US housing starts at slowest since 1991

NEW YORK (Reuters) – Ground-breaking on new U.S. homes last month fell to the slowest pace since 1991 and fewer building permits were issued than any time since 1993, according to government data released Thursday that points to a deepening housing crisis and heightened risk of recession.

In the labor market, the number of workers filing initial claims for U.S. jobless benefits fell unexpectedly by 21,000 last week, a report from the Labor Department said.

Even so, there were signs that people are still having trouble finding work. The number of so-called continued claims — those who are still on the benefit rolls after having drawn an initial week of aid — rose by 66,000 to 2.75 million in the week ended Jan. 5, the latest week for which figures were available.

The outlook for housing, meanwhile, isn’t getting better. Housing starts set an annual pace of 1.006 million units in December, lower than the 1.140 million units expected by economists. It was the slowest pace for housing starts since the May 1991 rate of 996,000 units.

“Housing starts make it looks we are in a recession, but jobless claims looks like we are in an expansion. These are mixed signals,” said Robert Brusca, chief economist at Fact and Opinion Economics in New York.

First-time claims for state unemployment insurance benefits fell for the third straight week, tumbling to 301,000 — its lowest since Sept. 22 — in the week ended Jan. 12, from 322,000 the prior week, the Labor Department said.

U.S. fixed-income securities pared gains in early trade, while stock futures trimmed losses after the surprise drop in new jobless claims.

The yield on the benchmark 10-year note traded up to 3.73 percent from 3.70 percent before the data was released. That compares with 3.74 percent late Wednesday.

“Even though this is only one week of data, the fact that unemployment claims didn’t skyrocket caused traders to say, ‘We are not right on the cusp of an abyss here in terms of a major recession,'” said David Dietze, chief investment strategist at Point View Financial Services in Summit, New Jersey.

The fall in new claims defied a Wall Street forecast for a rise to 335,000 from the originally reported 322,000 in the week ended Jan. 5.

The four-week moving average of new claims — a more accurate gauge of labor market trends because it irons out volatility in the week-to-week figures — also fell for the third straight week, dropping to 328,500 from 340,250 the prior week.

U.S. home building projects started in December fell by a sharper-than-expected 14.2 percent to their lowest in more than 16 years, while permits for future building hit a 14-year low, The Commerce Department said.

The 1.354 million units started in all of 2007 was the lowest total since 1.288 million units in 1993.

In the previous two big housing downturns, in 1975 and 1982-1983, housing starts stood in the range of 900,000 units per year for several months before rebounding.

“Builders are in trouble. They have a lot of inventory. They decided to cut back on their starts and that’s going to crimp the GDP,” said Brusca.

There were 1.376 million permits issued in all of 2007, down 25 percent from their year-ago levels and the lowest since 1.333 million permits in 1995.

Building permits fell 8.1 percent to an annual rate of 1.068 million, the slowest pace since a 1.056 million unit rate set in March 1993 and the sharpest fall since 8.1 percent decline in January 1995.

It was also the sharpest monthly drop since January 1995. Economists polled by Reuters had forecast December permits at 1.140 million units after the 1.162 million rate of November. (Additional reporting by Nancy Waitz and Patrick Rucker in Washington)