Initial claims unexpectedly fell 26,000 to 239,000 in the week ended June 24, far below even the lowest forecast of 265,000 in an Econoday survey, which would have left claims unchanged. The decline came after five consecutive weeks of increases that lifted the level by 40,000.

Yet with three weeks of prior gains, including 29,000 in the June 3 week, the four-week average increased to 257,250 from 256,000 the previous week, reaching its highest level since November 13, 2021. But this will be of little comfort to the Federal Reserve given that gains slowed in the prior two weeks and were followed by the June 24 drop that points to a resilient labor market.

Continuing claims in lagging data for the June 17 week were also down, by 19,000 to 1.742 million, following an 11,000 drop the previous week. This is the lowest level since the February 18 week. Nonetheless, the unemployment rate for insured workers held at 1.2 percent for the ninth consecutive week.

Today's lower-than expected claims came as the first quarter GDP growth rate was revised upward to 2.0 percent in a final estimate compared to a consensus of 1.4 percent. As a result, Econoday's Consensus Divergence Index rose to 58, pointing to an economy running well ahead of expectations, calling for further action from the Fed.

Jobless claims for the June 24 week are expected to come in at 270,000 versus a second straight and noticeably elevated 264,000 in the two prior weeks and 262,000 the week before that.

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.