In further signs of the dire economic situation, new-home construction fell to record lows in December and jobless claims continued to soar, the government reported Thursday.

New-home construction fell 15.5 percent from November to December to an annual pace of 550,000 units, the slowest pace since the Commerce Department starting compiling the data in 1959. Home builders have all but shut down projects as home values plunge and potential buyers stay on the sidelines of the troubled housing market.

“What you’re seeing is capitulation by home builders,” said John Lonski, chief economist at Moody’s Capital Markets. “The news you got today reinforces the view that stabilization of housing starts is well off into the future.”

The pace of new-home construction in December was 45 percent below its levels from a year earlier. The government estimated that 904,300 housing units were started in 2008, a drop of 33 percent from 2007. Last year would be the worst for housing starts on record.

The Federal Reserve has cut its benchmark interest rates to record low levels of zero to 0.25 percent to try to revive the struggling economy and stem the losses in housing, and it has introduced new programs to buy mortgage-secured debt. But homes sales and values have continued to decline.

“The magnitude of the housing bubble was unprecedented, and the corrective process promises to be a long and painful one,” Joshua Shapiro, chief United States economist at MFR, a forecasting firm, wrote in a note.

The Labor Department reported that weekly jobless claims rose 62,000 to a seasonally adjusted 589,000 for the week ended on Saturday. The nationwide unemployment rate has risen to 7.2 percent, and economists warn that the economy could reach 9 percent as the recession drags on.

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By JACK HEALY

Source: New York Times -U.S.A.