U.S. housing starts plunged in August, confirming that even pre-attack economic data was not looking good.

Starts plunged almost 7% in August to 1.53 million units annualized, the lowest level in nearly a year and well below the 1.59 million unit average over the past year. Both singles and multi-unit starts slipped. The more stable singles declined 2.4% and the volatile multis fell 22.9%.

“Until recently, the housing sector had been a pillar of strength in a slowing economy,” notes BMO Nesbitt Burns. “However, worries over the global economic slowdown, mounting job layoffs, and prospects of recession and war, will push homebuying plans aside. This cooling will occur even with the conventional mortgage rate tumbling below 6.9% in the last two weeks.”

BMO notes that in a separate release, initial jobless claims fell by a sharp 49,000 to 387,000 for the week ending September 15th. “Claims were limited given that this was the same week as the terrorist attacks. Government employment insurance offices likely were closed and claimants may have delayed filing in the aftermath of the attacks. Still, the four-week moving average remains above 400,000, supporting the view that the underlying trend in the labor market is decidedly weak.”

BMO concludes that, “Today’s housing report and yesterday’s Beige Book confirm stories that the economy was headed toward recession even before last week’s tragic events.”