7 July 2011
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 2011 was 7.4%, staying roughly
constant since January, following a steady fall during 2010.
The forecasts are summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to stay constant for two months,
and then decline slowly later this year, dropping to 6.7% by May of 2012. The
80% forecast intervals show that there is considerable additional uncertainty.
In particular, there is a possibility that the unemployment rate will increase somewhat
over the next several months. There is also a significant probability that the
unemployment rate will continue to fall, as low as 5.6% by May of 2012. The 50%
forecast intervals refine this uncertainty, showing that it is unlikely that
the unemployment rate will rise over the next year, and may indeed fall to as
low as 5.8% within a 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 |
2010:11 |
7.6% |
|||
2010:12 |
7.5% |
|||
2011:1 |
7.4% |
|||
2011:2 |
7.5% |
|||
2011:3 |
7.4% |
|||
2011:4 |
7.3% |
|||
2011:5 |
7.4% |
|||
2011:6 |
|
7.4% |
(7.3%, 7.5%) |
(7.3%, 7.5%) |
2011:7 |
|
7.4% |
(7.2%, 7.5%) |
(7.1%, 7.6%) |
2011:8 |
|
7.3% |
(7.0%, 7.5%) |
(6.9%, 7.7%) |
2011:9 |
|
7.2% |
(6.7%, 7.5%) |
(6.6%, 7.7%) |
2011:10 |
|
7.1% |
(6.5%, 7.4%) |
(6.4%, 7.7%) |
2011:11 |
|
7.0% |
(6.4%, 7.4%) |
(6.2%, 7.7%) |
2011:12 |
|
6.9% |
(6.2%, 7.3%) |
(6.1%, 7.7%) |
2012:1 |
|
6.9% |
(6.2%, 7.3%) |
(6.0%, 7.7%) |
2012:2 |
|
6.8% |
(6.1%, 7.3%) |
(5.9%, 7.8%) |
2012:3 |
|
6.8% |
(6.0%, 7.2%) |
(5.8%, 7.8%) |
2012:4 |
|
6.7% |
(5.9%, 7.2%) |
(5.7%, 7.8%) |
2012:5 |
|
6.7% |
(5.8%, 7.2%) |
(5.6%, 7.9%) |
Previous Forecasts