The number of Americans filing initial claims for jobless assistance dropped sharply last week, the government said on Thursday, in a decline suggesting the pace of layoffs had eased.

First-time claims for state unemployment benefits fell 18,000 to 338,000 in the week ended April 24, the Labor Department (search) said, marking the steepest weekly decline since a 28,000 drop in the Feb. 14 week.

Wall Street analysts had forecast claims to moderate to 345,000 from a revised 356,000 the previous week.

Financial markets are on red alert for strong employment news following powerful job creation in March, which raised expectations for a Federal Reserve (search) interest rate hike later this year. March showed 308,000 new jobs were created.

April's employment report is due May 7, but that survey closes mid-month and so will not be influenced by last week's claims numbers.

The four-week moving average of filings, which smoothes weekly fluctuations to provide a better picture of underlying trends, nudged 1,250 lower to 346,500.

The number of unemployed on the benefit rolls after claiming an initial week of aid rose slightly to 3.013 million in the week ended April 17, the latest for which figures are available, from 3.010 million the previous week.