Initial claims decreased 5,000 to 229,000 in the week ended August 23, below the 230,000 consensus in an Econoday survey, which had the lowest forecast at 228,000.

The four-week average edged up to 228,500 from 226,000 the previous week. While increases and declines have alternated over the past four weeks, declines have been smaller, with a cumulative 8,000, while increases have totalled 18,000, including 10,000 in the August 16 employment survey week.

Continuing claims remain above the stubbornly high 1.9 million mark at 1.954 million despite a 7,000 retreat in the week ended August 16, which left the insured unemployment rate at 1.3 percent for the 12th consecutive week.

Unadjusted claims decreased 2,873 or 1.5 percent in the August 23 week, while seasonal factors had expected a 1,405 (0.7 percent) increase.

The largest increase in initial claims in the August 16 week was in Kentucky (2,951) and the largest decrease was in California (down 2,290).

After an unexpected 11K jump to 235K last week, claims expected to retreat a bit toward the 4-week moving average (226.25K) to reach 230K.

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.