(Updated with Fed job outlook, personal income and spending data.)

NEW YORK ( TheStreet) -- Stocks were rising Wednesday morning after the Labor Department said unemployment claims last week dropped to the lowest level since July 2008.

The advance figure for seasonally adjusted initial claims decreased by a higher-than-expected 34,000 to 407,000 in the week ended Nov. 20, from the previous week's upwardly revised estimate of 441,000, encouraging hopes that the labor department may be stabilizing. Analysts were expecting initial claims to rise to 442,000, from 439,000 in the previous week, according to consensus estimates from Briefing.com.

The SPDR Dow Jones Industrial Average ( DIA - Get Report) and the SPDR S&P 500 ETF ( SPY - Get Report) were rising 0.9% and 0.8% respectively in while the PowerShares QQQ ( QQQQ) was up 1.5% in early trading.

The number of people filing continuing claims -- those who have been receiving unemployment insurance for at least a week -- came in lower than expected at 4.182 million for the week ended Nov. 13, a decrease of 142,000 from the previous week's revised figure of 4.342 million. Consensus estimates projected continuing claims to drop to 4.295 million.

The 4-week moving average in initial claims, which smoothes the volatility in week-to-week reports, was 436,000, a decrease of 7500 from the previous week's revised average of 443,500. The 4-week moving average in continuing claims was 4.309 million, a decrease of 51,500 from the preceding week's revised average of 4.306 million.

The advance seasonally adjusted insured unemployment rate was 3.3 percent for the week ending Nov. 13, a decrease of 0.1 percentage point from the prior week's unrevised rate of 3.4 percent.

Weekly claims data have largely hovered around the 450,000 level in 2010. For the third week in a row, weekly claims have been below 450,000. The data has not stayed below that level for more than two weeks in a row all year.

A consistent decline in jobless claims rather than wide fluctuations will help ease uncertainty around the jobs market and might serve to improve consumer confidence.

In other economic news, the Bureau of Economic Analysis said Wednesday that personal income and spending in October rose more than expected.

Personal income climbed 0.6% in October after declining 0.1% in September. Real disposable personal income rose 0.3%. Higher incomes translated into higher spending as well, with real personal consumption expenditure also rising by 0.3%. Analysts were expecting personal income and spending to rise by 0.4% and 0.6% respectively, according to estimates by Briefing.com.

Growth in personal income was driven by wage increases. Private wage and salary disbursements increased $33.2 billion in October, compared with an increase of $8.0 billion in September. Government wage and salary disbursements increased $2.5 billion, in contrast to a decrease of $4.6 billion. Other personal income rose $5.1 billion, compared to a $2.8 billion increase in the prior month.

Consumer spending accounts for 70% of GDP. Still, Americans are saving more, with personal saving as a percentage of disposable personal income creeping up to 5.7 percent in October, compared with 5.6 percent in September

The Personal Consumption Price Index increased 0.2%. Excluding food and energy, the index rose less than 0.1%, reinforcing the Federal Reserve's observation that inflation levels are low. The index is up 1.3% over the year, below the Fed's mandate of 2%.

The Fed said it would purchase $600 billion in Treasury securities earlier this month, in a bid to boost growth and employment. Minutes of the November 2-3 policy meeting released yesterday noted that the "progress towards the Committee's dual mandate of maximum employment and price stability as having been disappointingly slow."

Minutes showed that members disagreed on the benefits and effectiveness of quantitative easing, even though they almost unanimously voted for the move. The market's response to quantitative easing has so far been skeptical, with yields on long-term treasury's rising defiantly.

The Fed has said it would monitor economic data closely and may scale back its asset purchases if the economy improves more than expected.

Meanwhile, the Fed's outlook for the economy remains dim for the next two years. Noting sluggish trends in consumer spending and housing and labor market trends, the central bank lowered its GDP growth estimates for 2011 to 3% to 3.6% from its June estimate of 3.5% to 4.2%. GDP growth in 2012 would be in the 3.6% to 4.5% range in 2012 almost in line with earlier estimates.

The Fed expects unemployment rate to drop slowly to 8.9% to 9.1% in 2011 and to 7.7% to 8.2% in 2012.

-- Written by Shanthi Bharatwaj in New York

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