Initial jobless claims fell 10,000 in the July 20 week to a slightly lower-than-expected 235,000, a level right in line with the 4-week average which edged marginally higher to 235,500. This average has held in the 230 handle for six consecutive weeks, a range that is up from the 220 and 210 handles earlier in the year but is still consistent with strong demand for labor and a tight labor market.

Continuing claims in lagging data for the July 13 week fell 9,000 to 1.851 million which, like initial claims, is also right at the 4-week average of 1.854 million. This average has also been on the climb and is now at its highest level since late 2021. Nevertheless, the unemployment rate for insured workers remains unchanged at a very low 1.2 percent.

Jobless claims for the July 20 week are expected to come in at 238,000 versus a large jump to 243,000 from 223,000 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.