There's no sign of let up in the US jobs market, a factor that helps explain yesterday's 25-basis-point hike by the Federal Reserve. Initial jobless claims fell 7,000 in the July 22 week to 221,000 for the lowest level since February this year and near the low end of Econoday's consensus range. The four-week average fell nearly 4,000 to 233,750 for its lowest level since May.

Continuing claims in lagging data for the July 15 week fell 59,000 to 1.690 million to pull the unemployment rate for insured workers 1 tenth lower to 1.1 percent for its lowest reading since January this year.

Today's 8:30 run of strong data headlined by stronger-than-expected GDP and including the jobless claims report lifts Econoday's Consensus Divergence Index to plus 46, one of the highest peaks in a strong three-month stretch that underscores yesterday's assessment by Jerome Powell: US economic data are consistently beating expectations.

Jobless claims for the July 22 week are expected to come in at 235,000 versus 228,000 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.