NEW YORK, Sept 5: Pending sales of existing US homes plunged by a record 12.2 per cent in July, and private employers hired the fewest workers in more than four years in August, according to reports released on Wednesday that point to a weakening US economy.

Planned lay-offs at US companies surged by 85 per cent in August due to turmoil in the subprime mortgage market, another report said.

Together, the data raised expectations of a weak employment report from the government on Friday and added to the view that the US Federal Reserve could lower its overnight benchmark interest rate at its September 18 monetary policy meeting. The author of one of the reports said the weakening employment numbers added slightly to the prospects for recession.

The National Association of Realtors’ Pending Home Sales Index, based on contracts signed in July, fell to a reading of 89.9, the lowest since September 2001 when the index stood at 89.8. The association attributed some of the decline to mortgages falling through at the last moment.

The fall, the largest month-over-month decline since the series began in 2001, was much bigger than the 2 per cent drop in the index economists were expecting for July and helped paint a bleaker picture of the housing market moving forward.

“The decline in the pending sales index in the past three months has been by far the fastest at any time since the housing market began to slow,” said Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York.

“This is disastrous.” Stocks weakened following the data, with the Standard and Poor’s 500 index and the Dow Jones industrial average both falling more than one per cent in early afternoon trade. The dollar tumbled, falling about one per cent against the yen and nearly half a per cent against the euro. US government bond prices rose sharply sending benchmark yields to five-month lows.

Mortgage market troubles also played a big role in announced lay-offs in August, which rocketed to 79,459 from 42,897 in July, according to Challenger, Gray & Christmas Inc, an employment consulting firm. August’s job cuts were the highest since February, when they totalled 84,014.— Reuters