I’m adding some thoughts, and maybe some predictions for each question.
3) Unemployment Rate: The unemployment rate was at 3.5% in December, down 0.4 percentage points year-over-year. Currently the FOMC is forecasting the unemployment rate will increase to the 4.4% to 4.7% range in Q4 2023. What will the unemployment rate be in December 2023?
Here is a graph of the unemployment rate over time:
Click on graph for larger image.
The unemployment rate is from the household survey (CPS), and the rate decreased gradually in 2022. The unemployment rate decreased in December to 3.5%, down from 3.9% in December 2021. This tied the lowest unemployment rate since 1969.
Forecasting the unemployment rate includes forecasts for economic and payroll growth, and also for changes in the participation rate (previous question).
Here is a table of the participation rate and unemployment rate since 2008.
| Unemployment and Participation Rate for December each Year | |||
|---|---|---|---|
| December of | Participation Rate | Change in Participation Rate (percentage points) | Unemployment Rate |
| 2008 | 65.8% | 7.3% | |
| 2009 | 64.6% | -1.2 | 9.9% |
| 2010 | 64.3% | -0.3 | 9.3% |
| 2011 | 64.0% | -0.3 | 8.5% |
| 2012 | 63.7% | -0.3 | 7.9% |
| 2013 | 62.9% | -0.8 | 6.7% |
| 2014 | 62.8% | -0.1 | 5.6% |
| 2015 | 62.7% | -0.1 | 5.0% |
| 2016 | 62.7% | 0.0 | 4.7% |
| 2017 | 62.7% | 0.0 | 4.1% |
| 2018 | 63.0% | 0.3 | 3.9% |
| 2019 | 63.3% | 0.3 | 3.6% |
| 2020 | 61.5% | -1.8 | 6.7% |
| 2021 | 62.0% | 0.5 | 3.9% |
| 2022 | 62.3% | 0.3 | 3.5% |
Depending on the estimate for the participation rate and job growth (next question), my guess is the unemployment rate will increase to around 4% in December 2022 from the current 3.5%. (Lower than the FOMC forecast of 4.4% to 4.7%).
Here are the Ten Economic Questions for 2023 and a few predictions:
• Question #5 for 2023: What will the YoY core inflation rate be in December 2023?
• Question #6 for 2023: What will the Fed Funds rate be in December 2023?
• Question #7 for 2023: How much will wages increase in 2023?
• Question #8 for 2023: How much will Residential investment change in 2023? How about housing starts and new home sales in 2023?
• Question #9 for 2023: What will happen with house prices in 2023?
• Question #10 for 2023: Will inventory increase further in 2023?