New applications for unemployment benefits dropped to a near four-year low last week, a government report on Thursday showed, pointing to continued improvement in the labor market.

The Labor Department said initial claims for state unemployment benefits dropped 50,000 to 352,000, the lowest level since April 2008 and the biggest drop since September 2005. The prior claims data was revised up to 402,000 from the previously reported 399,000.

Economists polled by Reuters had expected claims to fall only to 385,000. Last week's claims data covered the survey period for January nonfarm payrolls and claims dropped by 14,000 between the December and January survey periods.

Payrolls increased 200,000 in December, with the unemployment rate dropping to 8.5 percent.

A Labor Department official said claims for six states, including California and Virginia, had been estimated owing to the Martin Luther King holiday on Monday. He said there was nothing unusual in the unadjusted data, which showed a sharp decline in claims.

The four-week moving average of claims, considered to be a better measure of labor market trends, dropped 3,500 to 379,000 last week.

The number of unemployed workers still collecting benefits after an initial week aid fell 215,000 to 3.43 million - the lowest since September 2008.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

Unemployment