The prolonged slump in housing pushed construction of new homes in 2007 down by the largest amount in 27 years with the expectation that the downturn has further to go.

The Commerce Department reported Thursday that construction was started on 1.353 million new homes and apartments last year, down 24.8 percent from 2006. It was the second biggest annual decline on record, exceeded only by a 26 percent plunge in 1980, a period when the Federal Reserve was pushing interest rates to post-World War II records in an effort to combat an entrenched inflation problem.

Many economists believe that the current slump in housing will rival the dive in the late 1970s and early 1980s when housing construction fell for four straight years before beginning to recover after the severe 1981-82 recession. For December, construction fell by a bigger-than-expected 14.2 percent.

In other economic news, the Labor Department said the number of newly laid off workers filing applications for unemployment benefits dropped by 21,000 last week to 301,000. That marked the third consecutive weekly decline and occurred even though the government reported that the unemployment rate increased sharply in December.

Some economists believe the current housing troubles will push the country into another recession as consumers are staggered by the steep drop in housing -- which has pushed home values down in many parts of the country. Consumers also have been faced with rising mortgage defaults and a severe credit crunch which has made loans harder to obtain.

Various recent reports have increased those worries including news that unemployment in December shot up to 5 percent, rising by the largest amount in one months since the country was reeling from the 2001 terrorist attacks. Many large financial institutions have announced billions of dollars of losses due to the meltdown in subprime mortgages.

The drop in construction in December was bigger than economists had been expecting and reflected weakness in all parts of the country. Housing construction fell by 30.8 percent in the Midwest and was down 25.8 percent in the Northeast and 19.6 percent in the West. The decline in the South was a smaller 3.3 percent.

Economists said the weakness showed that the housing correction was getting worse since the turmoil in financial markets hit in August.

"Builders have finally thrown in the towel," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "This is a precondition for recovery as it will eventually reduce the inventory overhang. But there is a long way to go."