Economic Development Recovery and Resiliency Playbook - Flipbook - Page 44
base needs to provide context. This can include static measures that provide a description of how the local and regional
economy are currently situated, as well as dynamic measures such as growth rates that describe how the economy has evolved
over time.
Composition of the Economic Base
Identifying the composition of the economic base entails drilling down into how jobs, establishments, and/or wages are
distributed. Economic base information comes in a wide range of diferent measures and classifications. In general terms, the
most relevant way of organizing economic base information is typically by industry.
Organizing the economic base information by industry allows the user to identify what drives the local and regional economy,
and where the jobs, business establishments, and wages are concentrated. Examining economic base patterns by industry will
identify which of the basic industries bring wealth into a region by focusing on regional, national, and global markets.
Most industry-specific job information is
classified by using the North American
Industry Classification System (NAICS),
which utilizes a hierarchical arrangement
with the most aggregated industry
definitions using two-digit numerical
codes, and more specific industry
definitions using six-digit (or even
eight-digit) codes.24 Figure 4.1 shows an
example of how one industry (cane sugar
manufacturing) is coded from the broad
manufacturing category to a more
specific description.
Figure 4.1. Example of NAICS Defnitions
for Cane Sugar Manufacturing
NAICS Code
Industry Description
31-33
Manufacturing
311
Food Manufacturing
3113
Sugar and Confectionery Product Manufacturing
31131
Sugar Manufacturing
311314
Cane Sugar Manufacturing
Source: U.S. Census Bureau
Other Economic Base
Measures
Comparing geographic areas provides additional context to an economic base analysis by assessing how the concentrations
of economic activity for a locality or region compare within a larger geographic area. At a more simplistic level, a locality or
region can compare how its economic base measures up against other geographic areas. The primary measures for making
geographic comparisons examine concentrations of economic activity and how the industry growth trends compare. Measures
can also be combined to provide diferent perspectives in analyzing employment alongside other measures. This allows for the
creation of indicators that can more succinctly explain economic trends or more complex indices that combine large numbers of
diferent measures.
Industry concentration. Location quotients (LQ) are a method of comparing industry concentrations of a region with
national or statewide concentrations of that same industry. LQs allow for comparisons between geographic areas and provide
context to an economic base analysis. The LQ indicates what a local area or region’s economy specializes in, with values
Economic Development Takeaway
For resiliency and disaster recovery, the location quotient can point to potential future
vulnerabilities or opportunities. If an area has a high concentration of economic activity
in an industry that has declined nationally, then that would be a potential vulnerability
for a community.
24
25
36
https://www.census.gov/naics/
Clouse, Candy; “Location Quotient;” January 2021.https://support.implan.com/hc/en-us/articles/360051560773-Location-Quotient
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