Forecasting of Unemployment Rate in Malaysia Using Exponential Smoothing Methods

Abstract

One of the issues that triggers worlds lately is the increasing rate of the unemployment rate. Consequently, this research objective is to compare the most accurate forecast method and to find the most suitable period to predict the future of Malaysia’s unemployment rate in 2016. There are five sets of Malaysia’s unemployment rate and three forecasting methods being used which are Naïve, Simple Exponential Smoothing (SES) and Holt’s method. The forecasting model was then selected based on the smallest accuracy measures. The results indicated that Holt’s is the optimal model in forecasting the overall yearly unemployment rate, male yearly unemployment rate and overall quarterly unemployment rate. Furthermore, for female yearly unemployment rate and overall monthly unemployment rate, the best forecasting method was SES. Meanwhile, the overall unemployment rate of Malaysia in year 2016 was predicted to be 2.9% while 3.4% was estimated to be the value of unemployment rate for second half year of 2016 by using quarterly and monthly data. The forecast value was remained the same as previous year for overall yearly male data and female data which were 2.9% and 3.3% respectively. Lastly, the best period in forecasting Malaysia’s overall unemployment rate was found to be month with the value of 3.4%.