WASHINGTON (Reuters) - New claims for unemployment benefits in the United States fell more than expected last week, pointing to more healing in the nation's battered jobs market.
Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 367,000, the Labor Department said on Thursday.
Job growth has gained momentum in recent months and the unemployment rate dropped to a near three-year low of 8.5 percent in December.
Analysts will be watching Friday's report on January payrolls for insight into what it will mean for policy after the Federal Reserve last week left the door open to additional economic stimulus.
"This is certainly a positive in front of non-farm payrolls and further supports the view that the U.S. economy is creating more jobs with the prospect for a lower unemployment rate," said Michael Woolfolk, a currency strategist at BNY Mellon in New York.
Analysts polled by Reuters before Thursday's data expected the payrolls report would show the unemployment rate holding steady at 8.5 percent.
U.S. stock futures erased losses to turn positive after the data, while Treasury debt prices pared gains.
Economists polled by Reuters had forecast claims falling to 375,000. Claims have been lower than 400,000 for eight of the last 10 weeks, holding below a level associated with labor market healing.
The four-week moving average for initial claims, a trend measure that smooths out volatility, fell 2,000 to 375,750.
"It certainly suggests we will continue to see job growth at the higher end of the recent range (which has been between) 100,000 to 200,000," said Christopher Low, an economist at FTN Financial in New York. "If claims continue to drop then we should see job growth stronger than that."
The Federal Reserve last week acknowledged some improvement in the labor market, but said the jobless rate remained too high and that it would likely keep overnight lending rates near zero until at least late 2014.
Chairman Ben Bernanke, who is due to testify before lawmakers later on Thursday, has said the Fed was mulling further asset purchases to help foster stronger economic growth.
The number of people still receiving benefits under regular state programs after an initial week of aid fell 130,000 to 3.437 million in the week ended January 21, the lowest since September 2008.
Economists had forecast so-called continuing claims at 3.55 million.
The number of Americans on emergency unemployment benefits rose 100,392 to 3.022 million in the week ended January 14, the latest week for which data is available.
A total of 7.67 million people were claiming unemployment benefits during that period under all programs, little changed from the prior week.
A separate Labor Department report showed growth in U.S. nonfarm productivity slowed in the fourth quarter while wages rebounded, although the increase in hourly compensation pointed to only moderate inflation pressures.
Reporting by Jason Lange; Additional reporting by Emily Flitter in New York; Editing by Andrea Ricci