The number of people filing initial unemployment claims for the last full week of September dropped to a seasonally adjusted 837,000, a drop of 36,000 from the previous week.
The weekly number remains elevated beyond the worst levels recorded before the COVID-19 pandemic, where it has been for over six months.
But the drop also puts claims at the lowest level they've been since the pandemic arrested the economy in March.
The unadjusted data also saw a significant drop of 40,263, reaching 786,942 in the week ending September 26.
"New unemployment claims in the traditional programs administered by states were down in the latest week, whether looking at the seasonally adjusted or non-seasonally adjusted counts. Still, they remain historically elevated," said Bankrate senior economic analyst Mark Hamrick.
"At the same time, the number of new claims in the Pandemic Unemployment Assistance program rose in the latest week reported," he added, noting 650,000 initial claims in a program that expands eligibility for benefits to the self-employed and gig workers.
On Friday, the Commerce Department will release the official monthly jobs data for September, based on a snapshot from the middle of the month. The report is expected to show a slowdown in the recovery, with unemployment remaining above 8 percent.
Thursday's data on the total number of people claiming benefits, which lags the initial claims numbers by two weeks, found a significant uptick of nearly half a million claimants, reaching 26.5 million.
That's the number of workers who would benefit from Congress renewing extra unemployment benefits that expired in July. House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steve Mnuchin are expected to make a last-ditch attempt to negotiate an agreement on new COVID relief Thursday before Congress disperses ahead of next month's election.
The Department of Labor noted that the data for the week could be somewhat off because California, the largest state by population, paused its processing of initial claims for two weeks in order to reduce its backlog and implement fraud prevention technology. To keep the numbers consistent, the department is using California's claims from last week as a stand-in.