Initial jobless claims fell again, are down 12,000 in the week ending October 26 week following a slight upward revision to 228,000 from 227,000 in the prior week. The October 26 level is nowhere near the 235,000 consensus in the Econoday survey of forecasters. The four-week moving average is down 2,250 to 236,500 in the October 26 week, after a revised 238,750 in the prior week.

The fall in initial claims was unexpected, with many analysts predicting a higher number due to residual effects of Hurricane Helene and the impact of the ongoing strike activity at Boeing. Seasonal factors had expected an increase in unadjusted claims of 7,292 (or 3.6 percent) from the previous week.

There was a noticeable drop in claims filed in California, Florida, and North Carolina, while New York saw the largest increase.

Insured unemployment is down 26,000 in the October 19 holiday week to 1.862 million, after a revised 1.888 million in the prior week still a sign of the ongoing softness in the labor market. The four-week moving average is up 10,750 to 1.870 million, after 1.859 million in the October 12 week. The insured rate of unemployment remained steady at 1.2 percent in the October 19 week and has seen almost no variation since March 2023.

The initial jobless claims data continues to be volatile, moving out of step with economists' expectations. The elevated number of those who continue to receive unemployment benefits, however, underscores the difficulty in finding new employment. The Federal Open Market Committee will likely focus on this aspect of the data in its assessment of the labor market's health when it meets next week.

Claims have receded to the range the market was familiar with before work stoppages and hurricanes skewed claims higher in the first part of October. The consensus looks for 235,000 in the latest week versus 227,000 in the week of October 19.

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.