The UK economy continues to deteriorate, inch by painful inch.
The number of people out of work and claiming benefits rose for the tenth month in a row during November to 902,000. That's the longest unbroken run of rises in nearly 13 years.
Meanwhile, the unemployment rate rose to a two-year high, up 0.2% to 4.9%, in the three months through October.
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That might be low in historical terms, but it's not so much the number as the direction it's headed that's the big worry...
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The weakening labour market has been reflected in company news this week. Provident Financial is set to shut down its Yes Car Credit business with the loss of around 820 jobs, after talks with potential buyers collapsed last week. Provident shares fell 7% to 558.5p.
Meanwhile, recruitment company Hays reported that it had seen good growth during its first half, driven by international sales. But investors chose to focus on a slowdown in fee growth at its UK unit. Growth has slowed to about 6% year-on-year, against expectations for 8% to 9%. Shares in Hays fell 3% to 124.75p.
And earlier in the week Johnston Press, the regional newspaper publisher, said that recruitment advertising revenues had fallen 22.9%. It said the switch was not caused by people moving towards using the internet, but weaker economic conditions. Employees are "sitting tight rather than risking a move", while employers are cutting back by advertising jobs in fewer places.
But it's not just companies directly affected by recruitment that need to worry. According to think tank Capital Economics, the unemployment data also bodes ill for a less obvious sector commercial property. With only modest growth in the financial and business sector workforce, CE is comparatively bearish on prospects for City office rental growth. It expects growth of about 2% year on year by the end of 2006, compared to the 3.8% predicted by the Investment Property Forum.
Commercial property investors would also be well-advised to take a look across the Channel to Germany for a reminder of the potential dangers. Deutsche Bank has frozen its €6.1bn Grundbesitz-Invest property fund. This is to prevent a rush of investors from pulling money out ahead of an asset revaluation that could see the group's assets written down by up to €1bn. The decision to prevent people from withdrawing their money "is unique in the 40-year history of open-ended real estate funds" said one analyst.
The fund has about 300,000 mostly private investors and owns 128 properties, with two-thirds in Germany. This year investors have yanked €900m from the fund, and last year they took out €1.5bn. But outflows have jumped in the last two days as concerns over the revaluation escalate.
The big problem with commercial property funds is that the underlying assets, unlike most shares, are pretty illiquid. You can't just hit a button on a keyboard to offload an office block. And values are not transparent either you only really know what a property is worth once it has been sold.
If investors panic and a large number suddenly want to pull their money out of a fund, that could force it to sell some of the underlying properties. But achieving a quick sale isn't always easy, particularly in a weak market. This would in turn drive down the price fetched, which then impacts on the value of the fund, which makes more investors pull out, and so on.
But investors on this side of the Channel are yet to take fright. Property companies were among the top gainers in the FTSE 100. A report in the FT suggests that the Abu Dhabi royal family is set to buy a portfolio of City property, including Plantation Place, from British Land. This would be the family's first investment in City property, though they already own a chunk of the West End.
For more on how the oil boom has sucked massive amounts of money into the Gulf region, and to learn where all that cash is being spent, read this week's issue of MoneyWeek, out on Friday.
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And more on stock markets...
The FTSE 100 closed 14 points higher at 5,521. British Land, Hammerson, Liberty International and Land Securities were all higher as property groups benefited from hopes that the Abu Dhabi royal family is keen on buying into a British Land portfolio in the City. Defence group BAE Systems gained 3% to 345.75p as it won a share of work in a £3.6bn UK warship-building programme.
Over in continental Europe, the German Dax Xetra shed 23 points to 5,286 while the Paris Cac 40 lost 19 to 4,674.
Across the Atlantic, US stocks were mixed. The US trade deficit expanded in October to a record $68.9bn as demand for crude oil imports offset a large jump in exports. Analysts had expected the gap to narrow to $62.9bn. The Dow Jones rose 59 points to 10,883, and the S&P 500 hit a four-and-a-half-year high, up 5 to 1,272. But the tech-heavy Nasdaq fell 2 to 2,263 as broker downgrades for computer giant Apple hurt sentiment.
In Asian trading hours, oil was lower, trading at around $60.50 a barrel in New York, while Brent crude was trading at around $58.80.
Spot gold took another hit, down to around $505 an ounce, continuing its fall from Monday's 25-year high of around $540. Meanwhile, silver fell back to around $8.37 an ounce.
In Asian stock markets, the Nikkei 225 slid 210 points to 15,254. The dollar suffered its biggest one-day drop against the yen in four years on the back of the record US trade deficit, sending Japanese exporters sharply lower. Toyota fell 2.2%, while photocopier maker Canon fell 1.9%.
And in the UK later this morning, there will be more news on how the high street fared in November when official statistics on retail sales are published.
