The Labor Department said Thursday that new applications for unemployment insurance fell to a seasonally adjusted 631,000 last week. That was down from the prior week's 645,000, which was revised slightly higher from the government's initial estimate.
Economists expected a small increase in new claims.
The four-week moving average of initial jobless claims, which smooths out volatility, dropped last week to 637,250, the lowest level since late February and a decrease of about 20,000 from the high in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak.
Still, the number of people continuing to draw unemployment benefits jumped to more than 6.27 million, the highest on records dating back to 1967 and steeper than economists expected.
New filings - as opposed to those who remain on the unemployment compensation rolls - are closely tracked by economists for clues about the future direction of the economy. Analysts want to see a sustained decline in new applications as a sign of improved conditions.
Although last week's drop in new claims was welcome, the level remains elevated and signals a troubled jobs market. The labor market usually doesn't recover until well after a recession has ended. That's because companies won't want to ramp up hiring until they feel certain any recovery has staying power.
The record number of continued claims suggests that many laid-off workers are having trouble finding new jobs.
As a proportion of the work force, the total jobless benefit rolls are the highest since late December 1982. The continuing claims data lag initial claims data by a week.
Besides the continued claims, the report said there were 2.4 million people receiving benefits, as of April 11, under an extended unemployment compensation program enacted by Congress last year. That provides an additional 20 to 33 weeks on top of the 26 weeks typically provided by states.
Workers and companies have been hard hit by the recession, which began in December 2007. It has snatched 5.1 million jobs and pushed the unemployment rate to a quarter-century high of 8.5 percent. It is expected to top 10 percent by early next year before it starts to slowly drift downward.
Companies have laid off workers and resorted to other cost-saving measures to survive the recession, which has eaten into sales and profits.
More job losses were announced this week. Textron Inc. said it will expand layoffs, eliminating 8,300 jobs, or 20 percent, of its global work force as the recession weakens demand for corporate planes. The maker of Cessna planes, Bell helicopters and turf-maintenance equipment earlier this year said it would reduce its work force by 6,200 jobs, or 15 percent, mostly at Wichita, Kansas-based Cessna.
Elsewhere, General Motors Corp. laid out a massive restructuring plan that includes cutting 21,000 U.S. factory jobs by next year. Clear Channel Communications Inc., the largest owner of U.S. radio stations, said it's cutting 590 jobs in its second round of mass layoffs this year. And bearings and specialty steels maker Timken Co. indicated it will cut about 4,000 more jobs by the end of this year after earlier suggesting about 3,000 jobs already had been targeted.
Still, many analysts predict the recession is easing in the current quarter.
The economy is still expected to shrink from April to June, but not nearly as much as it has been. In the first quarter of this year, the economy tumbled at an annualized 6.1 percent drop. That followed a 6.3 percent annualized decline in the final quarter of last year.
Another report showed that the recession is making employers more frugal when it comes to workers' compensation packages. U.S. workers' wages and benefits inched up just 0.3 percent in the first quarter of this year, the smallest gain on records dating back to 1982, the department said.
Among the states, California saw the largest increase in claims with 8,535 for the week ending April 18, which it attributed to more layoffs in the construction and service industries, according to the Labor Department. The next largest increases were in New York, Connecticut, Georgia and North Carolina.
Pennsylvania saw the largest drop in claims with 7,799, which it said was due to fewer layoffs in the construction, service and transportation industries. The next biggest declines were in Florida, Illinois, Ohio and Washington.