Initial jobless claims came in lower than expected in the latest week, dropping by 13,000 in the week ending May 3 from the unrevised 241,000 level reported for the prior week. The May 3 week's level compares to the consensus of 232,000 in the Econoday survey of forecasters. The four-week moving average is up by 1,000 to 227,000 in the May 3 week.

Seasonal factors had expected a decline in unadjusted claims of 4,584 (-2.0 percent) from the previous week, but they actually plunged by 16,972 (-7.6 percent), instead.

Michigan (+6,906) was the only state with a noticeable increase in unadjusted first-time claims. Massachusetts (-3,992), New Jersey (-3,560), and New York (-15,089) all reported significant declines.

Insured unemployment fell by 29,000 in the April 26 week to 1.879 million from a downwardly revised 1.908 million in the prior week but continuing claims are higher by 93,000 compared to the same week a year ago, an constant reminder of labor market weakness. The four-week moving average is up by 8,750 to 1.875 million, from a revised 1.866 million in the April 19 week. The insured rate of unemployment dipped to 1.2 percent in the April 26 week.

Initial claims numbers dipped in the final week of April/beginning of March, but the persistently high level of continuing claims (yet to drop below 1.8 million since May 2024) underscores the growing uncertainty around the economic outlook highlighted in the May 7 FOMC statement.

Claims seen back down to 232K from a high 241K in the previous week. If claims hold around the new higher level, will give pause about the resilient labor market.

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.