WASHINGTON, Dec 30 (Reuters) – New U.S. claims for jobless said hit their lowest level in more than two years last week and factory activity in the Midwest grew in December at its fastpace since 1988, evidence the recovery was gaining steam. Views economic activity accelerated in the fourth quarter were hardened by another report on Thursday showing pending sales of previously owned homes rose more than expected inNovember, even though the housing market remains in distress. Initial claims for state unemployment benefits fell 34,000to a seasonally adjusted 388,000, the lowest reading since early July 2008, the Labor Department said. That was well below economists’ expectations for 415,000. Separately, the Institute for Supply Management-Chicago’sbusiness barometer jumped to 68.6 from 62.5 in November,beating economists’ expectations for a dip to 61.0. A reading above 50 indicates expansion in the regional economy. Although analysts said the data could have been distorted by the Christmas holiday season, the reports still backedperceptions the recovery from the worst recession since the1930s was gaining traction after a pause earlier in the year. “There’s a certain seasonal bias in some of these things… but there’s no denying that the economy is improving,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. Signs the economy was improving helped to push prices forU.S. government debt lower, while the dollar rose to a session high against the yen. Stocks on Wall street were little changed.