Initial jobless claims came in lower than expected, falling by 7,000 in the week ending February 8 from the revised 220,000 level (previously 219,000) reported for the prior week. The February 8 week's level compares to the consensus of 217,000 in the Econoday survey of forecasters. The four-week moving average is down 1,000 to 217,000 in the February 8 week.

The downside miss this week after the upside miss last week shows why it makes sense to follow the four-week moving average which has held nicely below 220,000 so far in 2025 after moving above that level at the end of 2024. That suggests a labor market more than holding its own, as Federal Reserve officials like to say.

Claims are expected to ease to 217,000 in the latest week after rising unexpectedly by 11,000 to 219,000 a week ago. The four-week moving average last week rose 4,000 to 216,750.

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.