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While the national unemployment rate may have ticked up slightly in 2010, in states such as California, Nevada, and Michigan the employment picture continues to look grim (CNNMoney, September 21, 2010). Consider the following table, which lists a portion of the monthly unemployment rates (seasonally adjusted) in California from 2007-2010. The full data set can be found on the text website, labeled California Unemployment.
Year
Month
Unemployment Rate (%)
2007
Jan
4.9
Feb
5.0
....
2010
Dec
a. Plot the above series. Which polynomial trend model do you think is most appropriate?
b. Verify your answer by formally comparing the linear, the quadratic, and the cubic trend models.
c. Forecast the unemployment rate in California for January 2011.
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