New claims for jobless benefits were up 13,000 to 196,000 in the week ending February 4, sightly above the Econoday survey consensus of 192,000, after an unrevised 183,000 in the prior week. The increase partly reversed five weeks of declines (except for one week that was unchanged) totalling 40,000, and is more in line with the layoff announcements of the past few weeks, especially in the tech sector.

The four-week moving average was still down 2,500 to 189,250 in the February 4 week, extending a declining trend that started in the December 10, 2022 week. The four-week average is now at its lowest level since the April 30, 2022 week, although the pace of decrease slowed from 5,750 in the January 28 week and 9,250 the week before.

Insured claims for unemployment benefits rebounded 38,000 to 1.688 million in the week ended January 28 after dropping 16,000 the previous week. The four-week moving average rose 14,500 to 1.651 million in the January 21 week. The insured rate of unemployment for those eligible to receive unemployment benefits ticked up to 1.2 percent after four weeks at 1.1 percent.

It remains to be seen whether today's initial claims increase is the beginning of a longer-term trend that will translate into the monthly employment data that defied all expectations in January. It will take more than a week to comfort the Federal Reserve, especially since Econoday Consensus Divergence Index currently stands at 22, suggesting economic activity has been appreciably stronger than expected.

Jobless claims for the February 4 week are expected to come in at 192,000 versus 183,000 in the prior week which was once again lower than expected.

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.