25 March 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 February 2011 was 7.4%, holding
steady from January, but continuing a steady fall for the past year.
The forecasts fare summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to decline slowly over the next
year, dropping to 6.7% by January 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 again mid-year, possibly
rising back up to 7.9% by November of 2011. There is also a significant
probability that the unemployment rate will continue to fall, as low as 5.5% by
February of 2012. The 50% forecast intervals refine this uncertainty, showing
that it is unlikely that the unemployment rate will rise, and can easily fall
to 5.7% by February of 2012.
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: 7 |
8.2% |
|||
2010: 8 |
8.0% |
|||
2010: 9 |
7.9% |
|||
2010:10 |
7.7% |
|||
2010:11 |
7.6% |
|||
2010:12 |
7.5% |
|||
2011:1 |
7.4% |
|||
2011:2 |
7.4% |
|||
2011:3 |
|
7.4% |
(7.3%, 7.4%) |
(7.3%, 7.5%) |
2011:4 |
|
7.3% |
(7.1%, 7.4%) |
(7.1%, 7.5%) |
2011:5 |
|
7.2% |
(6.9%, 7.4%) |
(6.8%, 7.6%) |
2011:6 |
|
7.1% |
(6.6%, 7.4%) |
(6.5%, 7.6%) |
2011:7 |
|
7.0% |
(6.5%, 7.4%) |
(6.3%, 7.7%) |
2011:8 |
|
7.0% |
(6.3%, 7.4%) |
(6.2%, 7.7%) |
2011:9 |
|
6.9% |
(6.2%, 7.3%) |
(6.1%, 7.7%) |
2011:10 |
|
6.9% |
(6.2%, 7.3%) |
(6.0%, 7.8%) |
2011:11 |
|
6.8% |
(6.1%, 7.3%) |
(5.9%, 7.9%) |
2011:12 |
|
6.8% |
(6.0%, 7.3%) |
(5.8%, 7.9%) |
2012:1 |
|
6.7% |
(5.9%, 7.3%) |
(5.6%, 7.9%) |
2012:2 |
|
6.7% |
(5.7%, 7.2%) |
(5.5%, 8.0%) |
Previous Forecasts