Housing starts dropped for the third straight month in May, plummeting to their lowest level in eight months, according to a new report from the Census Bureau .

The number of new housing projects started in May was down 5.5 percent over the month and 2.4 percent on the year. Both single family and multi-unit structures like apartment buildings saw construction activity drop over the month, as starts fell 3.9 percent and 9.8 percent, respectively.

Building permits for new construction work, meanwhile, fell 4.9 percent on the month and 0.8 percent on the year. Again, multi-unit structures drove much of the weakness, with a 10.1 percent decline. But the lack of new home construction likely won't do much for rising home and rental prices across much of the U.S.

"It's too soon to say that the homebuilding recovery from the Great Recession has peaked, but the data so far this year on residential construction has worrisome implications for economic growth," Gus Faucher, chief economist at The PNC Financial Services Group, wrote in a research note Friday. "Residential building has contributed to economic growth over the past few years, and if it is slowing, that would weigh on the expansion."

Indeed, one of the only bright spots in Friday's housing report was home completions, which were up 5.6 percent on the month and 14.6 percent on the year. That's good news in the near term, as more housing availability helps moderate prices by giving those on the market more options. But with permits and starts dropping over the month and on the year, it looks like America's ongoing inventory shortage will continue to be a problem in the months ahead.

"Demand for housing is generally sturdy, thanks to job gains, wage growth, and better access to mortgage credit," Faucher said. "But a shortage of construction workers may be weighing on the construction industry, and in some parts of the country short supply of land to build on is also a factor."

Indeed, the construction industry managed to create 11,000 new jobs in May, according to the Bureau of Labor Statistics. But in the two months prior, job creation was either flat or declining.

Construction outfits burned by the housing bubble and subsequent Great Recession are still reluctant to go gangbusters on home construction nearly a decade after the financial crisis began. Hiring has been modest at best in recent months, and the lack of new starts and permits doesn't point to an immediate turnaround.