* Initial jobless claims fall 37,000 last week
* Second-quarter GDP growth revised up to 1.3 percent
* Consumer spending, exports stronger than earlier thought
* Third-quarter GDP growth could top 2 percent
(Updates markets close)
By Lucia Mutikani
WASHINGTON, Sept 29 The chances of the U.S.
economy averting a new recession got a boost on Thursday with
claims for jobless benefits falling to a five-month low last
week and growth a touch stronger in the second quarter than
Initial claims for state unemployment benefits fell 37,000
to 391,000, the Labor Department said, well below economists'
expectations for 420,000. But the department cautioned that the
way it adjusts the data for seasonal fluctuations may have
overstated the strength.
Separately, the Commerce Department said U.S. gross
domestic product grew at an annual rate of 1.3 percent in the
second quarter, up from the previously reported 1.0 percent.
Consumer spending and export growth both were stronger than
"When you connect these data points together, they indicate
a very tepid recovery. We are still experiencing positive
growth, which is better than we feared a few months ago," said
Paul Ballew, chief economist at Nationwide in Columbus, Ohio.
The cautious optimism generated by the data was tempered
somewhat by a report showing the housing sector remained on the
rocks last month.
Investors on Wall Street welcomed the claims and growth
data and increasing confidence in Europe's response to its debt
crisis. U.S. stocks ended mostly higher, with the Standard &
Poor's 500 index .SPX gaining 0.81 percent.
Prices for the 30-year U.S. Treasury bond US30YT=RR rose,
while the dollar rose marginally against a basket of other
major currencies .DXY.
INSTANT VIEW - US jobless claims fall [ID:nS1E78S088]
Graphic - U.S. jobless claims, year to date:
Graphic - U.S. Q2 GDP revised up to 1.3 percent
Graphic - U.S. pending home sales
FED READY TO ACT AGAIN
Haggling in Washington over budget policy and the deepening
debt crisis in Europe had eroded confidence, leaving the U.S.
economy on the brink of a new recession.
A survey of U.S. chief executives released by the Business
Roundtable on Thursday showed their views of the economy's
prospects deteriorated in the third quarter, with the number
who expect to cut jobs roughly doubling. For more see
Faced with a weak recovery, the Federal Reserve last week
announced a new measure designed to push long-term borrowing
costs lower by shifting assets on its balance sheet to longer
In a speech on Wednesday, Fed Chairman Ben Bernanke said
the U.S. central bank might need to ease monetary policy
further if inflation or inflation expectations fell
The drop in initial claims for unemployment benefits took
them below 400,000 for the first time since early August. The
department, however, said the weakness in the labor market in
recent years may have led the model it uses to seasonally
adjust the data to overstate last week's drop.
The decline also reflected the fading impact of Hurricane
Irene, which had caused claims to spike in the Sept. 10 week.
Still, the total number of unemployed continuing to claim
benefits after an initial week of aid fell to 3.73 million in
the week ended Sept. 17 from 3.75 million a week earlier.
The Sept. 17 week corresponds with the survey period for
the department's household employment measure, which is used to
construct the national unemployment rate.
RECESSION FEARS EASE
In August, the jobless rate remained stuck at 9.1 percent,
with a separate survey of employers showing hiring ground to a
halt, which ratcheted up recession fears.
Those worries are beginning to fade. Factory output
continues to expand and businesses have maintained their
appetite for spending on capital goods.
"Indications are that the third quarter is doing better
than previously thought. We now anticipate third-quarter real
GDP growth of just above 2 percent," said Nigel Gault, chief
U.S. economist at IHS Global Insight in Lexington,
Housing, however, remains a weak spot.
The National Association of Realtors said its index of
pending home sales, based on contracts signed in August, fell
1.2 percent to 88.6, its lowest since April.
NAR said contract signings, which usually precede actual
closings by a month or two, were held back by tight credit and,
in the Northeast, by Hurricane Irene.
With millions of Americans locked into mortgages worth more
than their homes, historically low interest rates are failing
to lift sales. Freddie Mac said on Thursday that the average
rate on U.S. 30-year fixed rate mortgages fell to a record low
4.01 percent this week.
(Additional reporting by Jason Lange; Editing by Andrea Ricci
and James Dalgleish)