,
according to their North American Industrial Classification System (NAICS) codes. The
system begins with “Supersectors” which includeNotes for determining the basic employment of a city
Economics 432- Urban Economics
Edward Coulson, Fall 2004
Employment data for metropolitan areas is located at
http://data.bls.gov/labjava/outside.jsp?survey=sm
and the national data is located at
http://data.bls.gov/labjava/outside.jsp?survey=ce
1. Recall that the base multiplier is calculated as the ratio of total to basic employment. Therefore the key step is determining basic (i.e. export) employment.
2. This calculation is done on an industry-by-industry basis. City employment is the sum of employments in each of the industries in the city. It’s basic employment is similarly the sum of basic employments in each of the city. That is, B=B1+B2+...+Bk. Basic employment (B) is the sum of basic employment in industry 1 (B1) and basic employment in industry 2 (B2) all the way through industry k.
3. NAICS CODES: Industries are classified, at the BLS website and elsewhere
,
according to their North American Industrial Classification System (NAICS) codes. The
system begins with “Supersectors” which include
10- Natural Resources and Mining
20- Construction
30- Manufacturing
40- Trade, Transportation, and Utilities
50- Information
55- Financial Activities
60- Professional and Business Services
65- Education and Health Services
70- Leisure and Hospitality
80- Other Services
90- Government
More specific industry classifications add more digits to the code numbers. For example, within the manufacturing sector there are two other supersectors, Durable Goods Manufacturing (31) and Nondurable Goods manufacturing (32). Individual sectors have longer code numbers: Primary Metals Manufacturing is 31331, and within this category one can find 313313, Aluminum Production and Processing. And so on.
4. Not every code is available for every MSA. Only if there are enough firms are in the MSA to provide a good sample and to protect the privacy of individual firms are the employment figures reported. So pretty much every city has every supersector code. But no city will have a listing for every five-digit code. But if there are enough firms such that a one is listed, its probably an important industry for that city, and you ought to include it in your analysis.
5. When looking at the available five- or six-digit sectors, don’t forget about the remainder of the supersectors. Your analysis should be comprehensive in terms of the city employment.
6. As noted in (2) above you have to decide how much of the sector’s employment is basic. There are three fundamental options:
A. All
B. Part
C. None
If the sector in question sells all of its output or service to people outside the city then (A) is a good choice. This is true even when a small part of the output goes to local residents. For example, all of the automobile industry in Detroit probably ought to be counted as basic employment, even though some small fraction of the output gets into the garages of Detroit. A good portion of manufacturing employment in every city can be treated this way, though there are important exceptions.
(C) is a good guess for service sectors that are by nature local-serving. Real estate, grocery stores, etc. are very local serving. If the area is big on tourism, though, you need to be careful about this.
(B) is for those industries that are in-between. In this case you need to ask how much a part of the output and employment are destined for export. Location quotients are helpful for this, though they need not be taken as the final answer. Above all, use your brains, and your knowledge of your city to help you out.
7. The location quotient is
City employment in industry
Total city employment
US Employment in industry
Total US employment
If the LQ is greater than one, it indicates ‘excess’ employment in the city-industry, and the excess is presumably meant for export. Hence the export employment in industry I can be calculated as
Bi = Ei*(LQi-1)/LQi
But Location Quotients can be deceiving if
a. There are taste (that is, demand) differences between the city and the rest of the country.
b. The data is at a high level of aggregation.
c. The national industry in question is fundamentally an export industry