The number of U.S. workers filing new claims for unemployment insurance plunged last week to the lowest level in a year, an encouraging sign amid a sluggish labor market. 

The Labor Department reported Thursday that new claims dropped by a seasonally adjusted 32,000 to 383,000 for the week ending June 1.

But the bigger-than-expected drop might have been exaggerated by seasonal adjustment factors related to the Memorial Day holiday, analysts cautioned.

With last week's decline, new jobless claims have fallen for three weeks straight and are now at their lowest level since May 5, 2001.

The more stable four-week moving average of new claims declined last week to 411,250, the lowest level since late March.

The declines in new claims suggest that the recovery is prompting some companies to ease the pase of layoffs. But other figures indicate that the jobs market remains sluggish.

The number of unemployed workers continuing to draw jobless benefits hovered close to a 19-year high. Workers continuing to collect benefits rose to 3.82 million for the week ending May 25, suggesting there's not a lot of hiring going on.

Even if companies reduce the speed at which they lay off workers, the jobless rate will keep rising if companies are reluctant to hire employees back.

The nation's unemployment rate jumped to 6 percent in April — the highest in nearly eight years.

The government will release May's employment report on Friday and many analysts are predicting the jobless rate will edge up to 6.1 percent, despite the expected addition of 50,000 jobs. The jobless rate will probably go up again because job growth won't be strong enough to take care of more jobseekers streaming into the market, economists say.

Against such a backdrop of sluggish job growth, economists believe the unemployment rate will rise as high as 6.5 percent this summer.

Companies are worried about the recovery's staying power and are reluctant to quickly hire back workers, crank up spending and make other big commitments until they are convinced the turnaround is for real, economists say.

Citing uncertainties about the vitality of the unfolding economic recovery, the Federal Reserve earlier this month decided to leave short-term interest rates unchanged at 40-year lows.

The specter of rising unemployment and a belief that consumers won't have a lot of pent-up demand coming out of the recession were factors in the Fed policy-makers' decision to hold rates steady. Many economists predict the Fed will leave rates unchanged through the summer.

Low rates might motivate consumers, whose spending accounts for two-thirds of all economic activity in the United States, to keep on spending and businesses to step up investment.