That number was down 29,000 from the previous week.
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New claims were far below Wall Street expectations for 413,000 applications, and the lowest since the week of Feb. 8. It was also the first time since then that initial claims were below the critical 400,000 mark, a level viewed by economists as the sign of a soft jobs market. Claims had been above 400,000 for 22 straight weeks.
Still, a Labor spokesman urged caution in reading too much into one week's figure, saying "it is not uncommon for the series to exhibit volatility during July because of traditional temporary layoffs in industries such as automobiles, textiles and apparel."
The unexpectedly steep drop in claims cheered analysts, and the U.S. dollar maintained initial moderate gains on the data, while Treasuries were off a bit.
"It suggests that we may have hit a peak in the unemployment rate but as (Federal Reserve (news - web sites) Chairman Alan) Greenspan suggested, we have to be careful of the July data because of distortions," said Ian Morris, chief economist at HSBC Securities.
"We need to wait to see what the underlying trend is over the next few weeks, but this is a very hopeful start for those economists looking for a bounce back in the second half," Morris said.
Good for those 29,000 who didn't lose their jobs.