Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
2 August 2012
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 2012 was 7.0%, increasing from the
low of 6.7% achieved in April 2012.
The forecasts are summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to continue to increase over the
next year, rising to 7.4% by March 2013. The 80% forecast intervals show that
there is considerable additional uncertainty. In particular, there is a
possibility that the unemployment rate will increase to 8.8% by June 2013.
There is also a significant probability that the unemployment rate will
continue to fall, as low as 6.1% by June of 2013. The 50% forecast intervals
refine this uncertainty, showing that it is unlikely that the unemployment rate
will rise over 8.0%, and may fall back to 6.7% within a year. Overall, the
likelihood is higher that the unemployment rate will increase than decrease.
This is a meaningful change in our forecasts.
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 |
|
7.0% |
(7.0%, 7.1%) |
(6.9%, 7.2%) |
|
2012:8 |
|
7.1% |
(6.9%, 7.2%) |
(6.8%, 7.3%) |
|
2012:9 |
|
7.1% |
(6.9%, 7.3%) |
(6.6%, 7.6%) |
|
2012:10 |
|
7.2% |
(6.9%, 7.5%) |
(6.5%, 7.8%) |
|
2012:11 |
|
7.3% |
(6.9%, 7.7%) |
(6.5%, 8.0%) |
|
2012:12 |
|
7.3% |
(6.9%, 7.8%) |
(6.4%, 8.2%) |
|
2013:1 |
|
7.3% |
(6.8%, 7.8%) |
(6.4%, 8.2%) |
|
2013:2 |
|
7.3% |
(6.8%, 7.8%) |
(6.4%, 8.3%) |
|
2013:3 |
|
7.4% |
(6.8%, 7.9%) |
(6.3%, 8.4%) |
|
2013:4 |
|
7.4% |
(6.8%, 7.9%) |
(6.3%, 8.6%) |
|
2013:5 |
|
7.4% |
(6.8%, 8.0%) |
(6.2%, 8.7%) |
|
2013:6 |
|
7.4% |
(6.7%, 8.0%) |
(6.1%, 8.8%) |
Previous Forecasts