Initial jobless claims fell last week to the lowest level since July 2008.

In the week that ended on February 5th, new applications for unemployment insurance totaled 383,000, a decrease of 36,000 from the previous week’s 419,000, according to the Department of Labor.  This drop in claims far exceeded expectations of most analysts who expected a more modest decrease.

The number of claims for jobless benefits roughly indicates the number of workers that are laid off in a given week. Historically, a decrease in initial claims usually precedes a drop in the unemployment rate.

Last week’s drop is a continuation of an overall downward trend in initial claims since the summer of 2009, and a sign of gradually growing economy.

“We’ve had a saw tooth pattern ratcheting downward for the past three months through the holidays and what’s been an incredibly harsh and cold winter,” says Michael Englund, chief economist at Action Economics.

Englund points out that the steady decreasing in initial claims over the last three months coincides with other signs of an improving economy such as rising bond yields and an improving stock market.

The number of jobless claims can vary considerably from week to week depending on weather and holidays. The four-week moving average number of claims, a less volatile measure that softens irregularities caused by severe weather and holidays fell by 16,000 down to 415,500.  The same week last year saw a moving average of 473,500.

“This indication is very encouraging indeed, it exceeded expectations. But it could be a one time blip,” says Diana Fuchgott-Roth, director of the Center for Employment Policy at the Hudson Institute and Chief of Staff of President Bush’s Council of Economic Advisors. “If the trend continues, it will show we are headed towards more job creation.”

Nevertheless, one week’s claims falling below 400,000 is a psychologically significant milestone that might hint at an improving job market, according to Toon van Beeck, a senior analyst at IBIS World.

“We would love to pop open our champagne bottles because of this, but what we are really seeing is continued volatility,” says van Beeck. “Next week, claims might go far above 400,000, but if it consistently stays below that mark, it can spark confidence and employers will be more willing to add to their payrolls.”

The initial claims number comes after the government reported a paltry 36,000 increase in jobs for January.

The number of Americans that are continuing to receive unemployment insurance as of January 29th also fell by 47,000 to 3.88 million.  This number has also been dropping gradually since peaking in March of 2009 at over 6 million.

When taken together with emergency unemployment benefits available in states that meet certain unemployment thresholds, the total number of people receiving some form of unemployment insurance tops 9.4 million.

This number only represents a fraction of Americans that remain unemployed, as not all unemployed workers are eligible for benefits.  A great fraction of the decrease in unemployment insurance recipients represents those whose benefits have been exhausted, but have not necessarily found employment.