Jobless claims can be choppy this time of year due to hard-to-guage post-holiday layoffs. Initial claims did spike 25,000 in the January 20 week to 214,000 but the 4-week average -- which is especially important to watch during volatile periods -- actually fell a bit to 202,250. It's this latter figure that economists will be keying on when forecasting January payrolls.

Continuing claims in data for the January 13 week rose 27,000 after falling 27,000 in the prior week. The latest level is 1.833 million which is right at this reading's four-week average of 1.835 million. The unemployment rate for insured workers is unchanged at a very low 1.2 percent.

The jump in the latest week's initial claims aside, demand for labor remains very strong. US data on net continue to exceed forecasts as measured by the Relative Performance Index which, boosted by this morning's 3.3 percent GDP performance, stands at 31 to extend a full month of strength.

Jobless claims for the January 20 week are expected to rise back to 200,000 versus 187,000 in the prior week, which was well below the consensus and the lowest since the September 24 week of 2022.

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.