The strength of the national economy continues to amaze most economists. An unusual combination of expansionary fiscal policy (record breaking government deficits) and restric­tive monetary policy (high real interest rates) has produced a remarkably strong growth rate with relatively moderate inflation. The national economic figures tell the story (Table 1). Real Gross National Product is up a solid 7.5% and industrial production a robust 11.7% over year earlier levels. Yet prices as measured by the Consumer Price Index, have risen a modest 4.4%. Most economists anticipate at least a mild deterioration of the nation's economic performance because of government budget and foreign trade imbalances. However, few are expecting a recession before mid-1985.

     The roaring national expansion has filtered into nearly all sectors of the economy and nearly all regions of the country. The Central Wisconsin region is no exception. The regional unemployment rate this past June was 8.3%, down 1.5% from the year earlier figure. Never­theless, this improvement lags far behind the decreases in the unemployment rate in both the state and the nation. The Wisconsin rate stood at 7.1%, while the national rate for June was 7.4%, on a comparable seasonally unadjusted basis. Both rates are well below the unemployment figures recorded in all three Central Wisconsin counties, indicating that the regional labor market" still has considerable slack.

     The region has far out performed the state and even the nation in creating jobs over the past year. Central Wisconsin employment is up a healthy 5.4%, compared to a total Wisconsin gain of 3.4%. Reductions in the state unemployment rate have been greatly aided by a near stable labor force (up .6% in the past year). The Central Wisconsin labor force has increased 3.7% during the same period.

     The economic expansion has triggered employment gains in nearly all major sectors of the Central Wisconsin economy. Only government employment is below year earlier levels and this is due directly to a one-month statistical fluke. Employment increases in the service and trade .sectors are beginning to replace manufacturing gains as the driving force in the expansion. The emergence of these two sectors has been expected and represents a clear sign that the economic expansion is maturing.

     The expectations of Central Wisconsin corporate executives are far more subdued than they were in the first quarter of 1984. Business leaders expect local and national economic conditions to improve but at a much more moderate pace than has prevailed over the last six months.

     The Stevens Point area expansion, belatedly joining Wood and Marathon Counties, has now become broad based. Spurred by the opening of the Plover Factory Outlet Mall, the retail trade sector began generating jobs in the second quarter. However, the manufacturing and construction sectors continue to show the most dramatic gains.

     The employment picture in the Stevens Point area is very positive despite another major layoff announcement (the third this year) and a statistical fluke which caused the government payroll to drop in June. Labor market improvements are confirmed by a big jump in the volume of local help wanted advertisements. However, a rise in initial unemploy­ment claims at the Stevens Point office suggests that a slow down in the rate of improve­ment may be in sight.

      Construction activity continues to expand in the area fueled by rising bank loans and deposits. The second quarter was particularly active with First Financial Savings and Loan Association and Journal Printing beginning major construction projects. Residential con­struction appears to be flattening out after impressive gains earlier in the expansion.  Permits are down slightly from last year. High real interest rates may finally be beginning to squeeze this sector.

     The major conclusion derived from the statistical evidence contained in this report is that the Central Wisconsin expansion has matured, with all major sectors now participating. Portage County has joined its neighbors in the broad based expansion. Although growth is likely to continue in the near term, several warning signs have begun to appear. These signs include a moderation in business executive expectations, a rise in initial unemployment claims, a flattening out of residential construction activity and near stable bank deposits since the beginning of the year.