Initial jobless claims are down 19,000 to 204,000 in the December 31 week after a small downward revision to 223,000 in the prior week. The reading is below the consensus of 225,000 in an Econoday survey. The four-week moving average is down 6,750 to 213,750 in the December 31 week after 220,500 in the prior week. It appears there was no late surge in jobless claims at year-end, although some workers may have delayed filling until after the start of January due to the holiday period. Should there be an upward revision in the coming week's data, it will still be consistent with low levels of claims and a solid labor market.

Insured jobless claims are down 24,000 at 1.694 million in the December 24 week after 1.718 million in the prior week. The four-week moving average is up 6,000 to 1.688 million in the December 24 week, a level that suggests the current reading is about on trend. The insured rate of unemployment is unchanged at 1.2 percent for the fifth week in a row. While levels of insured claims have risen since late November, these appear to have stabilized. The same is the case for the insured unemployment rate which remains only slightly above historic lows and consistent with a tight labor market, at least for workers eligible for unemployment benefits.

Jobless claims for the December 31 week are expected to hold steady at 225,000 from the prior week.

New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smooths out weekly volatility.

Jobless claims are an easy way to gauge the strength of the job market. The fewer people filing for unemployment benefits, the more have jobs, and that tells investors a great deal about the economy. Nearly every job comes with an income that gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so a stronger job market generates a healthier economy.

There's a downside to it, though. Unemployment claims, and therefore the number of job seekers, can fall to such a low level that businesses have a tough time finding new workers. They might have to pay overtime wages to current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because of a shortage of workers. This leads to wage inflation, which is bad news for the stock and bond markets. Federal Reserve officials are always on the look-out for inflationary pressures.

By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation looks threatening, it's a good bet that interest rates will rise, bond and stock prices will fall, and the only investors in a good mood will be the ones who tracked jobless claims and adjusted their portfolios to anticipate these events.

Just remember, the lower the number of unemployment claims, the stronger the job market, and vice versa.