Jobless claims are clearing the way for another rate hike! Initial claims fell 6,000 in the January 21 week to a much lower-than-expected 186,000, the lowest level since April last year. The 4-week average is now ratcheting lower, down more than 9,000 to 197,500.

In only a limited offset, continuing claims in lagging data for the January 14 week rose 20,000 to lift the unemployment rate for insured workers a tenth to 1.2 percent, back to where it was in December.

But it will be initial claims, where declines point to future declines for continuing claims, that grab the eyes of Fed hawks who are free to argue that strength in labor demand gives cover to pound down inflation for good.

Jobless claims for the January 21 week are expected to come in at 202,000 versus a very low 190,000 in 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.