The national economy has exhibited remarkable strength over the past year (Table 1). Indeed, the growth rate has been so robust that economists are beginning to express concern about shortages developing in key sectors (one of which is the paper industry). When the economy nears capacity, the inevitable result is a rising price level. However, the Consumer Price Index has not yet detected significant upward pressure on prices. The CPI is 4.6% higher in March 1984 than the level prevailing the previous March. Most economists remain convinced that prices will begin accelerating as the economic ex­pansion progresses. Some year end estimates run as high as 7%. Financial market awareness of the relationship between capacity constraints and a rising price level partially explains the upward drift in interest rates.

     Capacity limitations and labor shortages are not a concern in the Central Wisconsin region (with the possible exception of the paper industry). Unemployment remains well above the pre-recession lows recorded in 1979. Although the Wood, Portage and Marathon County area has posted a solid 7% gain in employment since March of 1983, the lingering effects of recession remain. Unemployment rates in the area range from Marathon County's 10.6% to the 9.8% registered in Portage County. Although these rates are down considerably from the March 1983 tri-county average of 12.2%, they remain discouragingly high. The Central Wisconsin unemployment rate is well above the state and national average. Infor­mation gathered by the Research Bureau strongly suggests that the recession did not bottom out in Central Wisconsin until March 1983, some three months after experts have dated the national trough. Therefore, the region is in an earlier stage of economic expansion than the nation as a whole. Moreover, the recession cut payrolls more severely in the area. These two factors suggest that the Central Wisconsin economy is still well below its current potential level of output.

     Solid employment gains over the past year show up across the board in Central Wis­consin. The expansion is now broad based with services and trade posting healthy 7.1% and 9.0% increases respectively. Durable goods industries continue to expand payrolls, adding 700 workers in the first quarter of this year. Construction employment has jumped a spectacular 40% over the March 1983 level. Even government employment is up 9.4% in the region.

     Central Wisconsin's key industries have turned in mixed employment results. Lumber and wood products continue to pace the expansion, adding 200 jobs since last December. The paper industry has also moved into high gear. Employment is up 13.6% over last year, with nearly all of the gain occuring in the last three months. However, financial services have shown little payroll growth and food processing employment is 5.7% lower than in March 1983.

     Confidence among Central Wisconsin business leaders remains bouyant. Executives overwhelmingly felt national conditions have improved over the last six months. Echoing the view of most economists, Central Wisconsin executives expect the rate of national economic growth to subside in coming months. Optimism toward the Central Wisconsin economy is more subdued but still evident.

     An interesting and possibly important finding in the business attitude survey is the high level of confidence business people feel about future conditions in their own industries. The index reading jumped from a December 1983 level of 69 to 84 in March. These positive expectations regarding key Central Wisconsin industries bode well for the regional economy.

     Turning the spotlight on the Stevens Point area economy, a number of positive signs emerge. In spite of the adverse effects of the Bake-Rite Corporation plant closure which translated into 100 less food processing jobs compared to one year ago, manufacturing employment is up 19.4% in Portage County. Other encouraging local indicators include an increase in help wanted advertising, and decreases in public assistance and unemployment compensation claims. The number of residential construction permits is up 42.9% and the estimated value of new construction is 66.1% higher than in the first quarter of 1983. Further positive readings were recorded in the financial sector.

     The only negative findings compared to last year's depressing first quarter figures are in retail-wholesale trade employment, and nonresidential construction activity. The slow­down in nonresidential construction spending is not a major concern because of Central Wisconsin's traditionally low first quarter volume. However, the failure of the local economy to produce jobs in the trade sector is somewhat disturbing. Portage County has lagged well behind Wood and Marathon in generating trade jobs. Employment in this sector must respond before the local expansion can be deemed broad based.

      For the Central Wisconsin economy the positive developments over the past year far outweigh the negative. All of the signs of economic expansion are present: broad-based employment gains, rising construction activity, optimistic business leaders; and lower unemployment and public assistance claims. However, the recession in Central Wisconsin was deeper and the recovery started later than for the nation as a whole. The implication is that substantial excess capacity remains in the regional economy. A sharp slowdown in the national economy or worse-a premature recession-would prevent Central Wisconsin from reaching its output potential.