Initial claims numbers saw a minor increase after declining in each of the previous six weeks, and remains at a comfortably low level. However, the persistently high level of continuing claims (above 1.9 million for ten straight week) supports the argument made by Fed officials such as Christopher Waller who believe the central bank should cut interest rates sooner to support a weak labor market.

Initial jobless claims came in below expectations, with the level reported in the week ending July 26 up 1,000 from the unrevised 217,000 level reported for the prior week. The July 26 week's level compares to the consensus of 225,000 in the Econoday survey of forecasters. The four-week moving average is down 3,500 to 221,000 in the July 26 week.

Seasonal factors had expected a decrease in unadjusted claims of 24,075 (-11.1 percent) from the previous week, but instead there was a slightly smaller drop of 22,904 (-10.6 percent).

No states reported a noticeable increase in unadjusted first-time claims. Georgia (-2,134), Kentucky (-6,201), and Texas (-2,301) all had significant declines.

Insured unemployment was unchanged at 1.946 million in the July 19 week, with the prior week's level revised down from 1.955 million. Continuing claims are higher by 72,000 compared to the same week a year ago, as the pace of new hires remains sluggish. The four-week moving average is down by 2,500 to 1.949 million, from a revised 1.952 million in the July 12 week. The insured rate of unemployment remained at 1.3 percent in the July 19 week from the prior week.

Claims expected back up at 225K, right at the 4-week moving average, after falling a more than expected 4K to 217K in the previous week.

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.