Benefit claims dropped by 14,000 to 289,000 for the week ending on August 2, according to data from the Labor Department. The four-week average dropped to 293,500 --the lowest it has been since February 2006 -- from 297,500 the previous week.
Economists surveyed by Bloomberg estimated claims to increase to 304,000.
Jobless claims are an indicator of whether layoffs are rising or dropping. A drop in the number of claims usually suggests that there are fewer layoffs and the economy is producing jobs.
Companies have been retaining employees as the economy steadily improves and orders continue to increase on the back of consumer spending and demand.
"Demand for labor is continuing to improve -- we see that in virtually every report," said Russell Price, senior economist at Ameriprise Financial. "The current level of layoffs is very low and consistent with a pretty healthy job market."
The Federal Reserve has said that underutilization in the labor market is worrisome and could delay any move from the central bank to increase short-term interest rates. But as the job market continues to show improvement with the economy growing at a brisk 4 percent in the second quarter, economist expect the Fed to raise rates early 2015.