A 'Now Hiring!' sign stands on display next to the Jiffy Lube International booth during a Job News USA career fair in Overland Park, Kansas.

The number of Americans filing applications for unemployment benefits fell more than expected last week, pointing to underlying market strength despite a sharp slowdown in job growth in May.

Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 216,000 for the week ended June 15, the Labor Department said on Thursday. Data for the prior week was unrevised.

Economists polled by Reuters had forecast claims would decrease to 220,000 in the latest week. The Labor Department said no states were estimated. The drop in claims followed three straight weekly increases.

Claims are being closely watched for signs of a rise in layoffs stemming from a recent escalation in trade tensions between the United States and China.

The trade war has increased uncertainty over the U.S. economic outlook, prompting the Federal Reserve on Wednesday to signal it could cut interest rates by as much as half a percentage point over the rest of this year. The U.S. central bank kept rates unchanged on Wednesday.

Fed Chairman Jerome Powell acknowledged the meager job gains in May and said "in light of recent developments this bears watching," but also noted that "many labor market indicators remain strong."

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 1,000 to 218,750 last week.