New claims for jobless benefits dropped last week to their lowest level in four months, a positive sign for hiring that could bolster expectations the Federal Reserve will ease its monetary stimulus this year.

Initial claims for state unemployment benefits fell by 24,000 to a seasonally adjusted 334,000, the Labor Department said on Thursday. It was the lowest reading since March and a steeper fall than analysts had expected.

Readings for jobless claims can be volatile in July because many factories close to retool during the period, and it is difficult for the government to adjust the data for seasonal swings because shutdown schedules vary from year to year.

Still, a four-week average of new claims, which smoothes out volatility, fell 5,250 from a week earlier.

"This is still consistent with moderate job growth," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

The data suggested America's labor market is weathering this year's tax hikes and federal budget cuts, which appeared to drag heavily on economic growth during the first half of the year.

The reading also appeared to back the case for the Fed to begin winding down programs to support the economy later this year. The dollar extended gains against the yen, a sign investors were betting on tighter monetary policy in the future.

Thursday's claims data was drawn from the same survey week in which the Labor Department looks at employers' payrolls to estimate how many jobs the economy added during the full month.

Compared to the same survey week in June, the four-week average for claims was 0.7 percent lower last week.

A Labor Department analyst said there was nothing unusual in the data and that no states had provided estimates.

Economists polled by Reuters had expected first-time applications to fall to 345,000 last week. Claims for the prior week were revised to show 2,000 fewer applications received than previously reported.

The U.S. labor market has shown signs of strength in recent weeks, with 195,000 jobs added to payrolls in June. This has fueled expectations the Fed will start reducing the amount of bonds it buys every month, a program aimed at lowering interest rates and encouraging businesses to hire and invest more.

At the same time, Fed Chairman Ben Bernanke has said the Fed would only begin withdrawing its support if the economy improves as much as policymakers expect.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 91,000 to 3.1 million in the week ended July 6.