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US Sees Uptick in Consumer Spending

In this Wednesday, Dec. 12, 2012, photo, Lana Nguyen, right, holds up a shirt while helping friend Chris Ghiathi, left, shop in an H&M store, in Atlanta.
U.S. consumer spending rose two-tenths of a percent in December as incomes grew, according to Commerce Department data realeased Thursday. Some economists say that fits a pattern showing a gradually recovering U.S. economy.

Consumer spending is watched closely because consumer demand drives most U.S. economic activity.

The upbeat spending data may be evidence that an earlier report indicating that the U.S. economy shrank slightly over the past few months was a pause before modest growth resumes.

A separate report showed the number of Americans signing up for unemployment compensation rose by 38,000 to a total of 368,000 applications last week.

​Economists say the jump in jobless claims follows a couple of weeks of improving numbers and probably will not change the unemployment rate, which will be reported Friday and is expected to stay at 7.8 percent.

The unemployment situation has been improving slowly since the end of the recession.

Cornell University economics professor Sharon Poczter said current efforts to cut the jobless rate by cutting interest rates have not worked well.

"We see that almost nothing has changed on unemployment; it is exactly where it was when we started this recession," she said. "We can see that monetary policy alone will not fix unemployment."

Poczter suggested a better approach would be to reform the U.S. education system so high schools better prepare workers for the growing number of high-income, high-tech jobs.

"Our standards for the high school diploma have stayed the same, while the needed skills for those jobs have increased," she said. "So how could it possibly be that the high school diploma is sufficient anymore?"

Poczter said middle class jobs were disappearing and wages for the remaining jobs were falling even before the economic crisis and the recent recession accelerated that trend.