United States initial jobless claims were down 19,000 from the previous week's revised level to 223,000.
It was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labour market.
The unemployment rate was 4.8 per cent in January, close to what economists consider full employment.
That added to comments by the influential head of the New York Fed, William Dudley earlier in the week, which prompted the market's implied probability for a rate rise at the next meeting to rise sharply.
A survey from the US central bank on Wednesday showed the labor market remained tight in early 2017, with some of the Fed's districts reporting "widening" labor shortages. The PCE price index increased 1.6 percent in December.
The Labor Department said there were no "special factors" impacting that week's figures. Only claims for Oklahoma were estimated.
The drop pulled the four-week moving average down to its lowest level since it hit 232,750 in the week ended April 14, 1973. Analysts were looking for a lower figure of 2.065 million.
Claims, which count the number of people who applied for unemployment insurance for the first time in the past week, dropped by more than expected to 223,000.
Smoothing out week-to-week volatility, the four-week moving average fell 6,250 to 234,250 from last week's average of 240,500 (revised down from 241,000).