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The number of Americans filing new claims for unemployment benefits declined further last week, while layoffs dropped to their lowest level in just over 21 years in July as companies held on to workers amid a labor shortage.

The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy's health, also showed the number of people on state jobless rolls dropped in late July to its lowest level since March 2020, when mandatory closures of nonessential businesses were enforced to slow the first wave of COVID-19 cases.

Though the data falls outside the survey period for July's closely watched employment report, it bolstered economists' expectations for another month of strong payrolls gains. The employment report for July is due to be released on Friday.

Initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 385,000 for the week ended July 31. Data for the prior week was revised to show 1,000 fewer applications received than previously reported.

The claims report showed the number of people continuing to receive benefits after an initial week of aid dropped 366,000 to 2.930 million during the week ended July 24, the lowest level since the pandemic started. The decline in the so-called continuing claims was led by California, which saw 256,370 people dropping off unemployment rolls.