I compare unemployment expectations from the Michigan Survey of Consumers to VAR forecastable movements in unemployment. I document three key facts. First, one-half to one-third of the population expects unemployment to rise when it is falling at the end of a recession even though the VAR...

Using micro-level data, we document a systematic, income-related component in household income forecast errors. We show that these errors can be formalized by a modest deviation from rational expectations, where agents overestimate the persistence of their income process. We then investigate the...