Initial unemployment claims broke lower in the September 2 week, falling a sharp 13,000 to a 216,000 level that was last matched in February this year and confirming still very tight conditions in the labor market.

The result puts Econoday's Consensus Divergence Index at plus 31, a level indicating tangible outperformance of US data relative to expectations and further underscoring the risk of a rate hike at the Federal Reserve's September 19-20 meeting.

Continuing claims in lagging data for the August 26 also fell sharply, down 40,000 to 1.679 million to trim the unemployment rate for insured workers back to 1.1 percent where it has mostly held since July.

Jobless claims for the September 2 week are expected to come in at 238,000 after falling 4,000 to 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.