Initial jobless claims came in higher than expected in the latest week, up by 6,000 in the week ending January 18 from the unrevised 217,000 level reported for the prior week. The January 18 week's level compares to the consensus of 218,000 in the Econoday survey of forecasters. The four-week moving average is up 750 to 213,500 in the January 18 week, after 212,750 in the prior week.

The volatility in initial jobless claims continues. Seasonal factors had expected a decrease in unadjusted claims of 75,722 (-21.5 percent) from the previous week's post-holiday surge, but the actual decline was less, -68,135 or -19.3 percent.

There was a noticeable jump in unadjusted first-time claims filed in California not surprising given the devastating LA wildfires. There was a major decline in applications filed in Georgia, Illinois, Kentucky, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania, South Carolina, and Texas.

Insured unemployment increased by 46,000 in the January 11 week to 1.899 million, from a downwardly revised 1.853 million in the prior week and continuing claims are now 138,000 higher compared to the same week a year ago, a continuous reminder of the softening labor market. The four-week moving average is up 500 to 1.866 million, from an upwardly revised 1.865 million in the January 4 week. The insured rate of unemployment remained at 1.2 percent in the January 11 week, continuing the trend seen for most of 2024 and into the start of this year.

The spike in initial claims numbers, plus the elevated level of continuing claims, underlines the lukewarm labor market in which the hiring pace remains moderate.

Claims are expected nearly flat at 218,000 after a bigger than expected increase of 14,000 to 217,000 a week ago. That would compare with the four-week moving average of 212,750. There is often volatility in this series around holiday periods like year end.

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.