It appears that the national economy has cooled down during Third Quarter. For Third Quarter 1996 the economy slowed to a 2.3 percent rate of expansion. This amount of change in Gross Domestic Product is consistent with what most analysts were forecasting for the period.
 

     Approximately two‑thirds of all economic activity is accounted for by household spending. A close look at household data indicates that American consumers have slacked off somewhat in their purchasing during Third Quarter. This has caused the amount of economic growth in the country to abate from the torrid 4.7 percent pace of Second Quarter.
 

     Relatedly, in September, housing starts slowed and business inventories increased. Higher interest rates instituted by the Federal Reserve many months ago appear to have placed a brake on consumer spending and the economy. Of course, the Federal Reserve's major objective is price stability, or at least moderate inflation, which hopefully will enhance long‑term economic growth. To achieve this objective the Federal Reserve has not hesitated in the past to increase interest rates and decrease short‑run economic activity.
 

     As a matter of record, inflation remains abated and relatively stable. In 1995, prices rose at an annual rate of 2.5 percent. In contrast, during the first 9 months of this year, the price level has already risen by 3.2 percent. However, the core rate of inflation, that is the Consumer Price Index minus food and energy costs, rose by only 2.8 percent over the first three quarters of the year. This is good news because it might indicate that the Federal Reserve will feel that it is not necessary to increase interest rates and dampen future economic activity.
 

     Employment and income generation will be helped if the Federal Reserve decides not to tighten credit conditions. For Wisconsin, nonfarm employment is forecasted to grow at a 1.1 percent annualized rate for 1997, ‑ after expanding by 2.6 percent in 1995. Demographics of our state population is a major factor in this lower growth rate. Simply stated, employment growth will be limited by the availability of labor.
 

     Growth in Wisconsin personal income has been strong over the past number of years. From 1992 to 1995, the respective growth rates were 7.5, 4.4, 5.8, 4.5 percent. The trend in personal income growth should continue in 1997 at a rate of 5.2 percent after slowing to about 3.0 percent in 1996.
 

     On a county‑level basis, personal income has changed a great deal over the past decade in our Central Wisconsin region. For comparison purposes per capita personal income on a current dollar basis has changed from: $11,016 to $19,525, or 77 percent for Marathon; $11,034 to $18,004, or 63 percent for Portage; and $12,677 to $21,299, or 68 percent for Wood from the mid‑1980s to mid‑1990s. While income growth next year might not be as robust as past years, the expansion in income should approximate the state rate of about 5.0 percent in 1997. Thus, 1997 is forecasted to be a period of slower growth.