Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
25 June 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 May 2012 was 6.8%, staying roughly
constant during 2012, after declining from 7.7% in January 2011.
The forecasts are summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to slightly increase over the next
year, rising to 7.2% by may 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
8.5% by May 2013. There is also a significant probability that the unemployment
rate will continue to fall, as low as 5.9% by May of 2013. The 50% forecast
intervals refine this uncertainty, showing that it is unlikely that the
unemployment rate will rise over 7.8%, and may fall somewhat to 6.5% 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 |
|
6.8% |
(6.7%, 6.9%) |
(6.7%, 6.9%) |
|
2012:7 |
|
6.8% |
(6.7%, 6.9%) |
(6.5%, 7.0%) |
|
2012:8 |
|
6.9% |
(6.7%, 7.0%) |
(6.4%, 7.2%) |
|
2012:9 |
|
6.9% |
(6.6%, 7.2%) |
(6.3%, 7.5%) |
|
2012:10 |
|
7.0% |
(6.6%, 7.3%) |
(6.3%, 7.6%) |
|
2012:11 |
|
7.0% |
(6.6%, 7.4%) |
(6.2%, 7.8%) |
|
2012:12 |
|
7.0% |
(6.6%, 7.5%) |
(6.1%, 7.9%) |
|
2013:1 |
|
7.1% |
(6.6%, 7.5%) |
(6.1%, 8.0%) |
|
2013:2 |
|
7.1% |
(6.5%, 7.6%) |
(6.1%, 8.1%) |
|
2013:3 |
|
7.1% |
(6.5%, 7.7%) |
(6.0%, 8.3%) |
|
2013:4 |
|
7.2% |
(6.5%, 7.7%) |
(6.0%, 8.4%) |
|
2013:5 |
|
7.2% |
(6.5%, 7.8%) |
(5.9%, 8.5%) |
Previous Forecasts