Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 221,000 for the week ended June 29, the Labor Department said on Wednesday.

Data for the prior week was revised to show 2,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims dropping to 223,000 in the latest week. The Labor Department said only claims for Virginia were estimated.

Claims data could become volatile in the coming weeks as auto manufacturers temporarily shut down assembly plants for summer retooling.

Companies implement the plant closures at different times, which can throw off the model the government uses to remove seasonal fluctuations from the data.

Claims continue to be watched for signs of an increase in layoffs stemming from trade tensions between the United States and China.

Rising risks to economic growth from the trade war, and low inflation, prompted the Federal Reserve to signal last month interest rate cuts as early as at its July 30-31 meeting.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 500 to 222,250 last week.

The claims data has no bearing on June's employment report, which is scheduled for release on Friday.

Nonfarm payrolls probably increased by 160,000 jobs last month after rising by only 75,000 in May, according to a Reuters survey of economists.

The unemployment rate is forecast unchanged near a 50-year low of 3.6pc in June for a third straight month.

The economy is slowing as last year's massive stimulus from tax cuts and more government spending fades.

Manufacturing is struggling, the trade deficit is widening again, consumer confidence is ebbing and the housing sector remains mired in a soft patch.

The Atlanta Fed is forecasting gross domestic product to rise at a 1.5pc annualized rate in the April-June quarter.

The economy grew at a 3.1pc pace in the first quarter following a temporary boost from exports and an accumulation of inventory.

Thursday's claims report also showed the number of people receiving benefits after an initial week of aid fell 8,000 to 1.69 million for the week ended June 22.

The four-week moving average of the so-called continuing claims slipped 1,750 to 1.69 million.