# Wisconsin Unemployment Rate Forecast

## University of Wisconsin

21 December 2009

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).

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 large than the forecast interval.

The forecasts are summarized in Figure 1 and Table 1. The point forecast is for the unemployment rate to decline steadily over the next twelve months, dropping to 7.1% by November of 2010. The 80% forecast intervals show that there is considerable additional uncertainty. The unemployment rate may fall as low as 5.7%, or raise as high as 8.9% over this period. The 50% forecast intervals refine this uncertainty, showing that it is unlikely that the unemployment rate will rise above 8.3%, and more likely than not fall to at least 7.8% by November.

Figure 1: Wisconsin Unemployment Rate Forecasts

TABLE 1: Wisconsin Unemployment Rate Forecasts

 History Point Forecast 50% Interval Forecast 80% Interval Forecast 2009: 8 8.8% 2009: 9 8.4% 2009:10 8.4% 2009:11 8.2% 2009:12 8.1% (7.9%,  8.3%) (7.9%,  8.4%) 2010: 1 8.1% (7.8%,  8.3%) (7.7%,  8.6%) 2010: 2 8.0% (7.6%,  8.3%) (7.4%,  8.6%) 2010: 3 7.8% (7.3%,  8.2%) (7.2%,  8.5%) 2010: 4 7.7% (7.1%,  8.1%) (6.9%,  8.5%) 2010: 5 7.7% (7.0%,  8.1%) (6.8%,  8.6%) 2010: 6 7.6% (6.9%,  8.1%) (6.7%,  8.6%) 2010: 7 7.6% (6.7%,  8.1%) (6.5%,  8.8%) 2010: 8 7.5% (6.6%,  8.1%) (6.4%,  8.9%) 2010: 9 7.4% (6.4%,  8.0%) (6.2%,  8.8%) 2010:10 7.3% (6.2%,  8.0%) (5.9%,  8.8%) 2010:11 7.1% (6.0%,  7.8%) (5.7%,  8.6%)

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