The number of U.S. workers filing new claims for jobless benefits dropped by a much bigger-than-expected 58,000 last week to 346,000 on a seasonally adjusted basis, as there were fewer applications than expected this time of year filed in several states, a Labor Department report showed.
It was the largest one-week drop since September 2005 and the lowest weekly claims tally since the week ended April 19.
Initial claims for state unemployment insurance benefits had been forecast by analysts polled by Reuters to fall to a seasonally adjusted 395,000 for the week ended July 5, from 404,000 the week before.
A Labor Department official said the claims data is volatile this time of year because of auto plant shutdowns and this week's unexpectedly large decline could be offset by increased claim applications in coming weeks.
On an unadjusted basis, new jobless claims rose 8.1 percent last week to 398,432. But Labor Department officials had expected a 26.3 percent rise, so they trimmed the seasonally adjusted number to reflect that.
The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, fell to 380,500 from 390,500 the week before.
The number of people remaining on the benefit rolls after drawing an initial week of aid rose to 3.2 million in the week ended June 28, well above expectations.
It was the 11th straight week that these continued claims were above 3 million, in a sign the slow U.S. economy is make it harder for U.S. workers to find jobs.