I dissect the jobs report to see which industries are showing the best/worst growth in new hiring, on the thesis that companies in these industries may present investment opportunities.

The fastest growing industries are restaurants, hospitals, mine services, machinery, and oil & gas extraction. The worst were transportation equipment and a plethora of housing-related sectors.

Disclosure: At time of publication, William Trent owns shares of Starbucks (SBUX).

Disclosure: Author is long Starbucks (SBUX) at time of publication.

The two certainly trade like birds of a feather. Given that the housing market peaked about two years ago, perhaps it shouldn’t be surprising that two stocks closely tied to housing have drifted down. It’s hard to blame a company for doing poorly in a poor environment, so one might be sympathetic when listening to Home Depot explain its quarter.

Our market continues to be a challenging one. You are familiar with the statistics: housing starts are down 22%, existing home sales are down 12%, inventory of homes for sale is at 8.7 months — a 15-year high — and the home builder index is at 24%, a 16-year low. In addition, the issues around the subprime market continue to intensify and this is an important concern both for the financial markets generally and for housing specifically, since subprime mortgages accounted for 24% of the dollar volume in the mortgage market last year. So this is a difficult time and our performance reflects that.

Sales were $22.2 billion, down about 2% for the quarter. Comp sales were a negative 5.2%.

(Excerpt from full HD conference call transcript)

Not so fast, says Lowe’s.

The sales environment remains challenging as home improvement consumers hesitate to take on longer discretionary projects, but the core of our business remains relatively strong as our employees continue to help consumers maintain their largest financial asset. Total sales increased 5.8% while comp store sales declined 2.6% during the quarter.

(Excerpt from full LOW conference call transcript)

Ouch. Not to worry though – Home Depot management say they are taking care of that share loss.

We have reversed our market share loss; or in other words, we’re not losing market share as fast as we were.

(Excerpt from full HD conference call transcript)

Actually, I hate to break it to them but “reversing” share loss would be gaining share – not losing it at a slower pace. When management starts measuring its performance on the basis of “it could be worse,” it doesn’t exactly warm investor’s hearts. More encouraging words are heard from Lowe’s.

We can’t control the macro environment, but we are focused on executing and delivering great service in our stores to capture share….

In short, the message I want to ensure is conveyed today is that we’re always working to improve every facet of our business. In good times and in slower times, we’re focused on making our company stronger to become the store of choice for home improvement purchases. It’s those efforts to constantly improve our service to customers that helps drive market share gains and position the company for continued long-term success.

(Excerpt from full LOW conference call transcript)

It is always good to have a strong foundation. But it becomes even more important when things are tough. Given the apparent differences in strength between the two companies, it gets hard to understand how they have been trading in tandem.

Applied Materials’ profit surged 81% in its fiscal fourth quarter, but the results came up short of Wall Street expectations.

And in a subsequent conference the call with analysts, the world’s No. 1 vendor of chipmaking equipment said its fiscal 2007 year would get off to a slow start.

CFO George Davis singled out flat-panel-display manufacturing as the prime culprit for the slowdown.

Barron’s Tech Trader Daily on Circuit City (CC):

Circuit City has been holding meetings with the Street recently in which it is warning that average selling prices for flat-panel televisions are falling faster than the company had expected.

Associated Press on Wal-Mart (WMT - Annual Report):

“We are implementing our most aggressive pricing strategy ever across core categories, such as toys and electronics,” Scott said in a prerecorded phone message.

John Menzer, head of Wal-Mart U.S. stores, said there were “huge sales increases” among the discounted toys and in some electronics.

“We’re seeing a big growth in our new categories such as flat panel TV’s, MP3 players, laptops and cell phones.

MarketWatch on Home Depot (HD - Annual Report):

Home Depot Inc. on Tuesday said that it would be “opportunistic” in selling consumer electronics this holiday season, as it looks to drive sales during the critical shopping period.

On its third-quarter earnings conference call, the home-improvement retailer said that it planned to use its large-scale buying power to offer low prices on consumer electronics such as plasma and flat-screen television sets.

The only surprise in all this is why anyone would be surprised. From one end of the food chain (equipment manufacturers) to the other (retail) the story is all about too much capacity and faster than expected price reductions.

Other News

Mattel (MAT) posted an upside surprise due to stronger than expected Barbie sales (take that, Bratz!) as well as promotional tie-ins with Cars and Superman. The company reported second-quarter net income of $37.4 million, or 10 cents per share, compared with a year-earlier loss of $94 million, or 23 cents per share. Excluding items, earnings rose to 8 cents per share from 5 cents. Analysts on average had been expecting 4 cents, according to Reuters Estimates. Revenue rose 8 percent to $957.7 million, surpassing analysts’ expectations of $922.95 million.

Harley Davidson’s (HDI) quarterly earnings rose 2.5 percent and it was on track to meet its 2006 shipments. Harley said its second-quarter net profit rose 2.5 percent to $243.4 million, or 91 cents a share, from $237.4 million, or 84 cents a share during the period last year, meeting the average estimate. Revenue rose 3.3 percent to $1.38 billion., sending shares higher in premarket trading. The 2006 outlook bucked a trend of disappointing results and scaled-back expectations from U.S. recreational vehicle makers, which have been laboring under rising interest rates and energy prices, and a slowing housing market.

Previously, several U.S. companies selling pricey toys for adults — including boatmaker Brunswick Corp. (BC), snowmobile manufacturer Polaris Industries Inc. (PII), and RV maker Fleetwood Enterprises (FLE), — reported lower quarterly earnings, saying economic headwinds were keeping consumers out of showrooms.

Coca-Cola Co. (KO) posted better-than-expected earnings boosted by its PowerAde sports drink and Dasani bottled water brands. Second-quarter profits were $1.84 billion, or 78 cents a share, up from $1.72 billion, or 72 cents a share, a year earlier. Excluding a gain from the sale of shares in the initial public offering of its Turkish bottler, Coke reported earnings of 74 cents, 2 cents ahead of Wall Street expectations, according to Reuters Estimates. In the past year, Coke launched a flurry of brands such as coffee-infused soda Coke Blak and energy drink Vault and extended flavors of existing brands like Dasani flavored water, to cash in on the growth in the energy drinks (led by Watch List member Hansens Natural [HANS]) and water segments.

Jos a Bank (JOSB): Men’s clothing retailer JoS. A. Bank Clothiers Inc. said Thursday that sales at stores open at least one year, or same-store sales, increased 8.5 percent for the month of June, easily beating Wall Street expectations for a 4.3 percent boost.

BJ’s Wholesale (BJ): June sales fell 0.1 percent at its stores open at least a year as record-breaking rainfall hurt demand, and it lowered its quarterly profit forecast. Analysts, on average, expected 2.4 percent growth, according to estimates compiled by Reuters.

TJX Companies (TJX): Discount clothing retailer TJX Cos. on Thursday said June same-store sales rose 4 percent, beating both internal and Wall Street estimates, and prompting the company to estimate second-quarter earnings will be at or above the high end of its previous forecast.

Wall Street expected same-store sales, or sales at stores open at least a year, to add 2.7 percent, according to Thomson Financial.

Other Notable Retailers

Wal-Mart Stores Inc. (WMT) and other top U.S. retailers posted disappointing June sales on Thursday as soaring energy prices and record-breaking rains in the Northeast curbed consumer spending.

But mid-priced chains such as J.C. Penney Co. Inc. (JCP) and Kohl’s Corp. (KSS) reported strong gains, suggesting that some shoppers stayed away from more expensive department stores. Federated Department Stores Inc. (FD), owner of Bloomingdale’s and Macy’s, recorded lower-than-expected sales.

Overall, sales rose 2.8 percent at stores open at least a year — a key retail measure known as same-store sales. That was slightly below forecasts for a 3 percent gain, according to research firm Retail Metrics.

Apparel retailer Limited Brands Inc. (LTD), warehouse club operator Costco Wholesale Corp. (COST), and home decor chain Pier 1 Imports Inc. (PIR) were among the chains missing Wall Street’s sales targets.

The retail same store sales comparison was one such measure. Actual data, delivered monthly, as opposed to a forecast management may feel compelled to meet even if they need to cheat. And now a leading retailer is moving in the wrong direction. While the particular metric may be different for different industries, having actual data delivered on a monthly basis seems to us much more useful than a forecast for the whole quarter.