US jobless claims tumble

New claims for US unemployment insurance benefits tumbled last week, continuing to point to a tightening labor market as the Federal Reserve mulls an interest rate hike, government data released Thursday showed.

Initial jobless claims dropped by 11,000 to 264,000 in the week ending September 12, the Labor Department said.

The sharp decline pulled the four-week moving average down by 3,250 to 272,500. A year ago the average was 300,000.

The improving labor market is a key factor supporting the Fed's plan to raise its zero-level federal funds rate this year.

The unemployment rate fell to 5.1 percent in August, a fresh six-year low, but job growth slowed as employers appeared unwilling to beef up payrolls.

The Federal Open Market Committee, the central bank's policy arm, is due to announce its rate decision at 1800 GMT Thursday.