The 37,000 drop in claims was the biggest since the week that ended Feb 6, when claims fell by 51,000. Analysts had expected weekly jobless claims to fall to 420,000.
A Labor Department official said the larger-than-expected decline was partly explained by jobless claims returning to trend after the big rise the earlier week, which may have been skewed by the holiday season.
The four-week moving average of new claims, which strips out short-term volatility, dropped by 4,000 to 411,750.
Continuing claims fell to 3.86 million in the week ended January 8, the lowest level in over two years.
However, the total number of Americans on benefit rolls, including extended benefits under emergency government programs, jumped to 9.6 million in the week ended January 1 from 9.2 million the prior week.