Initial claims came in at the low end of expectations as they declined 3,000 to 224,000 in the week ended August 9, below the 230,000 consensus in an Econoday survey. Estimates had ranged from 220,000 to 233,000.

The four-week average was little changed at 221,750, edging up 750 from the previous week.

While initial claims remain at a relatively low level, continuing claims are still above the 1.9 million mark despite a 15,000 decline in the week ended August 2 that brought the level down to 1.953 million. Over the past four weeks, continuing claims rose by a net 2,000, including a 32,000 increase in the July 26 week.

Unadjusted claims were up 3,694 (1.9 percent) to 199,186 in the August 9 week, while seasonal factors had expected a 6,577 (3.4 percent) increase.

The largest increase in initial claims in the August 2 week was in Texas (1,002) and the largest decrease was in New York (down 1,017).

After the nasty monthly employment report, the consensus looks for claims to continue rising to 230K after an already worrisome 7K increase to 226K last 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.