Jobless claims fall by 21,000

WASHINGTON (Reuters) - The number of workers filing initial claims for jobless benefits fell unexpectedly by 21,000 last week, a government report showed on Thursday, suggesting some improvement in the health of the labor market.

First-time claims for state unemployment insurance benefits fell for the third straight week, tumbling to 301,000 in the week ended January 12 from 322,000 for the prior week and to its lowest since September 22, the Labor Department said.

Government securities pared gains in early trade, while stock futures trimmed losses after the surprise drop in new jobless claims.

The fall in new claims defied a Wall Street forecast for a rise to 335,000 from the originally reported 322,000 in the week ended January 5.

"While continuing claims indicate a rising rate of unemployment, initial claims imply the opposite," said Joseph Brusuelas, chief U.S. economist for Ideaglobal in New York.

"This sets up the January non-farm payrolls as the next big data release that will signal if the economy is currently in recession," Brusuelas said.

The four-week moving average of new claims -- a better gauge of labor market trends because it irons out volatility in the week-to-week figures -- also fell for the third straight week, dropping to 328,500 from 340,250 the prior week.

In a sign people are having trouble finding work, the number of so-called continued claims, or those who are still on the benefit rolls after having drawn an initial week of aid, rose by 66,000 to 2.75 million in the week ended January 5, the latest week for which figures were available.

Wall Street forecast continued claims to rise to 2.72 million from the originally reported 2.70 million in the week ended December 29.

The four-week moving average of continued claims rose for the 12th straight week, jumping 28,250 to 2.725 million in the week ended January 5, indicating some workers are struggling to find new jobs.

That was the highest level since mid-November 2005 when the four-week moving average of continued claims were bloated by the aftermath of Hurricane Katrina.