Initial jobless claims fell more than expected in the latest week, down 22,000 in the week ending December 14 from the unrevised 242,000 level reported for the prior week. The December 14 week's level came in below the consensus of 230,000 in the Econoday survey of forecasters. The four-week moving average is up 1,250 to 225,500 in the December 14 week, after an unrevised 224,250 in the prior week.

Seasonal factors had expected a drop in unadjusted claims of 57,932 (-18.7 percent) from the previous week, and the actual decline was smaller, -32,854 or -10.6 percent.

There was a noticeable fall in first-time claims filed in California, Georgia, Illinois, Michigan, Minnesota, New York, Pennsylvania, Texas, and Wisconsin.

Insured unemployment dipped by 5,000 in the December 7 week to 1.874 million, from a downwardly revised 1.879 million in the prior week but continuing claims are up by 71,000 from the same week a year ago, again highlighting the drop-off in demand for labor. The four-week moving average is down 6,000 to 1.880 million, after a downwardly revised 1.886 million in the November 30 week. The insured rate of unemployment was 1.2 percent in the December 7 week, same as the prior week and were it has been for most of the year.

The jobless claims data paints the picture of a stagnating labor market where employers are no longer adding to their payrolls in large numbers but are not making significant cuts either. The higher number of continuing claims compared to a year ago underscores the tough conditions facing those searching for new employment.

Claims are expected to retreat a bit to 230K after a surprising pop to 242K last week from 225K 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.