Modeling Unemployment Rates June 3, 2008 Ryan DeGrazier Chun-Hung Lin Johan Rothe Chun-Kai Wang Anastasia Zavodny

Motivation Policy: Policy: –Monetary –Fiscal Speculative Investing Speculative Investing –Hedging/Risk management Business Planning Business Planning –Costs and labor requirements

Civilian Unemployment Rate - Raw Data

Civilian Unemployment Rate - Histogram

Correlogram & Unit-Root Test

Civilian Unemployment Rate – First Difference

Histogram of First Difference

First Difference - Correlogram & Unit-Root Test

First ARMA Model

Diagnose First ARMA Model - Correlogram

Diagnose First ARMA Model – ARCH/GARCH

Second Model – ARMA & GARCH(1, 1)

Diagnose Second Model – Histogram of Residuals

Diagnose Second Model – ARCH/GARCH

Final Model Estimation 1948:07 – 2008:04

Residual Graph

Diagnostics – Correlogram of Residuals

Diagnostics – Correlogram of Squared Residuals

Diagnostics – Historgram of Residuals

Diagnostics – ARCH LM Test

Final Model Estimation 1948:07 – 2007:04

Internal Forecast – 2007:05 to 2008:04

Internal Forecast & Realized Data

Internal Forecast & Realized Data - Recolored

Forecast – 2008:05 to 2009:04

Recolored Forecast – 2008:05 to 2009:04

Thank you!!