Do banks currently use the unemployment rate to predict future?
Generally no. On corporates, the modeling is much different than on consumer. You see, corporate credits are required to submit quarterly financial statements to their lenders. Sometimes with some very specific data for calculations. A gent now at NYU named Edward Altman came up with the basic methodology of forecasting corporate loan defaults using a series of calculations way back in 1965. He is still doing it. These models are VERY good indeed. All the majors use models based on his work. Now, for a variety of consumer and residential loan types ( and some CRE loans where financials are not up to date), forecasting default behaviors may include macrofactor data like the Unemployment Rate and House Price Index. Current prime Mortgage Rates are another indicator of behavior (often voluntary prepayment).