The number of newly laid-off workers filing claims for unemployment benefits dropped unexpectedly last week, a sign the job market is healing as the economy slowly recovers.

New jobless claims have dropped steadily since the fall, raising hopes that the economy may soon begin creating jobs and the unemployment rate could fall. That, in turn, would give households more money to spend and add fuel to the broader economic rebound that began earlier this year.

The Labor Department said Thursday that new claims for unemployment insurance fell by 22,000 to a seasonally adjusted 432,000, the lowest since July 2008. That's much better than the rise to 460,000 that Wall Street economists expected.

The four-week average, which smooths fluctuations, fell for the 17th straight week to 460,250, the lowest since September 2008, when the financial crisis intensified. The crisis led to widespread mass layoffs, which sent jobless claims to as high as 674,000 last spring.

Economists closely monitor initial claims, which are considered a gauge of the pace of layoffs and an indication of companies' willingness to hire new workers.

The number of jobless workers continuing to claim benefits, meanwhile, dropped by 57,000 to 4.9 million, also better than the increase that analysts expected.

But the so-called continuing claims do not include millions of people that 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.

About 4.8 million people were receiving extended benefits in the week ended Dec. 12, the latest data available, an increase of 200,000 from the previous week. The rise is partly a result of another extension of benefits by Congress in November.

Among the states, Michigan had the largest increase in claims, with 8,382, which it attributed to layoffs in the auto industry. California, Florida, Iowa and Missouri saw the next largest increases. The state data lags initial claims by one week.

Tennessee saw the largest decrease, of 2,972, followed by Illinois, Pennsylvania, Georgia and North Carolina.