On Monday the US Commerce Department reported a 0.6% drop inconstruction spending in November compared to October. October's declinewas revised to a smaller 0.4%, compared to the 1.2% originally reported.Analysts had been expecting a steeper 1.3% decline for the month ofNovember.

According to the Commerce Department figures, private home building--roughly a third of total spending--dropped by 4.2% to an annual rate of $328 billion. This was the lowest level in close to ten years. By contrast, public spending grew 1.4% in November, reaching $322 billion.

A small drop is better than a large drop, but these numbers fluctuatefrom month to month, Bob Bach, SVP research, withGrubb & Ellis, tells GlobeSt.com. "They don't do anything to change the basic story for CRE, which is that construction activity is expected tocontinue to drop throughout 2009."

Even if the numbers had remained unchanged from October, it wouldn't--or at least shouldn't--provide tangible hope about industryfundamentals, he continues. "A significant decline in constructionactivity is pretty much baked into the cake now. Also, constructionspending doesn't say anything about the demand side of the equation. Amore significant indicator will be the job numbers that are coming outthis week."

Steve Pumper, executive managing director of Transwestern's InvestmentServices Group, seconds Bach's point about the job numbers. Last month unemployment registered a frightening steep rise, hitting 7%. In the summer of 2007, Pumper notes, unemployment was 4.5%.

"The conventional wisdom is that throughout the year we will be incurringeven more job losses, reaching between 8% to 9%, possible even reachingnorth of 9%. The retail sector returns for the holiday season is alsoan indicator he will be watching, he tells GlobeSt.com. "Depending onwho you are listening to it could bet between 5% to 8%."

Indeed, retail could well be the tipping point for a truly terrible year for CRE, Peter Cohan, principal of Peter Cohan & Assoc. tellsGlobeSt.com. "There are many retailers that are expected to go bankrupt this coming year, and of course that will have a huge impact on vacancies."

If the industry is scouring the landscape for positive news, Pumpersuggests they look to the liquidity crisis, which appears to be easingslightly. "I think we will see more evidence of that as the year goeson." It is an ironic turn of events. The real estate industry has beenbuffeted by the liquidity crisis for longer than the economy has been in recession--but it pretty much held its own because the fundamentalswere strong. Now that there are glimmers that liquidity is easing, real estate fundamentals are weakening because of the recession.