138, for example, Frumkin refers to "America's 63 million households." The correct figure is about 100 million. I was puzzled by the statement (p. 60) that the delinquency rate on consumer debt "is a leading indicator in that it turns down before a general recession begins and turns up before the subsequent recovery," until I realized that the author is remiss in not explaining that he is referring to the rate plotted on an inverse scale. Similarly, the discussion of the average duration of unemployment as a lagging indicator (p. 232) is confusing, because it fails to recognize the need to invert the plotting of that indicator.

In explaining the differing behavior of the various inflation measures, Frumkin writes that a fixed-weight index does not reflect buyers' shifts "from higher- to lower-priced items." The shifts are actually from items that are rising rapidly in price to those that are not. The book's explanation of why housing permits are a leading indicator is simply that permits "provide advance indication of housing construction." Equally important is the point that Frumkin makes in a different context more than 100 pages earlier: housing construction, itself, is a bellwether of economic activity, turning down before a recession begins and up before a recovery begins.

Also disconcerting is the sloppy editing. For example, the statement (p. 55) that, "During recessions, income showed less extreme cyclical movements than personal income" will confuse the reader who does not recognize that "disposable" has been omitted as the third word of the sentence. Similarly, the statement (p. 103) that "Exports and imports of goods and services including profits from foreign investments have accounted for a growing share of foreign trade in the American economy" leaves me wondering what could possibly account for the declining share of U.S. trade.

The flaws are easy to remedy. I hope that Frumkin will do so in a revised edition, and turn a very good work into an excellent one.
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Author:Steinberg, Edward
Publication:Monthly Labor Review
Article Type:Book Review
Date:May 1, 1990
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