The national economy experienced sluggish growth during the second quarter of 1986 despite the declining energy prices, the depreciation of the dollar, low levels of inflation, and rising consumer and business confidence. Real Gross National Product (GNP) grew at an annual rate of 1.1 % during the April - June period. This represents the lowest rate of growth since the recession of 1981-82. Furthermore, when this quarter's GNP is compared to the real GNP level of one year ago, the growth rate is 3.0%. Thus, the GNP data indicates a slow expansion. The present expansionary phase of the economy has already exceeded the average by almost one year. This suggests that the current business cycle expansion is in a mature phase and future rapid development is unlikely. Another indication of the sluggish national economy is industrial production, which fell .2% when contrasted with a year ago.

     A positive note is that unemployment in the United States stood at 7.1 % at the end of June. This represents a 5.3% decrease from last year. Also, interest rate levels have declined. Rates for three month U.S. treasury bills dropped from 7.01 % in June of 1985 to 5.99%. The decline is attributed to Federal Reserve monetary policy, the lessening of inflationary expectations, and weak domestic aggregate demand.

     The Consumer Price Index (CPJ) stood at 327.9 at the end of the second quarter. This represents an increase of only 1.7% over one year ago. The major factors behind the modest level of inflation have been falling energy prices, production facilities operating well below capacity (78%), the depreciated dollar, and small increases in wages and salaries.

     At the regional level, the Central Wisconsin economy showed some improvement. However, the performance must be characterized as uneven and sluggish. Marathon and Wood Counties posted decreases in unemployment. But Portage County lost ground and recorded a 5.4% increase over the second quarter 1985 level. The major factor in the increase was the loss of jobs in the services sector. The regional unemployment rate, while still higher than the state, managed to match the national unemployment rate. When compared to last year, the region was in a similar position vis-a-vis the nation. However, since the unemployment rate for the state has climbed from 6.6% to 7.0%, the region's improved performance relative to the state as a whole is, at least in part, due to the state's overall poor performance rather than substantially improved regional conditions.

     Once again the region displayed uneven performance in the area of employment. This reflects the structural differences of the counties. Marathon and Wood Counties" being more dependent on manufacturing than Portage County, are more sensitive to recent favorable changes in economic variables. As a result, they should experience greater economic activity than Portage County, which is more dependent on non-sensitive sources of employment, such as the government sector.

     As expected, the statistics indicate that Marathon and Wood Counties performed better than Portage when employment is compared to last year's numbers. The major sources of improved regional employment were in the sectors of nondurable goods, manufacturing and trade. Weakness was found in the services area. Overall, regional employment remained about the same as last year. Employment data from key regional industries indicates that lumber and wood products led the way with a 7.7% gain. However, financial services, which is a larger sector, showed a decrease of 7.9%. As a result, total employment in the key sectors actually dropped by 100 from last year. Regional business executives, while mildly optimistic, expressed less enthusiasm for future local activity than in March.

     Portage County has been adversely affected by the decrease in financial services and transportation, communication and utilities employment. The services sector is the largest source of employment in the county. Thus a 14.2% decline in this sector from last year will carry substantial weight in determining overall employment. All other sectors showed improvement except manufacturing which remained unchanged.

     The effects of lower energy costs, the devalued dollar, declining interest rates and other favorable circumstances have not as yet led to vigorous economic growth either regionally or nationally. The second quarter can be characterized as being sluggish with uneven performance. The major sectoral source of the weak regional economy was the decline in total employment in Portage County which resulted from a contraction in financial services employment.