WASHINGTON (MarketWatch) -- The number of people who applied for regular state unemployment-insurance benefits dropped 22,000 to 344,000 in the week ended Feb. 23, the U.S. Department of Labor said Thursday. Even as large federal spending cuts are set to kick in soon through sequestration, the data signal continuing improvement in the labor market, though claims levels could jump going forward as workers are cut. Economists surveyed by MarketWatch had expected an initial-claims level of 362,000 for the most recent weekly data. The government revised claims for the week ended Feb. 16 to 366,000 from a prior estimate of 362,000. The average of new claims over the past month, which smoothes out weekly volatility, fell 6,750 to 355,000. The government also reported that continuing claims dropped 91,000 to 3.07 million in the week ended Feb. 16, hitting the lowest level since June 2008. The four-week average of these continuing claims fell 35,500 to 3.16 million, the lowest level since July 2008. Continuing claims reflect the number of people already receiving benefits.