New U.S. claims for unemployment benefits fell as expected last week, with the four-week moving average dropping to its lowest level in more than 2-1/2 years, pointing to a strengthening labor market.

Initial claims for state unemployment benefits fell 16,000 to a seasonally adjusted 385,000, the Labor Department said.

Economists polled by Reuters had forecast claims falling to 387,000. The prior week's figure was revised up to 401,000 from the previously reported 397,000.

The four-week moving average of unemployment claims -- a better measure of underlying trends - dropped 7,000 to 386,250, the lowest since mid-July 2008 and staying below the 400,000 level for a third straight week.

The claims data covered the survey period for the government's closely watched employment report for March and offered more signs the labor market recovery was gaining traction. Employers added 192,000 jobs in February, the most in nine months.

The Federal Reserve on Tuesday said the economy was on firmer footing with the labor market improving gradually. It also dropped a reference it had used in a statement in January to employers remaining reluctant to add to payrolls.

A Labor Department official said there were no unusual factors affecting the report.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 80,000 to 3.71 million in the week ended March 5, the lowest level since September 2008.

Economists had expected so-called continuing claims to fall to 3.75 million from a previously reported 3.77 million.

The number of people on emergency unemployment benefits declined 58,580 to 3.54 million in the week ended February 26, the latest week for which data is available. A total of 8.95 million people were claiming unemployment benefits during that period under all programs.

Unemployment