The number of Americans applying for new unemployment benefits has hit a three-and-a-half year low, raising hopes the U.S. labor market is improving.

The Labor Department Thursday said first time claims fell by 19,000 to 366,000 last week, dropping to a level not seen since May 2008. The four-week moving average – a less volatile reading of jobless claims – also fell .

The data follows a report from the U.S. central bank earlier this week which said the country's economy has grown “moderately.” And earlier this month the U.S. unemployment rate fell to 8.6, the lowest it has been in more than two years.

Other recent reports also suggest the U.S. economy is picking up. A report Thursday from the central bank's New York branch showed manufacturing in that region has expanded to its highest level in seven months.

There are still reasons for concern. Thursday's Labor Department numbers show almost 7 million Americans are still getting some sort of unemployment benefits.

A separate report from the Labor Department showed a slight rise in food prices, pushing overall prices paid to U.S. wholesalers up three-tenths of one percent.