Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
24 January 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 December 2012 was 6.6%, dropping
from 7.3% in September, following a rise from the low of 6.7% achieved in April
2012. The fall in the September through December unemployment rate is
consistent with declining unemployment throughout most U.S. states.
The forecasts are summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to stay roughly constant, between
6.6% and 6.8% over the next 12 months. The 80% forecast intervals show that
there is considerable additional uncertainty. In particular, there is a
possibility that the unemployment rate could increase in late summer, possibly
to 8.0% by December 2013. There is also a significant probability that the
unemployment rate will continue to fall, as low as 5.7% by November of 2013.
The 50% forecast intervals refine this uncertainty, showing that it is unlikely
that the unemployment rate will rise over 7.3%, and may fall to 6.2% within a
year. Overall, the likelihood of further increases and decreases are roughly
comparable.
This is a significant change in our monthly forecasts, due to
the recent improvements in nearly all leading indicators, including the
national unemployment rate, building permits, housing starts, the Chicago Fed
National Activity Index, and the spread on high-yield bonds.
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 |
|
2012:1 |
6.9% |
|||
|
2012:2 |
6.9% |
|||
|
2012:3 |
6.8% |
|||
|
2012:4 |
6.7% |
|||
|
2012:5 |
6.8% |
|||
|
2012:6 |
7.0% |
|||
|
2012:7 |
7.3% |
|||
|
2012:8 |
7.5% |
|||
|
2012:9 |
7.3% |
|||
|
2012:10 |
6.9% |
|||
|
2012:11 |
6.6% |
|||
|
2012:12 |
6.6% |
|||
|
2013:1 |
|
6.6% |
(6.5%, 6.6%) |
(6.5%, 6.7%) |
|
2013:2 |
|
6.5% |
(6.4%, 6.6%) |
(6.3%, 6.7%) |
|
2013:3 |
|
6.6% |
(6.4%, 6.7%) |
(6.1%, 6.9%) |
|
2013:4 |
|
6.6% |
(6.3%, 6.9%) |
(6.0%, 7.1%) |
|
2013:5 |
|
6.7% |
(6.3%, 7.0%) |
(6.0%, 7.3%) |
|
2013:6 |
|
6.7% |
(6.3%, 7.1%) |
(5.9%, 7.4%) |
|
2013:7 |
|
6.7% |
(6.3%, 7.1%) |
(5.9%, 7.4%) |
|
2013:8 |
|
6.7% |
(6.3%, 7.2%) |
(5.9%, 7.6%) |
|
2013:9 |
|
6.8% |
(6.2%, 7.2%) |
(5.8%, 7.7%) |
|
2013:10 |
|
6.8% |
(6.2%, 7.2%) |
(5.8%, 7.8%) |
|
2013:11 |
|
6.8% |
(6.2%, 7.3%) |
(5.7%, 7.9%) |
|
2013:12 |
|
6.8% |
(6.2%, 7.3%) |
(5.7%, 8.0%) |
Previous Forecasts