Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
23 December 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 November 2013 was 6.3%, declining steadily
from 7.0% in May, after being roughly constant for the previous five months.
This trend is meaningfully lower than the unemployment rate 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 decline to 5.8 by June 2014, 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 slightly, possibly to 6.7% by November 2014. There is also a
significant probability that the unemployment rate will continue to fall, as
low as 5.1% by October 2014. The 50% forecast intervals refine this
uncertainty, showing that most likely the unemployment rate will fall slightly
to 6.1% by March 2014, and probably not fall below 5.4% in the next year.
Overall, the forecast is optimistic for the unemployment rate to fall; but not
by much.
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 |
6.7% |
|||
|
2013:9 |
6.6% |
|||
|
2013:10 |
6.5% |
|||
|
2013:11 |
6.3% |
|||
|
2013:12 |
|
6.2% |
(6.2%, 6.3%) |
(6.1%, 6.3%) |
|
2014:1 |
|
6.2% |
(6.1%, 6.3%) |
(6.0%, 6.3%) |
|
2014:2 |
|
6.1% |
(5.9%, 6.2%) |
(5.8%, 6.3%) |
|
2014:3 |
|
6.0% |
(5.8%, 6.1%) |
(5.6%, 6.3%) |
|
2014:4 |
|
5.9% |
(5.7%, 6.1%) |
(5.4%, 6.4%) |
|
2014:5 |
|
5.9% |
(5.6%, 6.1%) |
(5.3%, 6.4%) |
|
2014:6 |
|
5.8% |
(5.6%, 6.1%) |
(5.3%, 6.3%) |
|
2014:7 |
|
5.8% |
(5.5%, 6.1%) |
(5.2%, 6.4%) |
|
2014:8 |
|
5.8% |
(5.5%, 6.1%) |
(5.2%, 6.5%) |
|
2014:9 |
|
5.8% |
(5.5%, 6.1%) |
(5.2%, 6.5%) |
|
2014:10 |
|
5.8% |
(5.4%, 6.1%) |
(5.1%, 6.6%) |
|
2014:11 |
|
5.8% |
(5.4%, 6.2%) |
(5.1%, 6.7%) |
Previous Forecasts