Jobless claims declined for a second consecutive week to 215,000 in the week ended May 18, within the range of expectations and slightly below the consensus of 220,000 in an Econoday survey. The previous week was virtually unrevised at 223,000 from 222,000 initially reported.

At 219,750, the 4-week average reached its highest level since the September 16, 2023 week. While May 18 marked the third consecutive advance, the pace of increases continued to slow down: the 4-week average was up 1,750 in the May 18 week after rising 2,750 the previous week and 5,000 the week before.

Continuing claims in lagging data for the May 11 week rose 8,000 to 1.794 million, after rising 5,000 the previous week and 13,000 in the April 27 week. The 4-week average was up to 1.782 million from 1.777 million. The increases of the past three weeks totaling 26,000 haven't been enough to move the unemployment rate for insured workers, which remained at 1.2 percent in the May 11 week where it has been for the past year.

Jobless claims for the May 18 week are expected to edge down to 220,000 from 222,000. Claims have moved higher the last couple of weeks.

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.