Initial jobless claims came in lower than expected in the latest week, down 1,000 in the week ending December 21 from the unrevised 220,000 level reported for the prior week. The December 21 week's level came in below the consensus of 223,000 in the Econoday survey of forecasters. The four-week moving average is up 1,000 to 226,500 in the December 21 week, after an unrevised 225,500 in the prior week.

Seasonal factors had expected an increase in unadjusted claims of 23,556 (+9.3 percent) from the previous week, and the actual rise was slightly less, +22,663 or +9 percent.
There was a noticeable rise in first-time claims filed in California, Connecticut, Kentucky, New Jersey, and Tennessee.

Insured unemployment jumped by 46,000 in the December 14 week to 1.91 million, from a downwardly revised 1.864 million in the prior week and continuing claims are now up by 93,000 from the same week a year ago, again underscoring the prolonged softness in the labor market. The four-week moving average is up 3,250 to 1.881 million, after a downwardly revised 1.878 million in the December 7 week. The insured rate of unemployment rose to 1.3 percent in the December 14 week, up from 1.2 percent in the prior week.

The jobless claims data continues to show a stagnating labor market where the pace of hiring has slowed down significantly. The elevated number of continuing claims compared to a year ago underscores the tough conditions facing those searching for new employment.

After an unexpected drop of 22,000 to 220,000 last week, claims are seen rising to 223,000 this week, not far off the four-week moving average of 225,500.

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.