(Unemployment article updated with analyst commentary.)

NEW YORK ( TheStreet) --The number of Americans filing new claims for unemployment benefits dropped by a better than expected 27,000 last week according to a labor department report released early Thursday.

Initial claims fell to 451,000 in the week ended Sep.4, from the previous week's revised figure of 478,000. The figure was a much bigger drop than expected, despite the upward revision in the previous week's figure. Consensus expected initial claims to fall by 2,000 to 470,000 from the prior level of 472,000.

The number of people filing continuing claims -- those who have been receiving unemployment insurance for at least a week -- fell to 4.478 million for the week ended Aug. 28 , a decrease of 2,000 from the previous week's revised figure of 4.480 million. Consensus estimates expected continuing claims to dip to 4.445 million.

The 4-week moving average in initial claims, which smoothes the volatility in week-to-week reports, was 477,750, a decrease of 9,250 from the previous week's revised average of 487,000. The 4-week moving average in continuing claims was 4.488 million.

Last week, the labor department announced that non-farm payrolls lost 54,000 jobs and that the private sector added 67,000 jobs. The job loss figure, much lower than expectations, boosted investor sentiment.

"Given the flood of soft economic data that we've seen in recent months, the continued improvement in jobless claims is encouraging as it reinforces the reversal of the negative trend that had been in place," wrote Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors, in a research note.

Baird believes that job creation is still below the pace of new entrants in the workforce. "The cloud of uncertainty that hangs over the economy continues to restrain employers from going "all in" on expansion plans and aggressively ramping up their workforce," he wrote.

-- Written by by Shanthi Venkataraman in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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