Initial claims numbers for last week once again surprised to the low side, further confirmation that employment conditions have stabilized at a slow hiring pace coupled with a low level of layoffs. Continuing claims dipped below 1.9 million for the second time in the past three weeks, as employers' 'no-hire, no-fire' approach becomes entrenched.

Initial jobless claims came in lower than expected, with the level reported in the week ending January 10 down 9,000 from the revised 207,000 level reported for the prior week (previously 208,000). The January 10 week's level compares to the consensus of 212,000 in the Econoday survey of forecasters. The four-week moving average is down 6,500 to 205,000 in the January 10 week.

Seasonal factors had expected an increase in unadjusted claims of 45,652 (+15.3 percent) from the previous week, but instead there was a smaller increase of 31,984 (10.7 percent).

California (+5,471), Florida (+2,622), Georgia (+2,571), Indiana (+2,928), Massachusetts (+3,089), Michigan (+3,872), Missouri (+2,017), Ohio (+2,835), Tennessee (+3,522), Texas (+7,902), and Virginia (+2,252) reported noticeable increases in unadjusted first-time claims, while New York (-4,382), Oregon (-2,821) and Washington state (-2,955) reported significant declines.

Insured unemployment was at 1.884 million in the January 3 week, with the prior week's level revised down to 1.903 million from 1.914 million. Continuing claims are higher by 34,000 vs. the same week a year ago, underlining what continues to be a tepid labor market. The four-week moving average is down 250 to 1.889 million, from a downwardly revised 1.890 million in the December 27 week. The insured rate of unemployment remained at 1.2 percent in the January 3 week.

Claims expected at 212 K in the latest week after ticking up 8K to 208K 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.