First-time jobless claims lowest in two years

WASHINGTON - Americans earned more and spent more last month, and the number of people applying for unemployment benefits dropped last week to the lowest level in more than two years. At the same time, demand for long-lasting manufactured goods and new homes fell off.

All told, the latest government data released the day before Thanksgiving suggest an improving picture of the economy. Income and spending are rising, and layoffs are slowing. But this comes amid a decline in manufacturing activity, which had been a source of strength for months after the recession ended, and a struggling housing market.

Analysts question whether incomes can continue to grow at a consistent pace and keep consumers spending enough to invigorate the economy.

"The flurry of U.S. data this morning suggests that households have started to pick up the baton of growth from businesses," said Paul Dales, U.S. economist at Capital Economics.

Consumers boosted their spending 0.4 percent in October, the Commerce Department said Wednesday. That was up from a 0.3 percent increase in September.

People showed a slightly bigger appetite to spend because their incomes rose 0.5 percent, reflecting a slowly healing jobs market that gave a boost to wages and salaries.

And inflation is running lower at a record low. Prices for goods excluding food and energy rose just 0.9 percent in the 12 months ending in October, the Commerce report noted. That was down from a 1.2 percent annual gain posted in September.

Initial jobless claims dropped by 34,000 to a seasonally adjusted 407,000 in the week ending Nov. 20, the Labor Department said. The report raised hopes that more gains in hiring will be seen.

Still, another report showed that orders to U.S. factories for costly manufactured goods plunged in October by the largest amount in 21 months.

Durable-goods orders dropped 3.3 percent last month, the biggest setback since January 2009. Of special concern was a 4.5 percent drop in orders for nondefense capital goods, excluding aircraft. This category is viewed as a good proxy for business investment plans. It was the biggest drop since a 5.3 percent fall in July. - AP