Wisconsin
Unemployment Rate Forecast
Bruce E. Hansen
T. Haavelmo Professor
Department of
Economics
University of Wisconsin
25 October 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 September 2012 was 7.3%, dropping
from 7.5% in August, following a rise from the low of 6.7% achieved in April
2012. The fall in the September unemployment rate is consistent with declining
unemployment throughout most U.S. states.
The forecasts are summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to stay roughly constant with a
slight decrease, leveling at 7.1% around January 2013. The 80% forecast
intervals show that there is considerable additional uncertainty. In
particular, there is a possibility that the unemployment rate could increase in
late spring and summer, possibly to 8.4% by September 2013. There is also a
significant probability that the unemployment rate will continue to fall, as
low as 5.8% by September of 2013. The 50% forecast intervals refine this
uncertainty, showing that it is unlikely that the unemployment rate will rise
over 7.7%, and may fall to 6.4% within a year. Overall, the likelihood of
further increases and decreases are roughly comparable, with a considerable
widening of uncertainty in late spring.
This is a significant change in our monthly forecasts, due to
the recent improvements in nearly all leading indicators, including the
national unemployment rate, building permits, housing starts, the Chicago Fed
National Activity Index, and the spread on high-yield bonds.
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 |
7.0% |
|||
|
2012:7 |
7.3% |
|||
|
2012:8 |
7.5% |
|||
|
2012:9 |
7.3% |
|||
|
2012:10 |
|
7.3% |
(7.2%, 7.3%) |
(7.2%, 7.4%) |
|
2012:11 |
|
7.3% |
(7.2%, 7.4%) |
(7.1%, 7.5%) |
|
2012:12 |
|
7.2% |
(7.1%, 7.3%) |
(6.9%, 7.4%) |
|
2013:1 |
|
7.1% |
(7.0%, 7.3%) |
(6.8%, 7.4%) |
|
2013:2 |
|
7.1% |
(6.9%, 7.2%) |
(6.7%, 7.4%) |
|
2013:3 |
|
7.0% |
(6.8%, 7.3%) |
(6.6%, 7.4%) |
|
2013:4 |
|
7.0% |
(6.7%, 7.4%) |
(6.4%, 7.6%) |
|
2013:5 |
|
7.1% |
(6.6%, 7.4%) |
(6.3%, 7.8%) |
|
2013:6 |
|
7.1% |
(6.6%, 7.5%) |
(6.2%, 8.0%) |
|
2013:7 |
|
7.1% |
(6.5%, 7.6%) |
(6.0%, 8.2%) |
|
2013:8 |
|
7.1% |
(6.4%, 7.6%) |
(5.9%, 8.3%) |
|
2013:9 |
|
7.1% |
(6.4%, 7.7%) |
(5.8%, 8.4%) |
Previous Forecasts