The latest report from the Commerce Department in the US shows a significant slump in new homes being built, slipping -5% in July to a three-month low despite a 3.2% increase in building permits.

Building permits are used to gauge homebuilder confidence since most permits lead to a build within six months of filing for a single-family home and a year for apartments. The National Association of Home Builders reports that building projects have a wave effect on the economy through job creation and tax revenue, and that these low numbers are having an amplified negative impact on the market.

The August figures from the Commerce Department show that builders began work on a seasonally adjusted annual rate of 571,000 homes last month, a -5% decline from July and less than half the 1.2m homes that economists say is consistent with a healthy housing market in the US.

Single family homes, which represent roughly two thirds of home construction, fell -1.4% but apartment building plunged -12.4%. Hurricane Irene slowed construction in the Northeast, analysts said.

Construction fell to its lowest levels in 50 years in 2009, when builders began work on just 554,000 homes. Last year was not much better, and this year is shaping up to be just as bad.

Although home construction represents a small portion of the housing market, it has an outsize effect on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders.