WASHINGTON - The number of Americans filing new claims for unemployment benefits last week dropped to a fresh one-year low, suggesting layoffs were subsiding and strengthening expectations for another month of blockbuster job growth in April as a re-opening economy unleashes pent-up demand.

But the labor market recovery has a long way to go, with the report from the Labor Department on Thursday showing at least 17.4 million people were collecting unemployment checks in early April, a sign that long-term joblessness was becoming entrenched.

"While new layoffs have slowed considerably, they are still nowhere near the level associated with a stable labor market," said Andrew Stettner, senior fellow at The Century Foundation. "The problem isn't that unemployed workers are not accepting jobs, but rather that the number of jobless people far outpaces the number of suitable job openings."

Initial claims for state unemployment benefits decreased 39,000 to a seasonally adjusted 547,000 for the week ended April 17, the lowest since mid-March 2020. Data for the prior week was revised to show 10,000 more applications received than previously reported.

Economists polled by Reuters had forecast 617,000 applications for the latest week.

It was the second straight week that claims were below the 700,000 level since March 2020 when mandatory shutdowns of non-essential businesses like restaurants and bars were enforced to slow the first wave of COVID-19 infections. There were large declines in filings in Texas and New York.

Claims have remained high because of fraud, especially in California and Ohio. The enhancement of the unemployment benefits programs, including a weekly $300 subsidy, could also be encouraging some people to attempt to file a claim for assistance, though not every application is approved.

The latest Labor Department data on first payments show only a fraction of claims were successful over the past months.

The weekly subsidy and the Pandemic Unemployment Assistance (PUA) program will run through Sept. 6.

The unprecedented surge in claims early in the pandemic could also be messing with the model that the government uses to strip seasonal fluctuations from the data. Claims jumped to a record 6.149 million in early April 2020. In a healthy labor market, claims are normally in a range of 200,000 to 250,000.

Including the PUA program, 699,798 people filed claims last week, squeaking below 700,000 for the first time since the pandemic started.

U.S. stocks opened slightly lower after the release of the data. The dollar .DXY was steady against a basket of currencies. U.S. Treasury prices were mixed.

BROAD IMPROVEMENT

The United States has expanded COVID-19 vaccination eligibility to most American adults, and more than half that population has had at least one dose of a vaccine, according to the U.S. Centers for Disease Control and Prevention. A third of U.S. adults are fully vaccinated, as well as 26% of the population overall, it said.

That, together with the White House's $1.9 trillion pandemic rescue package, has allowed for broader economic re-engagement. The resulting surge in demand has left businesses scrambling for workers. Retail sales raced to a record high in March and factories are humming.

Last week's claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of April's employment report. First-time filings have dropped from 765,000 in mid-March.

Claims are generally considered a leading labor market indicator, but they have lagged employment during the pandemic.

While the recent downward trend supports expectations for robust job gains in April, economists are keeping an eye on the number of people receiving benefits under both the regular state unemployment insurance and government-funded programs to get a better read of the labor market's health.

The claims report showed the number of people receiving benefits after an initial week of aid decreased 34,000 to 3.674 million in the week ended April 10.

The so-called continuing claims have declined from 23.1 million at the height of the crisis. Part of the drop is likely because of people finding work and exhausting their eligibility for benefits, which is limited to 26 weeks in most states.

About 5.6 million people were on extended benefits during the week ended April 3, up 447,704 from the prior week. Another 492,999 were on a state program for those who have exhausted their initial six months of aid, down 119,699 from the week before. There were 17.405 million people receiving benefits under all programs during the week ended April 3.

"The unemployment claims data point to another strong jobs report for April despite all the drawbacks with the data," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. "The magnitude of the decline in claims suggests a marked improvement in the economy and the labor market as COVID restrictions continue to be eased."

The economy created 916,000 jobs in March, the most in seven months. Employment, however, remains 8.4 million jobs below its peak in February 2020.

(Reporting by Lucia Mutikani Editing by Chizu Nomiyama and Paul Simao) ((Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters Messaging: lucia.mutikani.thomsonreuters.com@reuters.net))