Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
1 December 2014
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 October 2014 was 5.4%, continuing a
steady decline since it had locally peaked at 7.1% in February 2013.
The forecasts are summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to decline to 5.2% by January 2015,
and then slowly increase to 5.4% by next August. The 80% forecast intervals
show that there is considerable additional uncertainty. There is a possibility
that the unemployment rate could increase, possibly to 6.2% by October 2015.
There is also a significant probability that the unemployment rate will
continue to fall, as low as 4.7% by May 2015. The 50% forecast intervals refine
this uncertainty, showing that it is unlikely the unemployment rate will increase
above 5.8%, or fall below 5.0% during in the next year. Overall, the forecast
is optimistic for the unemployment rate to stay roughly constant.
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 |
|
2014:1 |
6.1% |
|||
|
2014:2 |
6.0% |
|||
|
2014:3 |
5.9% |
|||
|
2014:4 |
5.8% |
|||
|
2014:5 |
5.7% |
|||
|
2014:6 |
5.7% |
|||
|
2014:7 |
5.8% |
|||
|
2014:8 |
5.6% |
|||
|
2014:9 |
5.5% |
|||
|
2014:10 |
5.4% |
|
|
|
|
2014:11 |
|
5.3% |
(5.3%, 5.4%) |
(5.2%, 5.4%) |
|
2014:12 |
|
5.3% |
(5.2%, 5.3%) |
(5.1%, 5.4%) |
|
2015:1 |
|
5.2% |
(5.1%, 5.3%) |
(5.0%, 5.5%) |
|
2015:2 |
|
5.2% |
(5.1%, 5.4%) |
(4.9%, 5.5%) |
|
2015:3 |
|
5.2% |
(5.0%, 5.5%) |
(4.8%, 5.7%) |
|
2015:4 |
|
5.3% |
(5.0%, 5.5%) |
(4.8%, 5.7%) |
|
2015:5 |
|
5.3% |
(5.0%, 5.5%) |
(4.7%, 5.8%) |
|
2015:6 |
|
5.3% |
(5.0%, 5.6%) |
(4.7%, 5.9%) |
|
2015:7 |
|
5.3% |
(5.0%, 5.7%) |
(4.7%, 6.0%) |
|
2015:8 |
|
5.4% |
(5.0%, 5.7%) |
(4.7%, 6.1%) |
|
2015:9 |
|
5.4% |
(5.0%, 5.7%) |
(4.7%, 6.1%) |
|
2015:10 |
|
5.5% |
(5.1%, 5.8%) |
(4.8%, 6.2%) |
Previous Forecasts