WASHINGTON - The number of U.S. workers filing new applications for unemployment insurance fell as expected last week, a government report showed on Thursday, while those continuing to receive benefits dropped to the lowest level in over a year.

Initial claims for state unemployment benefits dropped 29,000 to a seasonally adjusted 469,000 in the week ended February 27, down from an upwardly revised 498,000 the prior week, the Labor Department said.

Analysts polled by Reuters had expected claims to drop to 470,000 from a previously reported 496,000 the prior week. Initial claims data in recent weeks has been distorted by bad weather, making it difficult to gauge the labor market trend.

A Labor Department official said there were no special factors affecting last week's data.

Severe snowstorms hammered much of the country last month, bringing some areas to a standstill and keeping some workers at home. The bad weather will be a drag on the closely watched employment report for February, scheduled for release on Friday, analysts said.

The labor market is being anxiously watched to determine whether the economy's recovery from the worst downturn since the 1930s will be sustained when support from government stimulus and the rebuilding of inventories fade later this year.

The economy has lost 8.4 million jobs since the start of the downturn in December 2007, but the pace of layoffs has dropped sharply from early last year.

The four-week moving average of new claims, which irons out week-to-week volatility, fell 3,500 to 470,750, the Labor Department said.

The number of people still receiving benefits after an initial week of aid dropped 134,000 to 4.5 million in the week ended February 20, the lowest since early January 2009. This measure peaked in June last year and has been steadily declining.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, slipped to 3.5 percent in the week ended February 20 from 3.6 percent.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

Unemployment Fall