The number of Americans filing new jobless claims fell below one million for the first time since March.
About 963,000 people applied for benefits last week, up from nearly 1.2 million the week before, the labor ministry said.
The numbers have declined from their peak of 6.9 million in late March.
But they remain extremely high, sparking debate in Washington about the need for further stimulus.
More than 28 million people – nearly one in five U.S. workers – were still receiving benefits during the week ended July 25, the Labor Department said.
Before the pandemic, the highest number of new jobless claims recorded in a week was 695,000, established in 1982.
“Another larger than expected drop in jobless claims suggests that the employment recovery is picking up some momentum, but with a staggering 28 million workers still claiming some form of unemployment benefit, it There is still a long way to go in the job market, ”said Lydia Boussour, Senior US Economist at Oxford Economics.
Hiring in the United States slowed last month as the country struggled to contain the coronavirus, with employers adding 1.8 million jobs, up from 4.8 million in June.
The unemployment rate was 10.2%, down from 14.7% in April, but still higher than the 10% peak in the 2007-2009 financial crisis.
Economists say the trajectory of the economic recovery remains uncertain, and likely to worsen after an emergency $ 600 increase in unemployment benefits, intended to supplement payments during the pandemic, expired last month.
Talks in Washington over additional stimulus collapsed last week without a deal.