Analysts expect the labor market to remain weak for the most of this year, as most employers are reluctant to hire until an economic recovery is well under way.
The Labor Department said Thursday that its tally of initial unemployment claims dropped to a seasonally adjusted 610,000 from a revised 663,000 the previous week. That was significantly below analysts' expectations of 655,000 and the lowest level since late January.
The new report has given some economists reason for cautious optimism.
"I'm not suggesting that we are out of the woods completely but, boy, does it look like there's a whole series of economic data that are moving the other way after moving down for so many months in a row," Brian Wesbury, chief economist for First Trust Advisors, told CBS News.
A Labor Department analyst said the decline was partly due to a drop in auto manufacturing layoffs. The four-week average of claims, which smooths out volatility, fell 8,500 to 651,000.
Initial jobless claims reflect the pace of layoffs by companies and are considered a timely, if volatile, measure of the economy. While declining, they remain much higher than a year ago when claims stood at 369,000.
Finding a new job is difficult for those who have been laid off. The total number of people remaining on the jobless benefit rolls rose 172,000, topping 6 million for the first time. That's the highest on records dating from 1967. The figures for continuing claims lag initial claims by one week.
The department also said an additional 2.1 million people were receiving benefits under an extended unemployment compensation program enacted by Congress last year, as of March 28, the latest data available. That provides an additional 20 to 33 weeks on top of the 26 weeks typically provided by the states.
Employers have cut 5.1 million jobs since the recession began in December 2007, as they try to slash costs while consumers and businesses spend less. The department said earlier this month that companies cut a net total of 663,000 jobs in March, sending the unemployment rate to 8.5 percent, the highest in 25 years.
The Federal Reserve expects the unemployment rate will probably "rise more steeply into early next year before flattening out at a high level over the rest of the year," according to minutes from the central bank's March meeting released earlier this month. Many private economists expect the rate will hit 10 percent by year's end.
More job losses were announced this week. UBS AG, Switzerland's largest bank, said it expects a first-quarter loss of about $1.75 billion and will cut 8,700 jobs worldwide by the end of next year. ArcelorMittal SA, the world's largest steel maker, said it will idle a plant in Indiana and lay off about 400 workers. Credit card company Discover Financial Services said it plans to cut 500 jobs next month, or 4 percent of its work force.