New applications for unemployment benefits sank to the lowest level in 42 years, pointing to continued improvement in the labor market.

Initial claims fell by 6,000 to 247,000 in the seven days ended April 16, the Labor Department said. This is the lowest level since the week of Nov. 24, 1973.

Economists were expecting claims to move higher to 265,000. Some were expecting a pick up in claims due to the strike at Verizon Communications Inc. VZ, -0.39%

Analysts said that the The average of new claims over the past month fell 4,500 to a seasonally adjusted 260,500, also close to postrecession lows, the department said.

The four-week average smooths out sharp fluctuations in the more volatile weekly report and is seen as a more accurate predictor of labor-market trends.

The low level of claims is also a sign the U.S. economy was still adding jobs in April at a healthy clip. Low claims usually correlate with strong employment reports.

Some analysts cautioned against reading too much into the data, saying the early Easter continues to distort the seasonal adjustments.

Still, claims are running at levels consistent with robust 200,000 monthly gains in nonfarm payroll employment, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Also read:Most new jobs in U.S. are not crummy

The scarcity of layoffs and steady rate of hiring is at odds with weak gross domestic product. GDP is expected to decelerate in the first quarter from an already tepid 1.4% rate in the fourth quarter.

In addition, there was a negative sign from the factory sector as the Philadelphia Fed’s manufacturing index sank back into contraction territory after improving in March.

See: Philly Fed factory index plunges to -1.6 in April

Gus Faucher, deputy chief economist of The PNC Financial Services Group, said the dichotomy between the two economic indicators is that there is a “sectorial component” to the expansion.

Strength is concentrated in consumer services and construction, while manufacturing is a little soft, he said.

Jim O’Sullivan said the continued improvement in the labor market, along with a pickup in core inflation, would lead to more Federal Reserve tightening “soon - but not next week.”

Fed officials will meet on April 26-27 to plot monetary policy. They are widely expected to hold interest rates steady.

Some 2.14 million people collected weekly unemployment benefits, known as continuing claims, in the seven days ended April 9. That was 39,000 lower compared with the prior week.