WASHINGTON (MarketWatch) -- First-time claims for state unemployment benefits retreated sharply in the latest week after hitting their highest level since late March in the prior week, the Labor Department said Thursday. The number of initial claims fell 42,000 to 338,000 in the week ended Dec. 21. The consensus forecast of Wall Street economists was for claims to fall to about 345,000. This is the largest drop in weekly claims since November 2012. Analysts cautioned not to read too much into the data owing to difficulties seasonally adjusting the data around the holidays. These distortions can last until the beginning of next year. The four-week average, which tries to smooth-out volatility, rose 4,250 to 348,000. Claims in the previous week were revised to an increase of 11,000 to 380,000 compared with the initial estimate that they climbed 10,000 to 379,000. Also, the government said continuing claims increased by 46,000 to a seasonally adjusted 2.92 million in the week ended Dec. 14. Continuing claims reflect the number of people already receiving benefits.