U.S. unemployment rate. Following is the time series plot for the monthly U.S. Unemployment rate (%) from January 1997 to March 2007. These data have been seasonally adjusted (meaning that the seasonal component has already been removed).

a) What time series components do you observe in this series?

b) Develop a 6-month and 12-month moving average model for this series.

c) Fit a single exponential smoothing model to this series.

d) Use these models to forecast the Unemployment rate for March 2007.

e) Compute measures of forecast error (e.g., MAD and MAPE) and compare the accuracy of the forecasts for these two models.

Transcribed Image Text:

UNEMP_SADJ(%) 6.5- 6.0- 5.5- 5.0+ 4.5- 4.0+ Month Jan Jan Jan Year 1997 1999 2001 Jan Jan Jan 2003 2005 2007