WASHINGTON — The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes. It's the strongest signal yet that the economy has entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.

The much-awaited turnaround reported yesterday by the Commerce Department ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947.

Labor market still weak, but better

WASHINGTON — The number of people claiming jobless benefits for the first time dropped less than expected last week, evidence that the labor market remains weak even as the economy is recovering.

The Labor Department said yesterday its tally of newly laid-off workers seeking unemployment insurance fell by 1,000 to a seasonally adjusted 530,000. Analysts expected a steeper drop to 521,000.

Initial claims need to fall below about 450,000 to signal that employers are actually adding jobs, several economists said. Still, many saw some positive signs in the report.

Consumers buying more brand items

Signs of an improving economy might be in your kitchen or bathroom cupboards.

Consumers are showing a willingness to pay a little more to get Colgate toothpaste, Kellogg's Frosted Flakes and Gillette Fusion shavers. That's good news for the economy and the multibillion-dollar companies that make those products and have been battling to keep shoppers from trading down to store brands to save money.

Procter & Gamble Co., Colgate-Palmolive Co. and Kellogg Co. all gave upbeat earnings reports and even stronger outlooks for next year yesterday, a day that also saw the announcement that U.S. gross domestic product rose for the first time in a year.

Oil companies see rebound of sorts

NEW YORK — Oil companies have begun to pump more petroleum and bring in more profits as they recover from an otherwise miserable year. None of the world's biggest producers, however, sees a quick return to boom times of last year.

America's thirst for fossil fuels dropped considerably during the recession and it hasn't come close to recovering fully.

Exxon Mobil Corp. said yesterday that net income slumped 68 percent to $4.73 billion, or 98 cents per share, when compared with the same July-September period in 2008, the most lucrative ever for the oil industry.