• Employment Distribution and Location Quotients by Major Industry Sector


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    • Abstract: Employment Distribution and Location Quotients by Major Industry SectorU.S., Massachusetts and the 16 Workforce Areas2008 Annual Average Private Industry EmploymentThe location quotient is a measure that helps analysts examine the relative

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Employment Distribution and Location Quotients by Major Industry Sector
U.S., Massachusetts and the 16 Workforce Areas
2008 Annual Average Private Industry Employment
The location quotient is a measure that helps analysts examine the relative
concentration of industry employment in a particular area relative to another larger, or
base, area. For Massachusetts, the U.S. is the base area. For Workforce Areas, the
state is the base area. The measures are relatively easy to calculate yet provide a
potentially valuable insight into a local labor market’s industry structure, relative to the
larger base area. The tables are computed using annual average private industry
employment data and are published annually.
For a more detailed explanation of the calculation, uses and interpretation of location
quotients, see the narrative summary accompanying the updated 2008 tables.
Guide to Interpretation of Location Quotients
General Concept
The location quotient (LQ) is a commonly used measure intended to help analysts compare a
region’s level of industry concentration relative to a larger geographic unit such as the state or
the nation as a whole. The larger geographic area is referred to as the “base” area or the
“reference” area. Location quotients are typically developed for a state, with the U.S. as the
base area, or a sub-state area (such as a labor market area or a Workforce Area), with the state
as the base area. Location quotients are relatively simple to calculate and yet offer a quick and
often valuable insight into a region’s employment dynamics.
Calculation of Location Quotients
The location quotient is the calculated ratio of an industry’s share of total local area employment
divided by the same industry’s share of total base area employment. For example, to calculate
a location quotient for Educational Services (NAICS Sector 61) employment in Boston, one
would need the following data:
• Educational Services employment for Boston
• Total employment for Boston
• Educational Services employment for the base area (usually the state)
• Total employment for the state
The formula is as follows:
Educational Services employment in Boston
Total employment in Boston
L:.Q.= ===================================
Educational Services employment in MA
Total Employment in MA
Interpretation of Location Quotients
A location quotient of greater than one means that the local area has a relatively higher
concentration of employment in a given industry than the base area. A location quotient equal
to one means that the local area has the same proportion of employment in a given industry as
the base area. Location quotients of less than one mean that the area has a smaller proportion
of employment in the industry than the base area. This measure can be computed at any
industry level the analyst deems important. Location quotients at the aggregated two digit
NAICS Sector level may mask significant activity in more detailed industries in the local area.
Location quotients should also be viewed in conjunction with other factors, such as the absolute
level of employment in the industry. A very high location quotient in an industry that only
employs a small number of workers is probably not that significant to local planners. It is
generally accepted practice to interpret location quotients of >1.25 as “high” and


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