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 fell off.
The latest government data suggest an improving picture of the economy. Income and spending are rising, and layoffs are slowing. 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. “Whether or not households will be able to shoulder the burden of growth on their own is another matter.”
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. Incomes didn’t grow in September. The increases in both income and spending last month were the most since August.
And inflation is running lower. Prices for goods excluding food and energy rose just 0.9 percent in the 12 months ending in October, the Commerce Department report noted. That was down from a 1.2 percent annual gain posted in September. Inflation is running at a pace below the Federal Reserve’s comfort zone of between 1.5 percent and 2 percent.
The pace of layoffs slowed to the lowest level since July 2008. Initial unemployment claims dropped by 34,000 to a seasonally adjusted 407,000 in the week ending Saturday, 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 fell in October by the largest amount in 21 months.
Durable-goods orders dropped 3.3 percent last month, the biggest setback since January 2009, when the country was still mired in a recession.
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.
Even with the pickup in spending, consumers are still shying away from the type of buying needed to dramatically lower the nation’s 9.6 unemployment rate. In Arkansas, the unemployment rate was 7.8percent in October.
Normally after a recession, consumers spend more freely. But more than one year after the recession ended, Americans are more focused on paring debt, watching their spending and building savings.
Americans saved 5.7 percent of their disposable income in October. That was up from 5.6 percent in September and was the most since August. Before the recession, they were saving just more than 1 percent.
Federal Reserve Chairman Ben Bernanke and other economists worry that high unemployment, hard-to-get-credit, weak home values and lackluster wage growth are forces that will restrain the growth in consumer spending.
Information for this article was contributed by Christopher Rugaber and by Martin Crutsinger of The Associated Press.
Business, Pages 35 on 11/25/2010