In the summer
issue of Local Insights we discussed the value of economic diversity and
the Hachman Index (a method used to measure industry diversification in the
labor market)[1].
The article states that:
The Hachman Index is derived from the weighted average of the
industry Location Quotients (LQ) in a region. A LQ measures the regional
concentration of employment in a given industry relative to a larger geography.
As a rule of thumb, an LQ of 1.2 or higher represents an industry with a
relatively high concentration of regional employment, while a score of 0.8 or
lower indicates sparse regional employment… Breaking the Hachman Index into
individual components provides insight into the distribution of employment in a
local economy.
Figure 2 in that article resembles the charts to the right, except that the data in the article was aggregated to the regional level. Combining
the employment counts for all three Wasatch Front North counties obscures the
concentration of employment in certain industries at the county level. This
article sheds light on the relative density of employment in each county.
When examining the three charts, note the scale on the
horizontal axis. In 2012, Davis and Weber counties had very few location
quotient outliers. In Davis County, six industries were within the “normal”
location quotient range; in Weber County there were 10 industries with “normal”
location quotients. Furthermore, the industry with the highest concentration
of employment compared to national averages was public administration for both
counties, registering LQs of 2.4 (Davis) and 2.0 (Weber). | |
In contrast, Morgan County only has three industries with
LQs in the “normal” range, and the industry with the highest concentration –
covered agriculture, forestry, fishing & hunting – has a large LQ of 9.7.
In Utah, there is a correlation between the size of a county’s labor force and the degree of industrial diversity in the county; in general, this means the more workers in a county the more diverse the economy of that county. So it is not surprising that Davis and Weber counties have less variance in their respective LQs compared to Morgan County.
Understanding the relative concentration of employment by
industry lends some insight into the comparative advantages of a region. In
terms of the Wasatch Front North, we see that the labor economy is relatively
diverse.
