Housing starts fell 2.6 percent in January to an annual rate of 1.25 million units, with construction in the western United States plunging 41.3 percent and in the Midwest falling 17.9 percent.
Instead, McLaughlin pointed to the uptick in building permits. "For the year as a whole, housing starts of 1.17 million units were the strongest since 2007 as home builders try to keep up with rising demand", Nationwide Chief Economist David Berson said about the December housing starts report.
Marc Walco, PwC's U.S. Engineering & Construction Advisory Leader at PwC, believes that the data "represents a continued sign of strength and optimism in the housing sector".
"We do expect to see an acceleration in manufacturing output and employment growth this year", said Paul Ashworth, chief USA economist at Capital Economics in Toronto. Rising inflation, if sustained, could erode households' purchasing power and hurt spending, including home purchases.
Claims have been below 300,000, a threshold associated with a strong job market, for 102 consecutive weeks.
Economists had forecast first-time applications for jobless benefits rising to 245,000 in the latest week. However, housing starts are having a hard time picking up speed, according to residential construction data released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
Homebuilding last month surged 55.4 percent in the Northeast region of the country and jumped 20.0 percent in the South to the highest level since August 2007. The supply of existing homes fell in December to its lowest level since 1999.
Building permits had been expected to climb to 1.232 million from the 1.210 million originally reported for the previous month.
Single-family housing starts rose in January to an annualized rate of 823,000, up 1.9% from the revised December rate of 808,000. Over the course of the past 12 months, housing permits have risen 8.2 percent, up from 1,188,000 units in January 2016, with single-family and multifamily activity up 11.1 percent and 3.5 percent, respectively. Meanwhile, multifamily permits increased 19.8 percent to 477,000 units.