23 August 2013
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 2013 was 6.8%, constant from
June but declining from 7.0% in May, after being roughly constant for five
months, but still similar to the unemployment rates during 2012, which ranged
between 6.7% and 7.1%.
The forecasts are summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to rate constant for two months,
then decrease to 6.7% in October 2013 and then stay constant. The 80% forecast
intervals show that there is considerable additional uncertainty. There is a
possibility that the unemployment rate could increase, possibly to 7.7% by June
2014. There is also a significant probability that the unemployment rate will
continue to fall, as low as 5.8% by June 2014. The 50% forecast intervals
refine this uncertainty, showing that it is unlikely that the unemployment rate
will rise above 7.1%, and probably will not fall below 6.2% in the same time
period. Overall, the unemployment rate is slightly more likely to decrease than
increase in 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 |
2013:1 |
7.0% |
|||
2013:2 |
7.1% |
|||
2013:3 |
7.1% |
|||
2013:4 |
7.1% |
|||
2013:5 |
7.0% |
|
|
|
2013:6 |
6.8% |
|||
2013:7 |
6.8% |
|||
2013:8 |
|
6.8% |
(6.7%, 6.8%) |
(6.7%, 6.9%) |
2013:9 |
|
6.8% |
(6.6%, 6.9%) |
(6.5%, 7.0%) |
2013:10 |
|
6.7% |
(6.6%, 6.9%) |
(6.4%, 7.0%) |
2013:11 |
|
6.7% |
(6.5%, 6.9%) |
(6.2%, 7.1%) |
2013:12 |
|
6.7% |
(6.4%, 7.0%) |
(6.1%, 7.3%) |
2014:1 |
|
6.7% |
(6.4%, 7.1%) |
(6.0%, 7.3%) |
2014:2 |
|
6.7% |
(6.3%, 7.0%) |
(6.0%, 7.3%) |
2014:3 |
|
6.7% |
(6.3%, 7.0%) |
(6.0%, 7.4%) |
2014:4 |
|
6.7% |
(6.3%, 7.1%) |
(5.9%, 7.5%) |
2014:5 |
|
6.7% |
(6.2%, 7.1%) |
(5.9%, 7.5%) |
2014:6 |
|
6.7% |
(6.2%, 7.1%) |
(5.8%, 7.7%) |
2014:7 |
|
6.7% |
(6.2%, 7.2%) |
(5.8%, 7.7%) |
Previous Forecasts