Use the Jobs Report as a Stock Screen By Bill Trent RealMoney.com Contributor 4/4/2008 12:18 PM EDT

The unemployment rate rose from 4.8 to 5.1% in March, and nonfarm payroll employment continued to trend down (-80,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported. Over the past three months, payroll employment declined by 232,000.

On a year-over-year basis, total employment grew a meager 0.4%. If we get four more months at the current trend rate, and we'll be talking about year-over-year job losses.

Click here for larger image.

Source: Bureau of Labor Statistics

Still, the data are the data. As investors, we can either fret about the report or sift through it for investment ideas. With that in mind, I looked at the table presenting the industries that are doing the most hiring. Whoever is growing and hiring in this environment may be worth a further look.

The highest change in employment, 23.4%, came in the "food services and drinking places" industry. While critics may complain that those are low-paying jobs, they nonetheless show that an investable industry is expanding.

According to a Zacks Research Wizard query, six publicly traded restaurant chains with market capitalization above $500 million grew 20% or more over the last 12 months. They are:

• IHOP (IHP)
• Chipotle Mexican Grill (CMG)
• Panera Bread (PNRA)
• Red Robin Gourmet Burgers (RRGB)
• Texas Roadhouse (TXRH)
• Starbucks (SBUX)

Checking Into Hospitals

Hospitals were the second-fastest job growth industry at 13.7%, and job growth in this area passed statistical significance tests. Potential research candidates here include:

• Community Health (CYH)
• Universal Health (UHS)
• Lifepoint (LPNT)

Unfortunately, some of the other fast growers are government-related and not investable. One area that had statistically significant growth was "support activities for mining." Unfortunately, the closest thing to that that I could find was Minefinders (MFN) , which is fairly small.

However, combining the mining theme with the next-fastest grower led to some potentially promising manufacturers of mining machinery. These include:

• Bucyrus International (BUCY)
• Astec Industries (ASTE)
• Terex (TEX)
• Joy Global (JOYG)
• Manitowoc (MTW)

The only other industries showing statistically significant job growth were oil and gas extraction and the unhelpful category of "other information services." Focusing on the former, potential plays include:

• Allis Chalmers (ALY)
• Exterran (EXH)
• Dawson Geophysics (DWSN)
• Superior Well Services (SWSI)
• Helix Energy (HLX)

The Housing Effect

Even the industries losing jobs may be worth considering, either as potential short candidates or places to identify where cost-cutting activity may begin to improve bottom lines.

Probably not surprisingly, most of these industries are tied to housing. Significant job losses were felt in transportation equipment, building material and garden supply stores, furniture and home furnishing stores, furniture manufacturing and wood products. This trend would pertain to:

• Home Depot (HD)
• Lowe's (LOW)
• Weyerhaeuser (WY)
• Leggett & Platt (LEG)
• Furniture Brands (FBN)
• GATX (GMT)

The usual disclaimer applies, that this type of screen is just a starting point for further research. That said, it seems to be as good a starting point as any.

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At the time of publication, Trent was long Starbucks, although positions may change at any time.

William A. Trent, CFA, is a freelance equity analyst based in the New York metro area. He has been an equity analyst since 1996 and is co-author of Understanding and Evaluating Prospectuses, Offering Documents, and Proxy Statements. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Trent appreciates your feedback; click here to send him an email.

Read our conflicts and disclosure policy.