For the nation, real GDP is forecasted to grow 1.7 percent this year after expanding by 2.1 percent in 1995 and a brisk 3.5 percent in 1994. Employment growth will likewise struggle with net new jobs increasing by just 1.2 percent in 1996 compared to 2.3 percent last year. Personal income will most likely expand by 4.7 percent down from a healthy 6.0 percent of last year. 

     Similarly, the economic forecast for Wisconsin is tinged with the words of slowdown. Job generation will likely abate to just 0.8 percent during 1996 after averaging 2.9 percent over the 1994‑95 time frame. Wages and salaries will climb by only 3.7 percent in 1996 compared to a 5.7 average change during the 1994‑95 time frame. 

     Clearly the Federal Reserve's tight monetary policy has kept the lid on economic activity. The fear of accelerating inflation has prompted the Federal Reserve to always error on the side of caution when it comes to providing the economy with liquidity. The financial markets are likewise preoccupied with their inflationary visions of the future which in fact may be just a mirage. For example, when stronger than forecasted employment numbers came in March for the month of February, the markets interpreted this as a sign that the economy was growing too fast and hence a rising price level would follow. They believed the Federal Reserve would respond by tightening monetary conditions even further causing interest rates to rise and thus hurting the future profitability of businesses. As a result of believing this scenario, prices of bonds fell and their yields soared and the stock market took a sharp tumble. Interestingly enough, most analysts do not see the economy kindling rapid inflation anytime soon because of domestic and international competition. Thus far, the only sources of price pressure have come from the energy and food sectors. Both sectors have of course been affected by the unusually cold weather that gripped a large part of the U.S. 

     Besides the tight monetary stance of the Federal Reserve, other factors are playing a role in the early economic slowing in 1996. The GM strike, and its impact especially in the Midwest, served to slow matters down. The severe weather's influence on agriculture, tourism, and construction was also a negative for the economy. Household debt as a percent of disposable income and rising default rates on credit cards have caused many to lower their forecasts of economic growth. Capital good purchases by businesses have slowed down. A large percentage of this type of activity has centered on the acquisition of computers. Further, the economic stimulus provided by government spending will lessen as the federal government attempts to put the brakes on inflation adjusted spending. Thus, the economy is not likely to pick up any momentum until the latter half of the year.