Although the large drop is a positive for the ailing labor market, it was likely caused by temporary factors — fewer temporary closures of auto plants.

U.S. automakers, which usually close factories in early July while gearing up to build new models, sending their employees to pick up unemployment insurance, are, instead, ramping up production to meet growing consumer demand.

The four-week average, which is prone to fewer large swings, fell to 376,500, a drop of 9,750.

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All told, there were nearly 5.9 million people claiming state and federal benefits, an increase of 17,011 for the week ended June 23, a two-week lag from Thursday's figures.

Economists argue that initial claims need to be below 375,000 to represent a healthy labor market where there are fewer layoffs and increases in hiring.

Through the winter, employers added workers to their payrolls at a fast clip, but the spring and early summer have seen those figures fall sharply from more than 200,000 a month on average to just around 75,000.

Employers added only 80,000 jobs in June and the unemployment rate remained stuck at 8.2 percent.

Still, economists are expecting job growth to pick up this summer, with estimates ranging upward to 150,000 jobs a month.

Another bright spot this week was a small rise in job openings in May, up to 3.6 million from 3.4 million, a possible sign that hiring will pick up.

Still, 12.7 million are unemployed, and that is pulling the reins on consumer demand, with the combination of high unemployment and stagnant wage growth.

High unemployment depresses consumer spending, which represents 70 percent of economic activity, putting a dent in economic growth and making it more difficult for employers to increase their hiring.