Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
24 May 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 April 2010 was 8.5%, a large fall
from the 8.8% rate of March.
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 7.0% by April of 2011. The 80% forecast intervals show that
there is considerable additional uncertainty. The unemployment rate may fall as
low as 5.6%, or dip to 8.2% before rising back
to 8.6% in January 2011. The 50% forecast intervals refine this uncertainty,
showing that it is unlikely that the unemployment rate will rise, and more
likely than not fall to at least 7.7% by next April.
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 |
|
8.4% |
(8.3%, 8.5%) |
(8.3%, 8.5%) |
|
2010: 6 |
|
8.2% |
(8.1%, 8.3%) |
(8.0%, 8.4%) |
|
2010: 7 |
|
8.1% |
(7.8%, 8.2%) |
(7.8%, 8.4%) |
|
2010: 8 |
|
8.0% |
(7.6%, 8.2%) |
(7.5%, 8.4%) |
|
2010: 9 |
|
7.8% |
(7.4%, 8.1%) |
(7.3%, 8.3%) |
|
2010:10 |
|
7.7% |
(7.2%, 8.0%) |
(7.1%, 8.2%) |
|
2010:11 |
|
7.5% |
(6.9%, 7.9%) |
(6.8%, 8.3%) |
|
2010:12 |
|
7.4% |
(6.7%, 7.9%) |
(6.5%, 8.4%) |
|
2011:1 |
|
7.3% |
(6.5%, 7.9%) |
(6.3%, 8.6%) |
|
2011:2 |
|
7.2% |
(6.3%, 7.8%) |
(6.0%, 8.6%) |
|
2011:3 |
|
7.1% |
(6.1%, 7.8%) |
(5.8%, 8.6%) |
|
2012:4 |
|
7.0% |
(5.9%, 7.7%) |
(5.6%, 8.5%) |
Previous Forecasts