LOCATION QUOTIENTS Berks, Chester, Lebanon, Lancaster, Lehigh, Montgomery, Schuylkill counties 2001-2013
What is a location quotient? Metric for gauging the relative concentration or specialization of one or more industries, industry sectors or industry clusters in an area. Use BEA employment data from previous memo (2001-2013) Compare same counties vs. Pennsylvania Local employment in industry/ Total local employment ------------------------------------------ = Location Quotient State employment in industry/ Total state employment
How are they used? Location quotients (LQ) can identify potential sources of both comparative and competitive advantage and areas of regional specialization. LQs are helpful in identifying areas that have existing concentrations of workers with transferable skills, interconnected businesses, suppliers, and related industries, or growing industry areas where concentrated employment in that sector is weak but growing. Can be stacked with other employment data to evaluate competitiveness.
Comparative vs. Competitive Advantage There are specific reasons why each regional economy has a unique industry mix. Comparative advantages (Ease of production): Natural resource availability, location advantages (major highways), or existing availability of a highly or uniquely skilled labor force. Examples: Schuylkill County coal, Lehigh County highways, Berks County manufacturing base Competitive advantages (E.g. Lower costs of labor, land and doing business) Examples: Lower land/labor costs, incentives, strategic infrastructure investment (public pre-treatment wastewater plants, inland ports), addressing skills gap (Go Build Georgia program, Louisiana Fast Start)
Who uses them? Planners (Present and future land use, transportation needs) Public sector economic development efforts (Better understanding of the competitive realities in the marketplace) Workforce development (The workforce you have vs. the one you need) Private sector site selection (Available, skilled labor/workforce is a top concern (2013 and 2014 Area Development Corporate Survey) Companies (Minimize risk for hiring, retaining, and developing the workforce) Staffing agencies (Drive time, radius)
OK, Better, Best BEST: An industry with an LQ of 1.2 or higher indicates some degree of specialization. Industries with these quotients generate goods and services in excess of what it required inside the geography. BETTER: LQs of 0.8 to 1.2 indicate normal distribution of that industry with little specialization. It serves only the economy inside the geography. OK: LQs of less than 0.8 may indicate that the industry in the region is weak. This means other geographies are generating those goods and services. As a rule, you can interpret location quotients of >1.2 as high and <0.8 as low.
2013 Seven County LQ 2013 County LQ Berks Chester Lancaster Lebanon Lehigh Montgomery Schuykill Forestry, fishing, and related activities 1.47 2.68 2.06 1.32 * 0.12 1.16 Mining 0.21 0.15 0.23 0.12 * 0.11 1.66 Utilities 1.24 0.53 0.24 * 0.84 1.23 1.36 Construction 1.09 0.96 1.47 0.95 0.85 0.96 0.89 Manufacturing 1.66 0.76 1.60 1.76 0.90 0.88 1.99 Wholesale trade 1.12 1.38 1.39 * 1.21 1.43 0.66 Retail trade 1.09 0.92 1.16 1.15 0.98 0.99 1.09 Transportation and warehousing 0.80 0.63 1.12 1.41 1.44 0.48 2.46 Information 0.59 1.30 0.84 0.92 1.08 1.57 0.49 Finance and insurance 0.71 1.76 0.67 0.50 0.86 1.56 0.54 Real estate and rental and leasing 1.03 1.54 0.97 0.89 0.96 1.27 0.65 Professional, scientific, and technical services 0.80 1.84 0.74 0.50 0.77 1.81 0.44 Management of companies and enterprises 1.15 1.32 0.69 0.34 2.17 1.16 0.55 Administrative and waste management services 1.13 0.96 0.86 1.07 1.45 1.32 0.76 Educational services 0.43 0.66 0.57 0.55 0.58 0.86 0.24 Health care and social assistance 0.93 0.73 0.91 0.81 1.28 0.90 0.96 Arts, entertainment, and recreation 0.92 1.05 0.97 0.72 1.06 0.91 0.50 Accommodation and food services 0.90 0.73 1.04 0.86 0.93 0.80 0.77 Other services, except public administration 1.02 1.00 1.05 0.97 0.89 0.87 0.94
2001-2013 Seven County LQ Change Location Quotient Change 2001-2013 Berks Chester Lancaster Lebanon Lehigh Montgomery Schuykill Forestry, fishing, and related activities -2.1% 2.2% 1.0% * * -1.4% 1.3% Mining -3.9% -4.6% -5.3% * * -4.5% * Utilities 2.5% -5.0% -4.5% * -8.7% 4.4% 1.7% Construction 0.0% -0.7% 0.9% 0.0% -0.6% -0.8% -0.1% Manufacturing 0.8% -1.3% 0.1% 1.2% -2.4% -0.9% 1.1% Wholesale trade 1.3% 0.8% 1.1% * 0.6% 0.3% -1.2% Retail trade 0.2% 0.1% 0.2% -0.1% 0.3% 0.5% -1.1% Transportation and warehousing -1.7% -0.6% 1.4% 2.2% 3.2% -0.9% 7.7% Information 0.7% 1.6% 0.7% * -0.4% 0.0% * Finance and insurance -2.2% 0.4% -0.3% 1.2% -2.1% -0.2% -0.3% Real estate and rental and leasing 1.0% 0.1% -0.9% * -0.6% 0.2% 0.0% Professional, scientific, and technical services -0.6% 0.3% 0.3% 0.0% 0.4% 0.5% -0.4% Management of companies and enterprises -4.2% 2.8% -2.8% 3.1% 3.2% -1.4% 0.6% Administrative and waste management services 0.7% -2.0% -0.5% 3.9% 0.9% -0.8% 5.0% Educational services 0.8% 0.6% 2.2% 1.6% -0.9% 0.8% -1.8% Health care and social assistance 1.5% -0.4% 1.3% -1.3% 0.6% -0.6% 0.1% Arts, entertainment, and recreation -1.4% -0.4% 0.0% 0.0% -0.8% 0.2% 0.0% Accommodation and food services 0.1% 0.1% 0.1% -0.6% 0.1% 0.5% -1.5% Other services, except public administration 0.1% -0.2% 0.3% -0.1% -0.4% 1.0% -2.0%
Connecting LQs to our March discussion Combining employment growth and LQ, we can group our industries into four (4) categories: Competitive: Industries with an LQ of 1.0 or greater with employment growth; Emerging: Industries with an LQ less than 1.0 with employment growth; At-Risk: Industries with an LQ of 1.0 or greater with employment loss; Declining: Industries with an LQ less than 1.0 with employment loss.
Berks County industries by category Berks 2001 2013 LQ Growth 2001-2013 Employment Growth 2001-2013 Competitive (LQ>1.0, employment growth) Management of companies and enterprises 1.94 1.15-4.2% 2.0% Administrative and waste management services 1.03 1.13 0.7% 1.6% Wholesale trade 0.95 1.12 1.3% 1.2% Real estate and rental and leasing 0.91 1.03 1.0% 3.9% Other services, except public administration 1.01 1.02 0.1% 0.6% Emerging (LQ<1.0, employment growth) Health care and social assistance 0.77 0.93 1.5% 3.4% Arts, entertainment and recreation 1.09 0.92-1.4% 1.1% Accommodation and food services 0.89 0.90 0.1% 1.2% Professional, scientific and technical services 0.86 0.80-0.6% 0.5% Educational services 0.39 0.43 0.8% 2.6% Mining 0.34 0.21-3.9% 2.5% At-Risk (LQ>1.0, employment decline) Manufacturing 1.51 1.66 0.8% -2.2% Forestry, fishing and related activities 1.89 1.47-2.1% -0.8% Utilities 0.92 1.24 2.5% -0.6% Construction 1.10 1.09 0.0% -0.3% Retail Trade 1.07 1.09 0.2% -0.3% Declining (LQ<1.0, employment decline) Transportation and warehousing 0.98 0.80-1.7% -0.8% Finance and insurance 0.92 0.71-2.2% -1.0% Information 0.55 0.59 0.7% -2.2%
Selected industries
Manufacturing Manufacturing 2013 LQ Seven Counties Schuylkill 1.99 Lebanon 1.76 Berks 1.66 Lancaster 1.60 Lehigh 0.90 Montgomery 0.88 Chester 0.76 3rd Class Counties York 1.79 Erie 1.77 Berks 1.66 Lancaster 1.60 Westmoreland 1.27 Northampton 1.23 Luzerne 1.11 Lackawanna 0.97 Lehigh 0.90 Chester 0.76 Dauphin 0.67 Cumberland 0.66
Transportation and Warehousing Transportation and Warehousing 2013 LQ Seven Counties Schuylkill 2.46 Lehigh 1.44 Lebanon 1.41 Lancaster 1.12 Berks 0.80 Chester 0.63 Montgomery 0.48 3rd Class Counties Cumberland 2.31 Luzerne 1.83 Lehigh 1.44 Westmoreland 1.35 Northampton 1.35 York 1.17 Lackawanna 1.17 Lancaster 1.12 Dauphin 1.08 Berks 0.80 Chester 0.63 Erie 0.58
Health care Health care 2013 LQ Seven Counties Lehigh 1.28 Schuylkill 0.96 Berks 0.93 Lancaster 0.91 Montgomery 0.90 Lebanon 0.81 Chester 0.73 3rd Class Counties Lehigh 1.28 Erie 1.12 Lackawanna 1.10 Luzerne 1.01 Dauphin 0.97 Berks 0.93 Lancaster 0.91 Westmoreland 0.89 York 0.82 Northampton 0.74 Chester 0.73 Cumberland 0.70
Management of Companies Management of Companies 2013 LQ Seven Counties Lehigh 2.17 Chester 1.32 Montgomery 1.16 Berks 1.15 Lancaster 0.69 Schuylkill 0.55 Lebanon 0.34 3rd Class Counties Lehigh 2.17 Cumberland 1.61 Chester 1.32 Berks 1.15 York 0.97 Dauphin 0.90 Westmoreland 0.71 Lancaster 0.69 Luzerne 0.53 Northampton 0.53 Lackawanna 0.47 Erie 0.24