Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
1 September 2010
This memo reports a 12-month forecast for the seasonally
adjusted Wisconsin unemployment rate. In addition to point forecasts (the
expected future value of the unemployment rate), the memo also reports 50% and
80% forecast intervals (probable ranges for future values).
The unemployment rate in July 2010 was 7.8%, the fourth
straight monthly fall from the 8.8% rate of March.
The forecasts fare summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to decline slowly but steadily over
the next year, dropping to 7.0% by July of 2011. The 80% forecast intervals
show that there is considerable additional uncertainty. In particular, there is
a significant probability that the unemployment rate will increase again
towards the end of 2010 and the beginning of 2011, possibly rising back up to
8.7% by May of 2011. There is also a significant probability that the
unemployment rate will continue to fall, as low as 5.6% by July of 2011. The
50% forecast intervals refine this uncertainty, showing that it is unlikely
that the unemployment rate will rise over 7.9%, but may stay roughly constant
over the next year.
A 50% forecast interval is designed to contain the future
unemployment rate with 50% probability. It is just as likely for the rate to fall
in this interval as out of it. This is the smallest possible interval which has
even odds of containing the future rate. We can think of this interval as
“likely” to contain the future rate.
An 80% forecast interval is designed to contain the future unemployment
rate with 80% probability. We can think of this interval as “highly likely” to
contain the future rate. The 80% interval is designed so that there is a 10%
chance that the future value will be smaller than the forecast interval, and a
10% chance that the future value will be larger than the forecast interval.
Figure 1: Wisconsin Unemployment Rate Forecasts
TABLE 1: Wisconsin
Unemployment Rate Forecasts
|
|
History |
Point Forecast |
50% Interval Forecast |
80% Interval Forecast |
|
2010: 2 |
8.7% |
|
|
|
|
2010: 3 |
8.8% |
|||
|
2010: 4 |
8.5% |
|||
|
2010: 5 |
8.2% |
|||
|
2010: 6 |
7.9% |
|||
|
2010: 7 |
7.8% |
|||
|
2010: 8 |
|
7.8% |
(7.7%, 7.9%) |
(7.7%, 7.9%) |
|
2010: 9 |
|
7.8% |
(7.5%, 7.9%) |
(7.5%, 8.0%) |
|
2010:10 |
|
7.7% |
(7.3%, 7.9%) |
(7.2%, 8.1%) |
|
2010:11 |
|
7.6% |
(7.1%, 7.9%) |
(7.0%, 8.1%) |
|
2010:12 |
|
7.5% |
(7.0%, 7.8%) |
(6.9%, 8.1%) |
|
2011:1 |
|
7.5% |
(6.9%, 7.8%) |
(6.7%, 8.1%) |
|
2011:2 |
|
7.4% |
(6.7%, 7.9%) |
(6.5%, 8.3%) |
|
2011:3 |
|
7.4% |
(6.6%, 7.9%) |
(6.4%, 8.5%) |
|
2012:4 |
|
7.4% |
(6.4%, 7.9%) |
(6.2%, 8.6%) |
|
2012:5 |
|
7.3% |
(6.3%, 7.9%) |
(6.0%, 8.7%) |
|
2012:6 |
|
7.2% |
(6.1%, 7.9%) |
(5.8%, 8.7%) |
|
2012:7 |
|
7.0% |
(5.8%, 7.8%) |
(5.6%, 8.7%) |
Previous Forecasts