What is MacroWeb?

1986

            The economy of the US in 1986 was in the middle of an expansion that lasted from the end of 1982 through the 80's.[1]  The quarterly growth rates of real GDP for 1986 was 3.7%, 1.7%, 3.8%, and 2.1% over the four quarters and had an annual growth rate of 3.4%, which was closely related to the growth rates of 3.8% and 3.4% for 1985 and 1987 respectively.[2] 

            The average unemployment rate was on a downward trend from 1984 through 1988, averaging 7.5%, 7.2%, 7.0%, 6.2%, and finally 5.5% in 1988.  Over the year, the unemployment rate fell from 7.0% at the end of 1985 to 6.7% in January, then back to 7.2% in February before falling steadily to 6.6% in December.[3]

            The average inflation rate hit a trough of 1.9% in 1986, falling from 4.1% in 1984 to 3.7% in 1985 and then rising again to 3.6% in 1987 and 4.3% in 1988.  This decrease continued month to month during the year, starting at a high of 3.9% in January and decreasing to a low of 1.1% in December. [4]

            Interest rates for the year were also on the decline, with a Federal Funds rate decrease of 8.1% in 1985 to 6.8% in 1986 and 6.66% in 1987.

            The focal policies of the year included the Tax Reform Act of 1986, which reduced income tax rates while cutting back many popular income tax deductions, including provisions that reduced, or eliminated, income taxes for millions of low-income Americans.[5]