Initial jobless claims fell 16,000 to 187,000 in the January 13 week from 203,000 in the prior week. The January 13 reading is the lowest since 182,000 in the September 24, 2022 week. It was also well below the consensus of 209,000 in Econoday's survey of forecasters. The four-week moving average fell 4,750 to 203,250 in the January 13 week for its lowest reading since February last year.

Early January can be difficult to seasonally adjust, a period when businesses lay off their seasonal workers from the winter holiday shopping period. Typically, layoffs hit a peak in the first days of January. However, holiday hiring was more modest in 2023 and businesses may be keeping on some temporary employees to fill permanent positions. In the January 13 week, unadjusted claims were under what adjustment factors anticipated. The unadjusted total fell 29,543 to 289,228, or 9.3 percent lower while the seasonal factors looked for a decrease of 1.8 percent.

Continuing claims in lagging data for the January 6 week fell 26,000 to 1.806 million, while unadjusted claims rose 18,454 to 2.122 million. In either case, the movement is consistent with normal week-to-week changes. The adjusted four-week average fell 13,750 to 1.848 million and has been declining steadily, if modestly for the past two weeks. The insured rate of unemployment for workers eligible for unemployment benefits remained at 1.2 percent for the third week in a row.

Jobless claims for the January 13 week are expected to come in at 206,000 versus 202,000 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.