WASHINGTON -- New claims for unemployment insurance fell more than expected last week, evidence the job market is slowly healing as the economy recovers.

Still, many analysts worry the nation could be in for a "jobless recovery" as the unemployment rate rises despite some overall economic growth.

The Labor Department said Thursday that first-time claims for jobless benefits dropped to a seasonally adjusted 502,000 from an upwardly revised 514,000 the previous week. That's the fewest claims since the week ending Jan. 3, and below economists' estimates.

The four-week average, which smooths fluctuations, dropped to 519,750, the lowest in almost a year. It has fallen by more than 20 percent since its peak in the spring.

Economists closely watch initial claims as a gauge of the pace of layoffs. But claims also can provide a signal about the willingness of companies to hire, because laid-off workers able to find jobs are less likely to request benefits.

Many analysts estimate that claims must fall to roughly 450,000 to signal that the economy is adding jobs.

The number of people continuing to claim benefits dropped by 139,000 to 5.6 million, also below analysts' estimates. The figures on continuing claims lag initial claims by a week.

But millions of unemployed Americans have used up the regular 26 weeks of benefits typically provided by states and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government. Congress added 14 to 20 weeks to the extended program last week, the fourth extension since the recession began and the longest total extension on record.

About 4.1 million people were receiving extended benefits in the week ended Oct. 24, little changed from the previous week.

The unemployment rate jumped to 10.2 percent in October, the Labor Department said last week, as employers cut a net total of 190,000 jobs. That's the highest jobless rate in 26 years.

But the economy grew at a 3.5 percent annual rate in the July-September quarter after a record four straight quarterly drops. The disparity between the unemployment rate and economic growth figure has raised fears among many economists that the nation's economy could be in for a "jobless recovery."

More job cuts were announced this week. Adobe Systems Inc., the maker of Photoshop, Flash and Acrobat software products, said it will cut about 680 jobs, or 9 percent of its employees. And internet company AOL LLC, which will soon be spun off from parent Time Warner Inc., laid off about 100 full-time employees, reducing its work force to 6,900.

Among the states, Wisconsin had the highest number of claims, with 1,501, which it attributed to more layoffs in the construction, public administration and manufacturing industries. Illinois, Michigan, Puerto Rico and Texas had the next largest increases. The state data lag initial claims by one week.

California had the biggest drop in claims, with 6,752, which it attributed to fewer layoffs in the construction and service industries. Florida, Georgia, New York and North Carolina had the next largest decreases.