The Labor Department said Thursday that initial claims for unemployment insurance dropped to a seasonally adjusted 530,000 from an upwardly revised 551,000 the previous week. Wall Street economists expected claims to rise by 5,000, according to a survey by Thomson Reuters.
The four-week average, which smooths out fluctuations, dropped to 553,500. That's the lowest since late January, though still far above the 325,000 weekly claims typical in a healthy economy.
Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies' willingness to hire new workers.
The four-week average has fallen by about 100,000 since reaching a peak for the current recession in early April. Economists say initial claims below 400,000 would be a signal that employers are adding to the net total of jobs.
The number of people continuing to claim benefits for more than a week dropped 123,000 to a seasonally adjusted 6.14 million.
But when federal emergency programs are included, the total number of jobless benefit recipients was about 9 million in the week that ended Sept. 5, down slightly from the previous week. Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states. The House this week approved legislation that would add another 13 weeks in high-unemployment states.
The large number of people remaining on the rolls shows unemployed workers are having a hard time finding new jobs.
Most analysts expect the economy, bolstered by government stimulus efforts, will grow at a healthy clip in the current July-September quarter, technically ending the recession. But many economists also agree with Federal Reserve Chairman Ben Bernanke, who said earlier this month that growth isn't expected to be strong enough to reduce the jobless rate for some time.
Employers are still reducing payrolls. The department said earlier this month that companies cut 216,000 jobs in August, a large amount but still the smallest in a year. The unemployment rate jumped to 9.7 percent, the highest in 26 years, from 9.4 percent.
The recession, which began in December 2007 and is the worst since the 1930s, has eliminated a net total of 6.9 million jobs.
More job cuts were announced this month. Health insurer WellPoint Inc. said this week it may eliminate more positions in an effort to become more efficient, though the company did not provide details.
Drugmaker Eli Lilly & Co. said last week that it will cut 5,500 jobs over the next two years, or 14 percent of its work force.
Among the states, Wisconsin reported the largest increase in claims, with 1,573, which it attributed to layoffs in the construction and manufacturing industries. Oregon and Kansas reported the next largest increases. State data lag the initial claims figures by a week.
Texas reported the largest drop in claims of 4,623, which it said was due to fewer layoffs in the service and manufacturing industries. Illinois, Pennsylvania, Michigan and Massachusetts reported the next largest drops.