WASHINGTON -- New jobless claims fell slightly last week while the number of Americans receiving unemployment benefits rose, a sign the job market's recovery will be long and bumpy.

While most economists believe the recession has ended, they predict the jobless rate will keep rising until at least next summer as the country struggles to mount a sustained recovery. The worry is that household incomes will remain depressed and consumer spending, which accounts for 70 percent of the total economy, will continue to lag.

"The lack of job creation remains a big headwind for cash-starved and credit-constrained consumers and thus a major impediment for the fledging recovery," Sal Guatieri, senior economist at BMO Capital Markets, said in research note.

Most retailers posted sales declines last month as shoppers restrained back-to-school purchases to focus on necessities. Discounters did better than upscale chains, but the results Thursday raised further concern about the upcoming holiday season.

The Institute for Supply Management said its service index, which covers hospitals, retailers, financial services companies and more, inched closer to growth in August, but still contracted for the 11th straight month.

Priceline.com Soars Following Earnings Report, Threatens Short Sellers

Leading discount travel company impresses Wall Street with solid earnings report

by Joseph Hargett (jhargett@sir-inc.com) 2/19/2009 10:50 AM

Shares of priceline.com Incorporated (PCLN: sentiment, chart, options) have soared more than 17% so far this morning, as traders react to the company's stronger-than-expected quarterly report. After the close last night, Priceline said that fourth-quarter profit rose to $33.3 million, or 73 cents per share, from $32.9 million, or 68 cents per share, last year. On an adjusted basis, earnings arrived at $1.29 per share. Revenue rose to $406 million from $334.9 million last year. Analysts were looking for a profit of $1.05 per share on revenue of $378.1 million.

Looking ahead, Priceline said it sees first-quarter adjusted earnings of 85 cents to 95 cents per share. Wall Street's consensus first-quarter estimate currently stands at 58 cents per share.

"We are in the midst of a period of unprecedented economic turbulence that is significantly impacting travel demand, pricing and currency exchange rates," said President and Chief Executive Jeffrey H. Boyd. But Boyd noted that the company continued to grow and acquire market share during the quarter.

Analysts were quick to weigh in on the performance, with S&P Equity Research upgrading the shares to "buy" from "hold," and Citigroup boosting its price target to $105 per share from $83 per share. Furthermore, Piper Jaffray said "Despite the macroeconomic slowdown, we expect Priceline to continue to grow through domestic market share gains and a dominant international business."

Digging into the brokerage bunch, we find that 5 of the 9 analysts following PCLN rate the shares a "buy" or better, leaving only a modest amount of room for potential upgrades. Meanwhile, Thomson Reuters reports that the average 12-month price target for PCLN rests at $86.89 per share - a mere 7.5% premium to the stock's current trading range near $80 per share. Should more brokerage firms upgrade the equity or increase their price targets, we could see PCLN extend its recent rally.

Checking the Charts

Speaking of technical strength, PCLN has enjoyed a solid run higher since rebounding from its October 2008 lows. Specifically, the shares have added more than 79% since hitting a low of $45.15 on Oct. 28. The stock has been aided in its run higher by support at its 10-week and 20-week moving averages. Furthermore, today's earnings-induced rally has placed PCLN above formerly staunch resistance at the round-number 80 level. If the equity can close the week above this area of long-term resistance, it could be a bullish sign for the shares.

Such a bullish technical move could be trouble for short sellers. Following a 4.27% increase in the number of PCLN shares sold short during the most recent reporting period, more than 23% of the stock's float is now sold short. If the security can establish a foothold above the 80 level, it could spook these bearish investors into buying back their positions, potentially resulting in a short squeeze, or short-covering rally, for PCLN.

Worker productivity slowed in the summer while wage pressures increased, but both developments were better than expected and are unlikely to raise inflation alarms at the Federal Reserve.

The Labor Department reported Wednesday that productivity, the key ingredient for rising living standards, rose at an annual rate of 1.3 percent in the July-September quarter. That's down from the 3.6 percent growth rate in the second quarter, but slightly higher than the 1.1 percent increase initially reported a month ago and better than the 0.9 percent rise economists expected.

Wage pressures, as measured by unit labor costs, rose at an annual rate of 2.8 percent, after having declined at a 2.6 percent rate in the second quarter. The rate of increase in the third quarter was the biggest jump since a 4.5 percent rate in the fourth quarter of last year, but was below the 3.6 percent advance originally reported and that economists expected.

The Fed closely monitors developments in productivity and wages to see if inflation is getting out of hand. But the central bank was likely to view the recent developments as temporary and not long-run trends.

Analysts had expected a big downward revision in productivity given the fact that overall output, as measured by the gross domestic product, was revised to show a decline of 0.5 percent at an annual rate, a bigger drop than the 0.3 percent decrease that was originally reported.

Still, the 1.3 percent rise in productivity was the weakest showing since a 0.8 percent rise in the fourth quarter of 2007.

While rising wages and benefits are good for workers, if those gains outstrip increases in productivity it can create serious inflation problems as businesses are forced to boost the cost of their products to cover the higher wage demands.

Analyst: Mac, iPod discounts lower than expected

Black Friday discounts were not as steep as expected on Apple Inc.'s computers and iPods, a sign that the company is confident in strong holiday sales, a Kaufman Bros. analyst said Friday.

The analyst, Shaw Wu, said Apple (nasdaq: AAPL - news - people ) discounts this year are about the same as in the past, between 5 and 10 percent. Accessories have been slashed more aggressively, with some speaker discounts as much as 40 percent.

Wu said he had hoped Apple would have cut prices further, given how consumers have been affected by the credit crunch. But he took the modest promotions as "confidence by Apple that it does not need to discount heavily to move product."

And he said some consumers have managed to get better deals at Apple stores by bringing in promotional materials from other authorized retailers to get matching prices. That arrangement, Wu noted, should help sales but also protect the Cupertino, Calif.-company's high-end brand name.

Wu said other retailers have offered discounts of up to 13 percent on Macs and iPods.

He reiterated a "Buy" rating on Apple shares.

The stock fell $2.33, or 2.4 percent, to $92.67 in a shortened trading session.