People use computers to look for work at the California Employment Development Department in San Francisco, California September 4, 2009. (REUTERS / Robert Galbraith)

WASHINGTON - The number of U.S. workers filing new claims for jobless insurance fell more-than-expected to a nine-month low last week, according to a government report on Thursday that suggested the labor market was healing despite a setback in September.

Initial claims for state unemployment benefits dropped 33,000 to a seasonally adjusted 521,000 in the week ended October3, the lowest level since early January, the Labor Department said.

Analysts polled by Reuters had forecast new claims slipping to 540,000 last week from a previously reported 551,000. A Labor Department official said seasonal factors expected a decline in new claims at the end of a quarter and a rise at the start of a new quarter.

The four-week moving average for new claims fell 9,000 to 539,750 last week, declining for a fifth straight week. The four-week moving average is considered a better gauge of underlying trends as it irons out week-to-week volatility.

The number of people collecting long-term unemployment benefits fell 72,000 to 6.04 million in the week ended September 26, the latest week for which the data is available. That was the lowest level since late March and was below market expectations for 6.1 million. This measure has trended lower for three consecutive weeks. However, the decline could also indicate many jobless workers have exhausted their benefits.

The four-week moving average of continuing claims dropped 15,750 to 6.1 million. The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, eased to 4.5 percent, the lowest since early April, from 4.6 percent in the week ended September 19.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)