Research on UK Unemployment Rate Forecast Based on ARIMA Model

The objective of this study is to predict the unemployment rate in the UK and the Eurozone for the years 2014 to 2024 using the time series analysis model known as ARIMA. It is essential to be informed of changes to employment rates in order to address them and changes in the economic environment including historical occurrences such as Brexit, COVID-19, and shifts in the labor market. The ARIMA model was used because it fits non-stationary time series, which is a feature present in the employment rates of both time series. The monthly unemployment rates for each state were seasonally adjusted and the ARIMA parameters were estimated by the automatic method. The study observed that while the interior portion of the trading cycle was effectively predicted by the ARIMA model, it failed to do so for the short-term UK unemployment in the post-2023 period because of exogenous shocks. However, the model was equally successful in predicting a marginal contraction in unemployment rates in the Euro zone after 2023. By performing the Ljung-Box test, it was established that the residuals of the models were random and therefore, the models were fit. Accordingly, the results suggest that the estimates derived from the ARIMA model are beneficial in economic predictions, which helps governments to design better social security programs and other economic plans to address the changing employment landscape.