Social and Behavioral Sciences Commons^™

Can Machine Learning On Economic Data Better Forecast The Unemployment Rate?, Aaron S. Kreiner

Honors Papers

This paper examines different machine learning methods to project the U.S. unemployment rate one year ahead. The forecasts include a naive forecast equal to the current unemployment plus the change of unemployment over the last year, along with forecasts from a Lasso regression and a neural network model. The last two models, which can be quickly run using an SQL database, select data from the Federal Reserve Economic Database (FRED) and are fitted (trained) in-sample from 1970 to 2000 to forecast quarterly unemployment rates over 2001 to 2018. The training window is updated in each forecast quarter to include new …