2 April 2015
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 January 2015 was 4.8%, a drop from
5.0% from the previous month, continuing a steady decline since it had locally
peaked at 7.1% in February 2013. Data revisions have decreased the reported
Wisconsin unemployment rate for most of 2014. That is, the unemployment rate
was slightly lower in 2014 than previously reported.
The forecasts are summarized in Figure 1 and Table 1. The
point forecast is for the unemployment rate to stay roughly constant for the
next eight months, and then increase slightly to 5.0% in January 2016. The 80%
forecast intervals show that there is considerable additional uncertainty.
There is a possibility that the unemployment rate could increase, possibly to
6.0% by February 2016. There is also a significant probability that the
unemployment rate will continue to fall, as low as 4.1% by January 2016. The
50% forecast intervals refine this uncertainty, showing that it is unlikely the
unemployment rate will increase during the next six months or above 5.5% in the
next year, or fall below 4.5% during in the next year. Overall, the forecast is
that it is unlikely for there to be a large movement in the unemployment rate
before August, and after that there is somewhat more likelihood of an increase
in the unemployment rate starting in the fall than a decrease.
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 |
6.0% |
|||
2014:2 |
5.8% |
|||
2014:3 |
5.6% |
|||
2014:4 |
5.5% |
|||
2014:5 |
5.5% |
|||
2014:6 |
5.4% |
|||
2014:7 |
5.4% |
|||
2014:8 |
5.3% |
|||
2014:9 |
5.3% |
|||
2014:10 |
5.2% |
|
|
|
2014:11 |
5.0% |
|
|
|
2014:12 |
5.2% |
|
|
|
2015:1 |
5.0% |
|
|
|
2015:2 |
4.8% |
|
|
|
2015:3 |
|
4.7% |
(4.6%, 4.7%) |
(4.6%, 4.7%) |
2015:4 |
|
4.6% |
(4.5%, 4.7%) |
(4.5%, 4.7%) |
2015:5 |
|
4.6% |
(4.5%, 4.7%) |
(4.4%, 4.7%) |
2015:6 |
|
4.6% |
(4.5%, 4.7%) |
(4.3%, 4.8%) |
2015:7 |
|
4.6% |
(4.5%, 4.8%) |
(4.3%, 4.9%) |
2015:8 |
|
4.6% |
(4.5%, 4.8%) |
(4.3%, 4.9%) |
2015:9 |
|
4.7% |
(4.5%, 4.9%) |
(4.3%, 5.1%) |
2015:10 |
|
4.7% |
(4.5%, 5.0%) |
(4.3%, 5.2%) |
2015:11 |
|
4.8% |
(4.5%, 5.1%) |
(4.3%, 5.4%) |
2015:12 |
|
4.9% |
(4.5%, 5.2%) |
(4.2%, 5.6%) |
2016:1 |
|
5.0% |
(4.5%, 5.4%) |
(4.1%, 5.9%) |
2016:2 |
|
5.0% |
(4.5%, 5.5%) |
(4.1%, 6.0%) |
Previous Forecasts