The number of new people signing up for jobless benefits dropped sharply last week, offering an encouraging sign for the health of the labor market.

The Labor Department (search) reported Thursday that new applications filed for unemployment insurance declined by a seasonally adjusted 20,000 to 321,000 for the week ending May 14. The decline, larger than expected, pleased economists.

The four-week moving average of claims, which smooths out week-to-week fluctuations, rose last week to 329,750, an increase of 5,500 from the previous week. Even with the rise, the level of claims still pointed to a job market that is improving, analysts said.

A government report released earlier this month showed that hiring around the country picked up briskly in April. Employers boosting payrolls by 274,000, raising hopes of better days ahead for jobseekers and the economy as a whole. The unemployment rate held steady at 5.2 percent.

While the economy has been moving solidly ahead, the labor market's improvements have been uneven sometimes.

Still, the improvements that are being made on the jobs front have been sufficient to keep the Federal Reserve (search) on its path of gradually raising short-term interest rates. The Fed has boosted interest rates eight times -- each in quarter-point moves -- since last June to keep inflation and the economy on an even keel.