US jobless claims down while trade deficit narrows, according to Labor Dept.

The bullish labor market tone was also underscored by news that more people are coming off the unemployment benefits rolls.

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market continues to expand at a solid clip even as economic growth has stalled.

Sustained labor market strength supports views that the sharp slowdown in activity is probably temporary. A host of factors ranging from bad weather to a strong dollar has sucked momentum from the economy in the first quarter.

Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 268,000 for the week ended March 28, the Labor Department said on Thursday.

That was the lowest level since January and confounded economists' expectations for a rise to 285,000.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 14,750 to 285,500 last week.

The bullish labor market tone was also underscored by news that more people are coming off the unemployment benefits rolls.

The number of people still receiving benefits after an initial week of aid fell 88,000 to 2.33 million in the week ended March 21, the lowest reading since December 2000.

The strong labor market should keep the Federal Reserve on track to start raising interest rates this year.

The dollar rose to a session high against the yen, while prices for US Treasury debt fell. US stocks were poised to open slightly lower.

While the claims report has no bearing on Friday's March employment report as it falls outside the survey period, it should help allay fears of a long-lasting moderation in growth.

Nonfarm payrolls likely increased 245,000 last month, with the unemployment rate holding steady at a more than 6-1/2 year low of 5.5 percent, according to a Reuters survey of economists.

The economy has been hampered by weaker global demand and a now-settled labor dispute at the West Coast ports, as well as a strong dollar and a harsh winter.

First-quarter growth estimates range between a 0.6 percent and 1.7 percent annual pace. The economy grew at a 2.2 percent pace in the fourth quarter.

The estimates, however, could be raised after a separate report from the Commerce Department showed the trade deficit narrowed 16.9 percent to $35.4 billion in February, the smallest since October 2009.

Economists had forecast the trade deficit slipping to $41.2 billion. When adjusted for inflation, the deficit narrowed to $50.8 billion in February from $54.6 billion the prior month.

The West Coast ports dispute appears to have slowed the flow of imports and exports. The buoyant dollar, sluggish global demand as well as lower crude oil prices also likely impacted the trade balance in February.

In February, imports tumbled 4.4 percent to $221.7 billion, the lowest since April 2011. Imports of petroleum products were the lowest since September 2004.

Exports fell 1.6 percent to $186.2 billion in February, the smallest since October 2012.

Exports to Canada and Mexico - the main US trading partners - fell in February. Exports to China tumbled 8.9 percent, while those to the European Union were unchanged.

Imports from China plunged 18.1 percent, pushing the politically sensitive U.S.-China trade deficit down 21.2 percent to $22.5 billion.