The number of Americans filing new claims for unemployment benefits last fell sharply to the lowest level in four years, while U.S. import prices fell in June by the most in more than three years, government data showed on Thursday.

Initial claims for state unemployment benefits  dropped 26,000 to a seasonally adjusted 350,000, according to a Labor Department report — a hopeful sign for the struggling labor market.

The drop, which brought new claims to their lowest level since March 2008, was much steeper than Wall Street economists expected. The prior week's figure was revised slightly higher to 376,000 from the previously reported 374,000.

Hiring by U.S. companies slowed dramatically in the second quarter as employers grew worried about Europe's snowballing debt crisis, which is weighing on the global economy. Many employers also are concerned over the possibility the U.S. government may cut spending and let tax cuts expire next year, which could send the economy into recession  .

The level of new claims for unemployment insurance was the lowest since March 2008 — the early days of the 2007-2009 recession.

The fall in claims data suggests that while employers are holding the line on hiring, at least they aren't picking up the pace of layoffs.

That could boost hopes the stalling in job creation might prove temporary.

Still, the jobless claims data had an important caveat. A Labor Department official noted that part of the drop might be due to some auto manufacturers keeping their plants open during the first week of July to meet demand.

Normally plant closures during that week would lead to a spike in jobless claims, but they did not materialize. That suggests part of the strength in the labor market last week might be due to temporary factors.

The four-week moving average for new claims, a better measure of labor market trends, fell 9,750 to 376,500. That is still a significant drop, although the average is only at its lowest since May.

US June Import Prices Tumble

U.S. import prices fell last month by the most in more than three years mostly due to a plunge in the cost of imported oil, further icing inflation pressures.

Overall import prices dropped 2.7 percent, the Labor Department said on Thursday. It was the third straight month of declining prices for goods and services bought abroad.

Import prices have only risen once in the last seven months. June's decline was the steepest since December 2008.

The decline last month was even more than analysts had expected, and could give the U.S. Federal Reserve more scope to ease monetary policy if policymakers think the economy needs it.

The Fed targets annual inflation of 2 percent, and policymakers' preferred measure of inflation showed prices up 1.5 percent in May from a year earlier.

Prices for imported petroleum plunged 10.5 percent, also the sharpest drop since December 2008.