WASHINGTON -- The number of newly laid-off workers filing claims for unemployment insurance has fallen to the lowest level since early January, a sign the labor market is slowly improving.

The Labor Department said Thursday that first-time claims for jobless benefits dropped to a seasonally-adjusted 514,000 from an upwardly revised 524,000 the previous week. The fifth decline in six weeks was below Wall Street economists' forecasts of 525,000, according to Thomson Reuters.

The four-week average, which smooths fluctuations, fell for the sixth straight time to 531,500.

Economists closely watch initial claims, which are considered a measure of layoffs and the willingness of companies to add jobs.

The steady decline in claims indicates that companies are shedding fewer workers. Many economists expect that job losses will fall below 200,000 in October. That's still a large amount, but would be the fewest in a year.

Employers have eliminated a net total of 7.2 million jobs since the recession began in December 2007, sending the unemployment rate to a 26-year high of 9.8 percent.

Despite the improvement, the weekly tally of jobless claims remains above the 325,000 associated with a healthy economy.

The tally of people continuing to claim benefits dropped by 75,000 to 5.99 million, its first time below 6 million since the week of March 28. Continuing claims data lags initial claims by a week.

Many of those recipients have moved onto extended benefit programs. Congress has added about 53 weeks of emergency benefits on top of the 26 weeks typically provided by states. When extended programs are included, a total of 8.87 million people received benefits in the week ending Sept. 26, the latest week data is available. That's down about 40,000 from the previous week.

Most economists forecast the economy will grow at about a 3 percent pace in the second half of 2009. But they warn that won't be fast enough to bring down the unemployment rate. Federal Reserve Chairman Ben Bernanke has said that even with 3 percent growth, the jobless rate will remain above 9 percent through next year.

Among the states, Pennsylvania had the largest increase in claims, with 3,618, which it attributed to layoffs in the construction, primary metals, furniture and food industries. The next largest increases were in Washington, Wisconsin, Missouri and Texas. The state data lag initial claims by one week.

Florida reported the largest drop in claims, with 5,178, which it attributed to fewer layoffs in the construction, service and manufacturing industries. California, Tennessee, Illinois and Arkansas had the next largest drops.