"The housing market is not only bad, but still missing low expectations." That from a Cantor Fitzgerald analyst on just how awful the residential housing sector is. Even the most pessimistic forecasts are not being met.

For better of for worse, new housing construction has been one of the most important sectors of the economy simply because so much that goes into building and furnishing a house creates jobs at a faster rate than any other economic activity in our economy.

And when that sector is sick, it means that the jobs picture won't be getting any better either. Reuters:

Housing starts decreased the most since April, down 5.0 percent to a seasonally adjusted annual rate of 571,000 units, the Commerce Department said on Tuesday.

Offering a glimmer of hope for the sector, permits for future construction rose 3.2 percent.

Economists polled by Reuters had forecast housing starts to fall to a 590,000-unit rate in August. Housing starts are at less than a third of their peak during the housing boom.

"The housing market is not only bad, but still missing low expectations," said Sal Catrini, a managing director for equities at Cantor Fitzgerald & Co in New York.

An overhang of previously owned homes on the market has left builders with little appetite to break ground on new projects and is frustrating the economy's recovery from the 2007-09 recession.

On Monday, the National Association of Home Builders said already depressed U.S. homebuilder sentiment dipped in September.

"It (the housing market) won't improve until the labor market improves substantially and that doesn't look like that would happen this year," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Not much is going to happen until the current inventory of new homes are sold. And that's not going to occur until people start going back to work. In a way, we have a real Catch-22; in order for the jobs picture to brighten, the economy needs a healthy home building industry. But the builders won't increase their construction until people go back to work.