A year ago, the number of people continuing to draw jobless benefits was 2.7 million.
The department's report also showed that the number of newly laid-off workers filing first-time applications for jobless benefits dropped by a seasonally adjusted 94,000 to 492,000 for the week ending Dec. 27.
That decline, however, didn't signal any improvement in labor conditions. The drop - while bigger than economists expected - was mostly related to seasonal adjustment difficulties and reflected some out-of-work people not making it to unemployment offices to file claims over the Christmas holiday, analysts said.
Even with the drop, new filings remained elevated. A year ago, claims stood at 339,000.
Similarly, the four-week moving average of first-time jobless claims, which smooths out week-to-week fluctuations, fell last week to 552,250, a decrease of 5,750 from the prior week. A year ago, this figure was 344,500.
Economists expected so-called "continued" claims to rise to around 4.38 million, and that first-time applications for unemployment benefits would drop to around 550,000.
On Wall Street, investors took some comfort in the drop in first-time unemployment claims. The Dow Jones industrials were up about 60 points in morning trading.
Next week's jobless claims report is likely to be distorted by another shortened holiday week because of New Year's Day, analysts said.
"The bottom line here is that it probably won't be until mid-January that we begin to get a clear picture of what claims are saying," said Abiel Reinhart, economist at JPMorgan Chase Bank.
Employers have slashed payrolls as they scramble to cut costs. The deepening recession, disappearing jobs, shriveling nest eggs and tanking home values have forced consumers to cut back, which is hurting businesses.
Atlanta-based Interface Inc. on Tuesday said it will lay off about 530 employees to cope with weakening demand for its carpet products.
Other companies that announced mass layoffs recently include: technology services provider Unisys Corp., pharmaceutical company Bristol-Myers Squibb Co., International Paper Co. and Bank of America Corp.
The unemployment rate in November jumped to 6.7 percent, a 15-year high, as employers eliminated a staggering 533,000 jobs in that month alone. Since the recession began in December of 2007, the economy has lost nearly 2 million jobs.
Spurring job creation is a key priority for President-elect Barack Obama, who takes over on Jan. 20. He is contemplating a massive package of government spending and tax cuts to stimulate the economy.