The number of people on unemployment benefits dropped by 3,000 to 302,000 for the week ending July 12, whereas analysts polled by The Wall Street Journal had expected claims to hover around the 310,000 mark.
Jobless claims for the previous week increased by 1,000 to 305,000, with the four week moving average, which is a better indicator because it smooths out any volatility, was down 3,000 to 309,000.
This time of the year claims are seen to be volatile on account of car companies initiating shutdown to change over to new year models and a lot of people are on vacation. But this year car companies have tried to reduce the number of shutdowns needed in order to take advantage of brisk sales.
"The labor market is achieving somewhat better footing" and "housing data in May were showing some signs of revival," said Ellen Hughes-Cromwick, Ford Motor's chief economist. "We've seen very good improvements in manufacturing activity. Consumer sentiment has been in good stead and incomes are gaining ground."
Thursday's numbers show that the total number of Americans continuing to claim unemployment benefits dropped 79,000 to a seasonally adjusted 2.51 million in the week ended July 5.
The improving labor market should make things easier for the Federal Reserve, which has said that it will raise short-term rates only if inflation increases and the labor market improves.
"While we're making progress in the labor market, we haven't achieved our goal," Fed Chair Janet Yellen said in Congressional testimony Tuesday.
Notable deaths of 2014 [PHOTOS]