Initial claims numbers rose this week but remain at a comfortably level. However, persistently elevated continuing claims (above 1.9 million for 15 straight weeks) adds credence to the argument that the Federal Reserve needs to take action, especially in light of the July JOLTS report that showed job openings declining to a 10-month low and the spike in layoffs reported by Challenger.

Initial jobless claims came in slightly higher than expected, with the level reported in the week ending August 30 up 8,000 from the 237,000-level reported for the prior week. The August 30 week's level compares to the consensus of 232,000 in the Econoday survey of forecasters. The four-week moving average is up 2,500 to 231,000 in the August 30 week.

Seasonal factors had expected a decrease in unadjusted claims of 687 (-0.4 percent) from the previous week, but instead there was an increase of 5,791 (+3.0 percent).

Connecticut (+2,949) and Tennessee (+2,906) reported noticeable increases in unadjusted first-time claims, Kentucky (-2,889) reported a significant decline.

Insured unemployment was down 4,000 to 1.940 million in the August 23 week, with the prior week's level revised down to 1.944 million from 1.954 million. Continuing claims are higher by 91,000 vs. the same week a year ago, underlining the tepid pace of hiring. The four-week moving average is down 7,000 to 1.947 million, from a downwardly revised 1.954 million in the August 16 week. The insured rate of unemployment remained at 1.3 percent in the August 23 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.