Figure 1 compares the predicted civilian unemployment rate (PRED) with the actual civilian unemployment rate (UER) from January 1996 to December 2000. The predicted results come from estimating the linear time trend model UER t = b0 + b1 t + ε t. What can we conclude about the appropriateness of this model?
FIGURE 1 Predicted and Actual Civilian Unemployment Rates

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Percent 6.0 5.5 UER " PRED 5.0 - 4.5 4.0 3.5 3.0 + 1997 1999 1996 1998 2000 Year