Home Construction Ends Worst Year Since 1959

WASHINGTON (AP) — The government said Thursday that new-home construction plunged to a record low in December, capping the worst year for builders on records dating back to 1959.

It was a much weaker showing than the pace of 610,000 that economists were forecasting and ended 2008 on a dismal note.

For all of 2008, the number of housing units that builders broke ground on totaled about 904,000, also a low. That was a 33.3 percent drop from the 1.355 million housing units started in 2007. The previous low was set in 1991.

The report also showed that applications for building permits — considered a reliable sign of future activity — sank to a rate of 549,000 in December, a 10.7 percent drop from the previous month.

The collapse of the housing market has been devastating to the United States’ economic health. Its spreading fallout has contributed to big pullbacks by consumers and businesses alike, plunging the economy into a painful recession that recently entered its second year.

The Obama administration wants to ramp up efforts to stem skyrocketing home foreclosures, which have dumped even more properties on an already crippled market.

The Federal Reserve has taken several steps with the hope of providing some relief. It is buying certain types of mortgages and has cut a key interest rate to a range of zero and 0.25 percent, a record low.

Against that backdrop, mortgage rates have dropped to the lowest level in decades in recent weeks.

In another report, the government said the number of first-time jobless benefit claims jumped more than expected last week, as companies cut jobs at a furious pace.

The Labor Department says initial jobless benefit claims rose to a seasonally adjusted 589,000 in the week ending Jan. 17, from an upwardly revised figure of 527,000 the previous week. The latest tally was well above Wall Street economists’ expectations of 540,000 new claims.

The total matches a 26-year high reached four weeks ago. The last time claims were higher was in November 1982, when the economy was emerging from a steep recession, though the work force has grown by about half since then.

The increase is partly the result of a backlog of claims that piled up in several states that experienced computer crashes because of a crush of applications, a Labor Department analyst said.

The four-week average of claims, which smoothes out fluctuations, was 519,250, the same as the previous week.

The number of people continuing to seek benefits rose by 97,000 to 4.6 million, above analysts’ expectations of 4.55 million. That’s also up substantially from a year ago, when 2.7 million people were continuing to receive unemployment checks.