Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
13 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 May 2010 was 8.2%, the second large
fall from the 8.8% rate of March and 8.5% rate of April.
The forecasts fare summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to decline steadily over the next
year, dropping to 7.2% by May 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 8.9% by
March of 2011. There is also a significant probability that the unemployment
rate will fall down to 5.8% by May of 2011. The 50% forecast intervals refine
this uncertainty, showing that it is unlikely that the unemployment rate will
rise, 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 |
|
2009:12 |
8.5% |
|
|
|
|
2010: 1 |
8.7% |
|||
|
2010: 2 |
8.7% |
|||
|
2010: 3 |
8.8% |
|||
|
2010: 4 |
8.5% |
|||
|
2010: 5 |
8.2% |
|||
|
2010: 6 |
|
8.1% |
(8.0%, 8.1%) |
(8.0%, 8.2%) |
|
2010: 7 |
|
7.9% |
(7.8%, 8.0%) |
(7.7%, 8.1%) |
|
2010: 8 |
|
7.9% |
(7.6%, 8.0%) |
(7.5%, 8.1%) |
|
2010: 9 |
|
7.8% |
(7.5%, 8.0%) |
(7.4%, 8.2%) |
|
2010:10 |
|
7.8% |
(7.5%, 8.1%) |
(7.3%, 8.3%) |
|
2010:11 |
|
7.7% |
(7.3%, 8.0%) |
(7.2%, 8.3%) |
|
2010:12 |
|
7.7% |
(7.1%, 8.1%) |
(6.9%, 8.5%) |
|
2011:1 |
|
7.6% |
(6.9%, 8.1%) |
(6.7%, 8.6%) |
|
2011:2 |
|
7.6% |
(6.7%, 8.1%) |
(6.5%, 8.8%) |
|
2011:3 |
|
7.5% |
(6.5%, 8.1%) |
(6.2%, 8.9%) |
|
2012:4 |
|
7.4% |
(6.3%, 8.0%) |
(6.0%, 8.9%) |
|
2012:5 |
|
7.2% |
(6.1%, 7.9%) |
(5.8%, 8.8%) |
Previous Forecasts