Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
26 July 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 June 2010 was 7.9%, the third
straight large monthly fall from the 8.8% rate of March, 8.5% rate of April,
and 8.2% rate of May.
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 7.2% by June 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
8.8% by March of 2011. There is also a significant probability that the
unemployment rate will fall down to 5.7% by May of 2011. The 50% forecast
intervals refine this uncertainty, showing that it is unlikely that the
unemployment rate will rise over 8.1%, 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: 1 |
8.7% |
|
|
|
|
2010: 2 |
8.7% |
|||
|
2010: 3 |
8.8% |
|||
|
2010: 4 |
8.5% |
|||
|
2010: 5 |
8.2% |
|||
|
2010: 6 |
7.9% |
|||
|
2010: 7 |
|
7.8% |
(7.7%, 7.9%) |
(7.7%, 7.9%) |
|
2010: 8 |
|
7.8% |
(7.6%, 7.9%) |
(7.6%, 8.0%) |
|
2010: 9 |
|
7.7% |
(7.4%, 7.8%) |
(7.4%, 8.0%) |
|
2010:10 |
|
7.7% |
(7.3%, 7.9%) |
(7.2%, 8.1%) |
|
2010:11 |
|
7.7% |
(7.3%, 7.9%) |
(7.2%, 8.1%) |
|
2010:12 |
|
7.6% |
(7.1%, 7.9%) |
(7.0%, 8.2%) |
|
2011:1 |
|
7.6% |
(6.9%, 8.0%) |
(6.8%, 8.4%) |
|
2011:2 |
|
7.5% |
(6.8%, 8.0%) |
(6.6%, 8.6%) |
|
2011:3 |
|
7.5% |
(6.6%, 8.1%) |
(6.4%, 8.8%) |
|
2012:4 |
|
7.4% |
(6.4%, 8.1%) |
(6.2%, 8.9%) |
|
2012:5 |
|
7.3% |
(6.2%, 8.0%) |
(5.9%, 8.9%) |
|
2012:6 |
|
7.2% |
(6.0%, 7.9%) |
(5.7%, 8.9%) |
Previous Forecasts