Signs of a slowdown are finally beginning to emerge from the national economic data (Table 1). Although the year to year gains remain impressive, real GNP grew at a sharply reduced 2.7% annual pace during the third quarter of the year. Evidence of an eroding expansion can also be seen in the industrial production statistics. Production is up a solid 7.3% over the September 1983 level; however the June reading was 11.7% above the year earlier figure. On the positive side, interest rates appear to have peaked, at least temporarily, posting sharp declines throughout October. Moreover, the Consumer Price Index is a modest 4.5% above the year earlier reading.

     The majority of economists feel that the slowdown represents a much needed correc­tion. The expansion could not be expected to continue at the blistering pace set earlier this year without running into capacity constraints in key industries. Running up against these constraints inevitably accelerates the rate of price increase. A vocal minority of economists are beginning to interpret recent economic signals as indicating more than just a reduction in the rate of growth. Some are forecasting the development of a recession. The scenario usually presented by this group is that government budget and foreign trade deficits create imbalances in the economy which eventually overhaul the expansion sometime around mid-1985.

     Turning to Central Wisconsin, the evidence remains generally positive although signs of a slowing growth rate are beginning to appear. The most encouraging statistic is the region's unemployment rate. Overall, it stands at 6.6%, down 1.7% from the June reading and 1.6% below the year earlier level. All three counties in the region posted their lowest unemploy­ment rates since the beginning of the 1981-82 recession. Portage County registered a sur­prisingly low 5.8%, while Marathon and Wood Counties posted unemployment rates of 7.4% and 6.4% respectively. These rates are comparable to the state's 6.5% rate and slightly below the national level. However, these figures are not seasonally adjusted. September is traditionally Central Wisconsin's lowest unemployment month because of the important regional agriculture and food processing industries. Nevertheless, the September unemploy­ment rate represents a near capacity economy and could well be the cyclical low for the region.

     Employment gains were unevenly distributed throughout the region during the third quarter. Portage County recorded a robust 10.1% improvement, while Marathon County employment inched up 3.0% over last year. The Marathon County economy is more closely tied to national economic conditions than its neighbors. Similar to the nation as a whole, Marathon County growth has noticeably slowed. Total employment has slipped .6% since April of this year.

    The retail trade and construction sectors have posted the largest percentage gains in employment over the past year. However, all sectors in the regional economy were up over last September. The paper and lumber industries continue to make significant contributions to the economic expansion, increasing payrolls 12.2% and 9.8% in the past twelve months. However, Central Wisconsin's other two key industries-food processing and financial services reported no employment gains.

    Regional executives are growing increasingly cautious about future economic condi­tions. The Bureau's business confidence index recorded less optimism among executives regarding future national, local and industry conditions than prevailed three months ago. However, on average, business leaders indicated that they expected economic conditions to improve modestly in the coming months.