At the beginning of 2009, the economic downturn resulted in the loss of jobs and

Question

At the beginning of 2009, the economic downturn resulted in the loss of jobs and an increase in delinquent loans for housing. The national unemployment rate was 6.5% and the percentage of delinquent loans was 6.12% (The Wall Street Journal, January 27, 2009). In projecting where the real estate market was headed in the coming year, economists studied the relationship between the jobless rate and the percentage of delinquent loans. The expectation was that if the jobless rate continued to increase, there would also be an increase in the percentage of delinquent loans. The data below show the jobless rate and the delinquent loan percentage for 27 major real estate markets.

Compute the correlation coefficient. Is there a positive correlation between the jobless rate and the percentage of delinquent housing between the jobless rate and the percentage of delinquent housing loans? What is your interpretation?

0.9828

0.4413

0.9956

2.2366

Metro Area Jobless Rate (%) Delinquent Loans (%) Atlanta 7.1 7.02 Boston 5.2 5.31 Charlotte 7.8 5.38 Chicago 7.8 5.40 Dallas 5.8 5.00 Denver 5.8 4.07 Detroit 9.3 6.53 Houston 5.7 5.57 Jacksonville 7.3 6.99 Las Vegas 7.6 11.12 Los Angeles 8.2 7.56 Miami 7.1 12.11 Minneapolis 6.3 4.39 Nashville 6.6 4.78 New York 6.2 5.78 Orange County 6.3 6.08 Orlando 7.0 10.05 Philadelphia 6.2 4.75 Phoenix 5.5 7.22 Portland 6.5 3.79 Raleigh 6.0 3.62 Sacramento 8.3 9.24 St. Louis 7.5 4.40 San Diego 7.1 6.91 San Francisco 6.8 5.57 Seattle 5.5 3.87 Tampa 7.5 8.42

Explanation / Answer

From Excel

The correlation cofficient is 0.4413

Hence we sya that 44.13% correlation between X and Y

Jobless Rate (%) Delinquent Loans (%) Jobless Rate (%) 1 Delinquent Loans (%) 0.441324 1

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