The spike higher earlier this month in jobless claims has already faded, pointing to strength for next week's employment report for May. Claims had been as high as 232,000 in the May 4 week but settled to 216,000 and 219,000 in the last two weeks, the latter for the May 25 week in today's report. The 4-week average, however, is still elevated, at 222,500 which is more than 12,000 higher than the April 27 week.

In contrast to initial claims, continuing claims have held stable, up only 4,000 in lagging data for the May 18 week to 1.791 million. The unemployment rate for insured workers hasn't shown any movement at all, holding unchanged at 1.2 percent where it has been for more than a year.

The US labor market remains tight and very likely too tight when it comes to the risk of wage inflation and Federal Reserve policy.

Jobless claims for the May 25 week are expected to hold steady at 217,000 versus 215,000 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.