WRAPUP 4-Data hints US recovery is becoming self-sustaining

* Jobless claims drop to 407,000, lowest since July '08

* Spending up 0.4 pct, price gauge at record low in Oct.

* Durable goods orders fall; news home sales, prices slump

* Consumer sentiment in Nov highest since June
(Updates with late afternoon market action)

By Lucia Mutikani

WASHINGTON, Nov 24 (Reuters) - New U.S. claims for jobless
benefits hit their lowest level in more than two years last
week while consumer spending rose for a fourth straight month
in October, suggesting the economy is nearing a self-sustaining
recovery.

The picture was further brightened by another report on
Wednesday that showed consumer sentiment in November reached
its highest level since June, likely reflecting the surge in
stock prices in the wake of a Federal Reserve decision to again
loosen monetary policy.

But the upbeat mood was tempered somewhat by unexpected
declines in new home sales and in orders for long-lasting
manufactured goods in October.

"Up to this point I was very reluctant to say we have
turned the corner into a self-sustaining expansion. I think we
are verging on that," said Robert Dye, a senior economist at
PNC Financial Services in Pittsburgh.

Initial claims for state unemployment benefits fell 34,000
to 407,000, the lowest since mid-July 2008, the Labor
Department said. That was well below economists' expectations
for a fall to 435,000.
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For graphics, click on:

U.S. jobless claims: r.reuters.com/wyf96q

U.S. personal spending: r.reuters.com/geg96q

U.S. durable goods: r.reuters.com/reh96q
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Claims have broken out of lofty ranges that had held for
much of the year and are now firmly in territory that
economists say suggest solid job creation.

A separate report from the Commerce Department showed
consumer spending rose 0.4 percent in October, just a touch
below the 0.5 percent gain expected on Wall Street.

STRENGTHENING RECOVERY

The jobs and spending data provided further evidence of a
strengthening in economic activity and helped to divert
investors' attention from Ireland's debt crisis. Stocks on Wall
Street were up more than 1 percent in late afternoon trade.

Prices for U.S. government debt tumbled, while the dollar
touched a two-month high against the euro.

Spending is expected to get a boost this Friday, the
traditional start to the holiday shopping season.
[ID:nN23126294]

Consumers' willingness to open their wallets was
highlighted in upscale jeweler Tiffany & Co's (TIF.N) quarterly
results, which beat Wall Street forecasts. [ID:nN22278067]

"It looks like Christmas is coming this year after all, and
holiday spending will be the best since 2006," said Chris
Rupkey, chief financial economist at the Bank of
Tokyo-Mitsubishi UFJ in New York.

Although spending increased last month, inflation continued
to slow, helping to deflect criticism of the Fed's decision to
pump more money into the economy by buying an additional $600
billion worth of government debt.

The consumer spending report showed the Fed's preferred
core inflation measure slipped to just 0.9 percent when
measured from year-ago levels, the smallest gain on records
dating to 1960. Fed officials, who are worried an unexpected
shock could tip the economy into a troubling deflation, want to
see inflation running around 1.7 percent to 2 percent.

SENTIMENT RISES, BUT HOME SALES, PRICES FALL

Economists attributed the rise in the Thomson
Reuters/University of Michigan's final November consumer
sentiment index to both improving labor market conditions and
the lift stocks received from the Fed's so-called quantitative
easing. The index reached 71.6 this month, up from 67.7 in
October. [ID:N24215323]

"It does look like the launch of quantitative easing is
coinciding with a turning point in the U.S. economy. Can we say
there is a direct one-to-one correlation, I don't think we can
say that yet, but the timing sure looks good," said PNC
Financial's Dye.

But an 8.1 percent drop in new homes sales to a 283,000
unit annual rate last month was a reminder of the risks to the
recovery from the worst recession since the 1930s. The median
new home price fell a record 13.9 percent from September to the
lowest level since October 2003. [ID:nN23162240]

The Commerce Department also said durable goods orders
slipped 3.3 percent, the largest decline since January 2009.
Excluding transportation, orders dropped 2.7 percent, the
biggest fall since March 2009.

Though economists were reluctant to read too much into the
data given its volatile nature and the fact that the decreases
followed big gains in September, they were worried that the
drop in orders was almost across the board. [ID:nN23158716]

More concerning, non-defense capital goods orders excluding
aircraft -- a closely watched proxy for business spending --
dropped 4.5 percent after rising 1.9 percent in September.
(Additional reporting by Mark Felsenthal; Editing by Neil
Stempleman)