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» VISIT US ONLINE @ DSNEWS.COM 21 UNEMPLOYMENT RATE DROPS TO 5.6 PERCENT AS PAYROLLS INCREASE BY 252K e United States unemployment rate slipped another 0.2 percentage points in Decem- ber as employers introduced 252,000 new jobs. e Bureau of Labor Statistics (BLS) said that the national unemployment rate was down to 5.6 percent by year-end 2014, bring- ing that number down to its lowest level since June 2008. Economists had expected the jobless rate would fall slightly to 5.7 percent and that non-farm payrolls would increase by 245,000. Recently, ADP reported that private payrolls in December had increased by 241,000. December's slightly better than expected re- port also brought upward revisions for both Oc- tober and November payrolls. e government now estimates employers added 261,000 jobs and 353,000 jobs in those months, respectively. While the headline data looks strong, the numbers underneath it are less encouraging. e drop in the unemployment rate was accompa- nied by a 0.2 percentage point drop in labor force participation as more Americans gave up on finding a job. According to the government's household survey, 2.3 million people were classified as "marginally attached" to the workforce in December, up from 2.1 million in November (albeit down compared to the same time a year prior). Out of that group, 740,000—an increase of 42,000 from the previous report—had given up on looking for work. Factoring in those marginally attached Americans and workers who are employed only part time for economic reasons, BLS puts the U-6 unemployment rate at 11.2 percent. Another sour note in December's data: wages fell 5 cents to an average of $24.57, nearly undoing a 6-cent increase recorded in November. According to Fannie Mae's Chief Econo- mist, Doug Duncan, the underlying data may not be so encouraging for the housing market, however. Duncan said in a prepared statement that while job gains were generally solid each month throughout 2014, there were other aspects of the latest BLS report that were "underwhelming" – specifically, year-over-year growth in wage earn- ings of just 1.7 percent, the lowest in two years. Also, while the nation's unemployment rate took another dip of 0.2 percentage points down to 5.6 percent, its lowest level in six and a half years, that decline was accompanied by a drop in labor force participation down to 62.7 percent, tied for the lowest level since October 1977. "So far, the diminishing slack in the labor market has not yet translated into stronger wage gains, which sends a disappointing signal to the housing market," Duncan wrote in his state- ment. "We fear that housing may, again, lag the progress of the overall economy this year, as evidenced in results from the Fannie Mae December National Housing Survey, which shows a flat-line in consumer housing sentiment amid rising optimism in the general view of the economy." It remains to be seen if the lowering of Fed- eral Housing Administration's (FHA) mortgage insurance premiums by 50 basis points down to 0.85 percent, which was announced by FHA and touted by President Barack Obama in a speech in Phoenix recently, will change Ameri- cans' currently tepid attitude toward housing. e change is specifically meant to benefit first-time homebuyers, indicating that FHA is attempting to jump-start household formation. FHA estimates lowering their insurance premiums will result in hundreds of thousands of new homes purchased in the next few years. Duncan says he believes that in order for house- hold formation to flourish, there must be more growth in Americans' income. "While we expect economic growth to strengthen to an above-par pace this year, our view for the housing market remains cautious, as we believe that meaningful income growth needs to occur to spur household formation, which has been frustratingly anemic in the current economic expansion," Duncan wrote. "at dependence on income growth accelera- tion means the economy should drag housing upward rather than housing being a leader in growth acceleration."

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