STEVENS POINT-PLOVER AREA WAUSAU AREA AND MARSHFIELD AREA ECONOMIC INDICATORS

Transcription

1 Central Bank & Trust Marshfield Area Chamber of Commerce Marshfield Economic Development Association STEVENS POINT-PLOVER AREA WAUSAU AREA AND MARSHFIELD AREA ECONOMIC INDICATORS 2nd Quarter Presented by: Central Wisconsin Economic Research Bureau Randy F. Cray, Ph.D., Professor of Economics and Director of the CWERB Lawrence Weiser, Ph.D., Research Associate Jill Schabel, Administrative Assistant Special Report: Wisconsin s Tax Capacity and Tax Effort and What is the Next Step in Property Tax Relief? James R. Morgan, President, Wisconsin Taxpayers Alliance

2 TABLE OF CONTENTS Overview Table 1 Central Wisconsin Tables 2-6 Stevens Point Plover Area Table 7-14 Wausau Area Table 7-13 Marshfield Area Table 7-16 Outlook Special Report Wisconsin s Tax Capacity and Tax Effort What is the Next Step in Property Tax Relief? Presentations and research activities of the Central Wisconsin Economic Research Bureau in Stevens Point are made possible by a generous grant for M&I Marshall and Ilsley Bank of Stevens Point. We wish to thank them for their continuing support. Association for University Business and Economic Research CWERB - Division of Business and Economics University of Wisconsin-Stevens Point Stevens Point, WI / /

3 Overview The national economy continued its record long peace-time expansion during second quarter. Real Gross National Product, which measures the inflation adjusted value of all final goods and services produced in the economy, grew by a healthy 3.5 percent from last year. (Table 1) Industrial production, which measures factory output, increased by 3.4 percent. Interest rates are higher than a year ago, however, they have been trending downward during the last several months. Inflation, spurred on by higher food and energy costs, grew by 5.2 percent from last year. These variables are characteristic of an economy that has expanded. The unemployment situation in Central Wisconsin was not as disturbing as the higher unemployment rates might otherwise indicate, because the increase in rates occurred in the face of rising employment. This means that the number of entrants into the labor force grew more rapidly than the number of jobs. Total employment in each county and the region, as a whole, expanded respectably. Nearly 5000 jobs were created in Central Wisconsin in the last 12 month period. Job generation at the state and national levels has been somewhat slower than the regional pace. The manufacturing and service sectors led in job creation, with nondurable goods manufacturing employment showing a 10.4 percent increase. Trade, construction, and government payrolls grew more modestly. Overall, there are now nearly 115,000 people employed in the region. The paper products industry continues to expand operations throughout the region. The increased profitability in this key industry has acted as a catalyst for the recent surge in business investment. Combining the paper industry with the three other key Central Wisconsin industries results in an employment figure of 28.3 thousand. This represents approximately 24 percent of all nonfarm employment in the region. Business executives indicate that matters have improved nationally and locally but, they feel the situation in the months ahead will remain essentially the same. This means that we can expect no dramatic change in the area over the short-run. However, the Central Wisconsin area transportation network appears headed for a substantial upgrade. This is potentially one of the most important economic developments to take place in the region in the foreseeable future. The Stevens Point Area economy performed admirably during second quarter. Nonresidential construction and help wanted advertising support this contention and employment was improved in many categories. However, little progress was made in the area of local family financial distress. It appears that an improved local situation has not and may never reach all levels of the population.

4 The national economy is slowing, retail sales and housing are not as robust as in previous periods. The Federal Reserve Board has changed its position on the direction and condition of the economy and is now loosening credit conditions. Only time will tell if the change comes too late to head off a recession. TABLE 1: NATIONAL ECONOMIC STATISTICS Second Quarter Second Quarter Percent Change Nominal Gross Domestic Product (Billions) Real Gross Domestic Product (Billions of 1982 $) Industrial Production (1977= 100) $ $ $ $ Three Month U.S. Treasury Bill Rate 6.59% 7.78% Consumer Price Index ( = 100)

5 Central Wisconsin The Central Wisconsin economy continued to expand during second quarter. Employment growth was substantial when compared to levels. All three counties shared in the expansion. Further, all major industrial sectors displayed varying degrees of vigor with many industries reaching all-time high levels of employment. Key regional industries were paced by developments in the paper products industry. Economic conditions nationally and in the industry have been conducive to expansion. The regional economy is also dependent on the agricultural sector. Central Wisconsin is a leader in dairy and vegetable production. Better weather conditions this year have given rise to expectations of an improved harvest. This would provide an additional stimulus to the regional economy. Table 2 presents data on unemployment in Central Wisconsin. Portage, Marathon, and Wood counties all experienced increases in their unemployment rates. However, this increase occurred concomitant with continued growth in total employment, indicating a situation where the labor force is expanding at a faster rate than the number of new jobs. The Central Wisconsin overall unemployment rate rose by 0.4 percent from last year. At the state level, the jump was more dramatic as the unemployment rate increased by over half a percentage point. Employment in the region increased by a respectable 3.8 percent or 4900 positions. (Table 3) All three counties made significant strides in job creation, and employment has now reached record levels regardless of the time of year. Wood County led the procession with a gain of 1800 jobs. Marathon and Portage counties followed closely with gains of 1700 and 1400 respectively. As mentioned in previous reports, extensive commuting takes place between the counties. It is, therefore, useful to consider the aggregate totals of the region to gain more accurate insight into the economic viability of the area. Employment growth at state and national levels was positive, but not as robust in the Central Wisconsin area. Another approach to analyzing local economic conditions is to examine major sector employment. Table 4 shows that employment increased in all nonfarm sectors. Approximately 4000 more nonfarm jobs exist than just one year ago. This represents an increase of 3.6 percent. The manufacturing and service sectors added 1600 employees to regional payrolls. Trade, construction, and government made modest but positive contributions to the employment picture. Historically, manufacturing and service employment are at all-time record levels regardless of the time of year. Table 5 lists the region's basic industries. These industries are exporters in, the sense that they bring new money into the region and serve as the foundation of our regional nonfarm economy. Therefore, the 6.0 percent increase over last year comes as welcome news. Nearly 70 percent of this increase can be attributed to the paper products industries. The generally lower dollar and high world demand for these products have spurred the recent growth. Food processing employment grew by nearly 12 percent to The 500 additional jobs in this sector demonstrate continued steady

6 growth. Lumber and wood products increased by a modest 1.9 percent or 100 positions. Only finance, insurance, and real estate showed negative growth by posting a 100 job decline since. Table 6 lists the results of the CWERB's business confidence survey. Business executives feel that national and local conditions have improved somewhat over the past several months. They also expressed the opinion that national and local economic conditions and the positions of their industries will not change much over the next quarter. This can be interpreted to mean that they do not expect conditions to substantially improve or deteriorate. TABLE 2: UNEMPLOYMENT IN CENTRAL WISCONSIN Unemployment Rate June Unemployment Rate June Percent Change Portage 4.3% 4.8% Marathon 4.1% 4.4% +7.3 Wood 5.1% 5.4% +5.9 Central Wisconsin 4.4% 4.8% +9.1 Wisconsin 3.8% 4.5% United States 5.5% 5.5% 0.0 TABLE 3: EMPLOYMENT IN CENTRAL WISCONSIN Total Employment June (Thousands) Total Employment June (Thousands) Percent Change Portage Marathon Wood Central Wisconsin Wisconsin 2, , United States 116, ,

7 TABLE 4: CENTRAL WISCONSIN EMPLOYMENT CHANGE BY SECTOR Employment June (Thousands) Employment June (Thousands) Percent Change Manufacturing Durable goods Nondurable goods Services Trade Construction Government TABLE 5: EMPLOYMENT IN KEY CENTRAL WISCONSIN INDUSTRIES Industry Employment June (Thousands) Employment June (Thousands) Percent Change Paper Products Lumber and Wood Products Food Processing Finance, Insurance, and Real Estate

8 TABLE 6: BUSINESS CONFIDENCE IN CENTRAL WISCONSIN Index Value March June Recent Change in National Economic Conditions Recent Change in Local Economic Conditions Expected Change in National Economic Conditions Expected Change in Local Economic Conditions Expected Change in Industry Conditions = Substantially Better 50 = Same 0 = Substantially Worse

9 The Greater Stevens Point Plover Area The Stevens Point area economy continued to grow during 2nd quarter. Total employment grew to 32.9 thousand, an increase of nearly 4.5 percent. Further, the relatively high-paying manufacturing sector added nearly 200 jobs during the last year. Much strength was evident in nearly all indicators of past and future performance. One of the more exceptional pieces of information comes from the nonresidential construction scene. Building activity of this type was at record levels due principally to a major expansion at Consolidated Papers. Portage County is the number one producer of vegetables in the state. Thus a rebound in the agricultural sector from the drought of last year would provide a major boost to the local economy. As of press time, early summer rains seem to have assured a substantial improvement in local farm sector conditions. Table 7 presents the nonfarm employment situation by major sector. Manufacturing posted a 200 position gain, up 4.0 percent from a year ago. Manufacturing employment stands at an all-time high for second quarter. Nonresidential construction has stimulated a 15 percent increase in construction employment, and government payrolls expanded by nearly 200 positions. Trade employment showed an unexpectedly large decline over June of. However, these figures will most probably be subject to reevaluation by the Wisconsin Department of Labor and Human Relations. Finally, service sector employment was virtually unchanged from a year ago. Retail trade conditions are gauged by a survey of local merchants. (Table 8) The CWERB poll indicates that total sales and store traffic were somewhat better than the previous year at this time. With regard to future sales and store traffic matters should be moderately better in the quarter ahead. Retail activity is an important indicator of economic vitality because changes in this sector reflect the overall health of an economy. The help wanted advertising index (Table 9) is a measure of labor market conditions. The index shows that nearly three jobs are being advertised in the local newspaper in for everyone job advertised in From a year ago, the index has increased by nearly 40 percent and now stands at a record level for this time of year. Thus, it can be concluded that local payrolls should continue to grow. The purpose of this newspaper-based index is not to count all new jobs being offered in a community, but rather to capture the overall trend. Tables 10 and 11 measure local family financial distress. New public assistance claims in the county rose by 7.2 percent from a monthly average of 97 claims to 104 claims. Monthly average total caseload fell nearly 19 percent from 1726 to 1401 cases over the past year. With regard to new and total unemployment claims, matters

10 were virtually unchanged from a year ago. Thus, a small percentage of the population continues to experience difficulty even during this period of increasing prosperity. After several years of exceptional growth and expansion, local residential construction activity has slowed. (Table 12) Permits issued, the estimated value of new homes, the number of housing units, and the estimated value of residential alterations were all sharply lower than a year ago. This is the second consecutive quarter of contraction in this sector. The satiation of pent-up housing demand over the past several years and escalating prices have played important roles in the slackening of residential construction. In contrast, nonresidential construction activity was very strong. Table 13 shows that nearly every category is much above last year's levels. From a historical perspective, the number of permits, estimated value of new structures, and the number of business alteration permits issued reached record highs, regardless of the time of year. The decision to build or expand a business is primarily a function of expected profitability; therefore, these decisions can the considered an expression of optimism about the future. Table 14 presents local financial data. Bank deposits jumped by nearly $25 million or 9 percent. Lending activity was even stronger as evidenced by a $35.6 million increase in outstanding loans for a gain of 19.1 percent. The statistics may be biased upwards due to monies being temporarily transferred from one institution and/or region to another. Thus, caution should be exercised when interpreting the numbers. TABLE 7: PORTAGE COUNTY EMPLOYMENT CHANGE BY SECTOR Employment June Employment June Percent Change Manufacturing 5,000 5, Services 9,710 9, Trade 6,400 5, Construction Government 4,200 4,

11 TABLE 8: RETAILER CONFIDENCE IN STEVENS POINT-PLOVER AREA Index Value March June Total Sales Compared to Previous Year Store Traffic Compared to Previous Year Expected Sales Three Months From Now Expected Store Traffic Three Months From Now = Substantially Better 50 = Same 0 = Substantially Worse TABLE 9: HELP WANTED ADVERTISING IN PORTAGE COUNTY Index Value Stevens Point (June) (1980 = 100) U.S. (May) (1967 = 100) TABLE 10: PUBLIC ASSISTANCE CLAIMS IN PORTAGE COUNTY (Monthly Avg.) (Monthly Avg.) Percent Change New Applications Total Caseload 1,726 1, *As of First Quarter 1986 Public Assistance Claims in Marshfield are being compiled on a county-wide basis.

12 TABLE 11: UNEMPLOYMENT CLAIMS IN PORTAGE COUNTY Percent Change New Claims Total Claims TABLE 12: RESIDENTIAL CONSTRUCTION IN STEVENS POINT-PLOVER AREA* Percent Change Residential Permits Issued Estimated Value of New Homes $7,570.3 $6, Number of Housing Units Residential Alteration Permits Issued Estimated Value of Alterations $1,188.8 $ *Includes Stevens Point, Village of Plover, and the Towns of Hull, Stockton, Sharon, and Plover. TABLE 13: NONRESIDENTIAL CONSTRUCTION IN STEVENS POINT-PLOVER AREA* Number of Permits Issued 6 17 Estimated Value of New Structures $1,158.2 $12,072.6 Number of Business Alteration Permits Estimated Value of Business Alterations $5,810.1 $974.0 *Includes Stevens Point, Village of Plover, and the Towns of Hull, Stockton, Sharon, and Plover.

13 TABLE 14: FINANCIAL STATISTICS FOR PORTAGE COUNTY Second Quarter (Millions) Second Quarter (Millions) Percent Change Bank Deposits $263.7 $ Bank Loans $181.3 $

14 Wausau For approximately the past three years the Wausau area economy has been in an expansive mode. The second quarter of continues the succession of economically successful quarters. Total and nonfarm employment grew by respectable margins. In particular manufacturing, services, and trade were sources of strength. Further, retailer belief that matters have improved and unemployment claim data both support a positive assessment of the local situation. With a strong paper products industry, and a likely rebound in agriculture, the major concern for the area is the direction of the national economy. Historically the regional economy tends to lag events at the national level. However, this does not mean that the eventual influence is weak. To the contrary, the effect can be pronounced. Marathon County nonfarm payrolls grew by 2000 positions from a year ago. (Table 7) This represents a very healthy 4.1 percent rate of change. Individual industries experiencing the largest gains were trade, and services. Approximately 700 and 800 persons were added respectively. The manufacturing and construction sectors showed noticeable improvements of 400 and 200 jobs. Furthermore, all four of the previously mentioned sectors have reached all-time record high levels of employment. Only government employment showed any signs of contraction. The retailer confidence index gives insight into past and future economic conditions. Table 8 presents the results of the survey of local merchants. This group believes that store traffic and sales are improved over last year's levels. This is consistent with and supports other data in the report which portrays a growing Wausau area economy. Their feelings are equally optimistic with regard to future store sales and traffic. Table 9 shows that help wanted advertising has declined by approximately 15 percent from last year. However, when June is compared to June 1980 it is evident that, over the long term, steady growth has taken place. Thus, the area can expect slower but still respectable payroll expansion. The data at the local level mirrors the national situation. There, too, a slowdown is evident. The financial distress of local families continues to lessen. (Tables 10 and 11) Total public assistance claims dropped from 120 to 107, and initial and total unemployment claims fell by 16.4 and 7.3 percent respectively. Only new applications for public assistance increased from 14 to 23. An improved local and regional economy have played an important role in the general overall reduction. After a record setting first quarter, residential construction results were somewhat mixed during second quarter. (Table 12) Residential permits issued, the estimated value of new homes, and the estimated value of alterations were lower when contrasted with the historically strong performance of second quarter. On the more positive side, the number of housing units did not fall and residential alteration

15 permits rose by approximately 33 percent. The nonresidential construction scene is depicted in Table 13. Activity in this sector can vary a great deal due to the singular nature of business investments. Historically the results fall into the normal range of activity even though the numbers this quarter are below those of last year. The financial health of the community is represented by data in Table 14. Deposits expanded by over 9 percent to a record level of $607.5 million. Moreover, lending activity increased by $57 million, or 13.5 percent, to a record high. Both lending and deposit information are indicative of a growing economy and tell of the expanding situation. TABLE 7: MARATHON COUNTY EMPLOYMENT CHANGE BY SECTOR Employment June (Thousands) Employment June (Thousands) Percent Change Manufacturing Services Trade Construction Government TABLE 8 RETAILER CONFIDENCE IN WAUSAU Index Value March June Total Sales Compared to Previous Year Sore Traffic Compared to Previous Year Expected Sales Three Months From Now Expected Store Traffic Three Months From Now = Substantially Better 50 = Same 0 = Substantially Worse

16 TABLE 9 HELP WANTED ADVERTISING IN WAUSAU Index Value Wausau (June) (1980 = 100) U.S. (May) (1967 = 100) TABLE 10 PUBLIC ASSISTANT CLAIMS IN MARATHON COUNTY (Monthly Avg.) (Monthly Avg.) Percent Change New Applications Total Claims *As of First Quarter 1986 Public Assistance Claims in Marshfield are being compiled on a county-wide basis. TABLE 11 UNEMPLOYMENT CLAIMS IN WAUSAU Percent Change New Claims 2,862 2, Total Claims 20,541 19, * Includes Medford Area.

17 TABLE 12 NONRESIDENTIAL CONSTRUCTION IN WAUSAU AREA Percent Change Residential Permits Issued Estimated Value of New Homes $4,957.9 $4, Number of Housing Units Residential Alteration Permits Issued Estimated Value of Alterations $976.2 $ *Does not include the Town of Rib Mountain. Data Collected by University of Wisconsin-Marathon Center TABLE 13: NONRESIDENTIAL CONSTRUCTION IN WAUSAU Number of Permits Issued Estimated Value of New Structures $5,144.9 $3,472.5 Number of Business Alteration Permits Estimated Value of Business Alterations *Does not include the Town of Rib Mountain. Data Collected by University of Wisconsin-Marathon Center $1,081.1 $827.6 TABLE 14: FINANCIAL STATISTICS FOR MARATHON COUNTY (Millions) (Millions) Percent Change Bank Deposits $556.6 $ Bank Loans $422.5 $ *Data Collected by University of Wisconsin-Marathon Center

18 Marshfield Area The Marshfield area economy continued its expansionary trend during second quarter. Total and nonfarm employment in Wood County increased at very respectable rates. Moreover, total employment now stands at a record level of 39,000. Although the unemployment rate is somewhat higher than last year, the impact has been mitigated by an accompanying rise in the total number employed. Further, economic indicators and industry data suggest that the area economy will continue to do well if not derailed by developments outside the region. Another factor to consider is improved weather conditions, which should help bolster the farm situation thus providing a boost to the local economy. Nonfarm employment in Wood County continued to expand during second quarter (Table 7). Manufacturing gained approximately 1000 positions to lead all sectors. This is the highest total since the recession of the early 1980s. Service and government sector employment also added jobs to county payrolls, with gains of 920 and 300 respectively. Construction employment was unchanged while trade registered a small decrease of 200 positions. Overall in Wood County there are 37,910 people employed in nonfarm activities, a 2,020 or 5.6 percent increase from one year ago. The Marshfield Employment Index rose by a substantial 7.7 percent. This means that the CWERB estimates that Marshfield employment has increased by this percentage. Retailer sentiment is given in Table 8. Local merchants believe that store traffic and sales are somewhat better than a year ago. This is an important indicator that the economy has grown over the past twelve months. When asked about the future, this group expected sales and store traffic to improve by significant margins. The implication is that the local scene should continue to experience growth in the months ahead. Another leading indicator for the local economy is the help wanted advertising index. Job advertising increased by 8.3 percent from a year ago. This is in contrast to the 3 percent drop in advertising for the U.S. Since 1980 there has been a 234 percent increase in the number of jobs being offered through the local newspaper. Thus, the Marshfield area should continue to experience payroll expansion in the months ahead. Decreases in public assistance and unemployment claims indicate that fewer individuals and families are experiencing financial distress than one year ago. Total caseload and new applications for public assistance are lower than last year. The total caseload dropped from 678 to 622, and new applications dropped from 29 to 26. Initial unemployment claims are nearly 18 percent lower and total claims shrank by approximately 19 percent. These measures reflect a growing economy. However, as the numbers suggest, an improving economic situation may never be sufficient to reach all members of society. Residential construction is a leading indicator of economic activity (Table 12). The results for second quarter are lower in all but one category. Residential permits issued, the estimated value of new homes, the number of housing units, and the

19 number of residential alteration permits issued were below last year's levels. Only the estimated value of residential alterations was higher than the earlier period. Higher interest rates and a satiation of local housing demand played a significant role in the results. Business investment is primarily a function of expected future profitability. Further, a firm's construction investments, for both new construction and alterations, are usually large, singular events, creating large fluctuations in nonresidential construction statistics from period to period and year to year. For this reason percentage change figures are not reported for these categories. However, from a historical perspective, second quarter showed vigorous activity. Nearly all categories were higher than a year ago. The number of permits issued, the estimated value of new structures, and the estimated value of business alterations showed considerable strength. Only the number of alteration permits issued decreased. The overall situation bodes well for the local community because business investment often translates into new job opportunities. Financial statistics can give important insight into the local economy. Bank deposits were up slightly from last year, by approximately $1 million. Lending activity was up nearly $13 million, or 9.4 percent. At $144.3 million, bank loans are at an all time high for second quarter. The data suggest that the economy continued to grow during the last three months. Tables 15 and 16 present data on Clark County. This agriculturally oriented geographic unit is an important market area for Marshfield businesses. Therefore, for planning purposes, we include relevant economic statistics on this county in addition to economic indicators for the Marshfield-Wood County area. TABLE 7 WOOD COUNTY EMPLOYMENT CHANGE BY SECTOR Employment June Employment June Percent Change Manufacturing 9,500 10, Services 12,310 13, Trade 8,800 8, Construction 1,280 1, Government 4,000 4, Marshfield Employment Index

20 TABLE 8 RETAILER CONFIDENCE IN MARSHFIELD* Index Value March June Total Sales Compared to Previous Year Store Traffic Compared to Previous Year Expected Sales Three Months From Now Expected Store Traffic Three Months From Now = Substantially Better 50 = Same 0 = Substantially Worse *Data collected by UW Marshfield-Wood County TABLE 9 HELP WANTED ADVERTISING IN MARSHFIELD Index Value Marshfield (June) (1980 = 100) U.S. (May) (1967 = 100) TABLE 10 PUBLIC ASSISTANCE CLAIMS IN WOOD COUNTY (Monthly Avg.) (Monthly Avg.) Percent Change New Applications Total Caseload *As of First Quarter 1986 Public Assistance Claims in Marshfield are being compiled on a county-wide basis.

21 TABLE 11 UNEMPLOYMENT CLAIMS IN WOOD COUNTY Percent Change New Claims Total Claims TABLE 12 RESIDENTIAL CONSTRUCTION IN MARSHFIELD AREA* Percent Change Residential Permits Issued Estimated Value of New Homes $2,109.0 $1, Number of Housing Units Residential Alteration Permits Issued Estimated Value of Alterations $199.1 $ *Data collected by UW Marshfield-Wood County TABLE 13 NONRESIDENTIAL CONSTRUCTION IN MARSHFIELD AREA* Number of Permits Issued 3 18 Estimated Value of New Structures $635.6 $5,949.1 Number of Business Alteration Permits Estimated Value of Business Alterations *Data collected by UW Marshfield-Wood County $334.8 $403.6

22 TABLE 14: FINANCIAL STATISTICS FOR MARSHFIELD* (Millions) (Millions) Percent Change Bank Deposits $199.9 $ Bank Loans $131.9 $ *Data collected by UW Marshfield-Wood County TABLE 15: CLARK COUNTY EMPLOYMENT BY SECTOR June June Percent Change Manufacturing 2,100 2, Services 1,660 1, Trade 1,950 1, Construction Government 1,810 1, TABLE 16: CLARK COUNTY EMPLOYMENT STATISTICS June June Percent Change Unemployment Rate 5.5% 6.3% Total Employed 14,100 13, Total Unemployed Labor Force 15,000 14,

23 Outlook The national economy is definitely showing signs of softening. GNP growth during the second quarter of was a sluggish 1.7 percent. Furthermore, job growth is slowing and housing and auto sales have weakened. Many analysts feel that growth will not be significantly higher during the remainder of. Some are even more pessimistic and believe that the economy has already or is about to stall, thus pushing the country into a recession. The reason most often given for the slowdown is Federal Reserve Board policy. For approximately a year and a half the country's monetary authority has been tightening money and credit conditions with the objective of reducing inflationary pressures. While relatively higher interest rates and tighter credit conditions do dampen economic activity and help prevent the economy from overheating, the danger is that too much restraint may push the economy into.a period of higher unemployment and falling incomes. In the past several weeks, data about the condition of the economy seems to have convinced the Federal Reserve that its policy has been successful and that the greatest threat now facing the nation is recession rather than inflation. The outcome of the resulting loosening in monetary policy is difficult to predict. Substantial time lags exist between a change in policy and its effect on the national economy. Therefore, it will be interesting to see if this change in policy can stabilize the situation or if the economy is in an irreversible downturn. The high correlation between regional and national activity assures that these matters will eventually influence Central Wisconsin. But the long-term viability of the region depends on many factors such as the availability of natural resources and services and the quality of the labor force. Another crucial element is transportation. Recently announced plans to upgrade Highway 29 and sections of Highways 10 and 54 to four lanes bode well for Central Wisconsin. These proposed improvements in the transportation network are potentially among the most significant economic events in the history of the region. Given the area's natural endowments and strategic location, the improved ability to get inputs into and production out of the region should help ensure Central Wisconsin's future well into the next century.