Defying expectations and layoff announcements, initial jobless claims were down 15,000 to 190,000 in the week ended January 14, below even the lowest forecast of 200,000 in an Econoday survey. The last time claims were this low was in the week ended September 24, 2022.

This third consecutive decline brought down the four-week average to 206,000 from an unrevised 212,500 level, the lowest since May 14, 2022. The cumulative decrease over the past three weeks was 33,000, following a net 8,000 decrease the previous three weeks.

The level of insured unemployment benefits was up 17,000 to 1.647 million in the January 7 week, following two weeks of declines totaling 88,000. At 1.673 million, the four-week moving average is the lowest since the December 10, 2022 week. The insured rate of unemployment remained stable at 1.1 percent.

Jobless claims for the January 14 week are expected to rise slightly to 215,000 versus 205,000 and 206,000 in the two prior weeks.

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.