Initial jobless claims came in higher than expected in the latest week, rising by 11,000 in the week ending February 1 from the revised 208,000 level (previously 207,000) reported for the prior week. The February 1 week's level compares to the consensus of 215,000 in the Econoday survey of forecasters. The four-week moving average is up 4,000 to 216,750 in the February 1 week, after 212,750 in the prior week.

Initial jobless claims data continues its unpredictable streak. Seasonal factors had expected a minor decline in unadjusted claims of 208 (-0.1 percent) from the previous week, but instead they jumped 11,370 (+5 percent), instead.

There was a large rise in unadjusted first-time claims filed in California where continuing claims also remain elevated following the devastating LA wildfires, and New York.

Insured unemployment increased by 36,000 in the January 25 week to 1.886 million, from a downwardly revised 1.850 million in the prior week. Continuing claims are 73,000 higher compared to the same week a year ago, pointing to increased labor market softness. The four-week moving average is up 2,250 to 1.872 million, from a revised 1.870 million in the January 18 week. The insured rate of unemployment remained at 1.2 percent in the January 25 week.

Looking through the noise of the initial claims numbers, the high level of continuing claims (which still have not dropped below 1.8 million since June 2024), underlines why the Federal Reserve views the risks to its dual mandate as"roughly in balance."

Claims sank by 16,000 to a low 207,000 last week and are expected to rebound to 215,000 this week, back above their four-week moving average of 213,000.

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.