This post is adapted from the self-guided curriculum session on Location Quotients.
Location quotient (LQ) is a measure of the relative concentration of economic activity. It is a ratio of ratios:
- Ratio 1 measures the concentration of the industry’s economic activity within the region of interest.
- Ratio 2 measures the concentration of the industry’s economic activity within the reference point (usually the nation, but could be state or world).
- LQ is the ratio of regional concentration to national concentration.
The economic activity being measured is most often employment or the number of business locations (establishments) within the industry. Research activity, investment, and any other metric for economic activity can be used within an LQ to understand a region’s relative concentration.
Data tools
To calculate LQs based on employment or establishments, there are four main sources of data that economic development practitioners use.
Bureau of Labor Statistics Quarterly Census of Employment & Wages
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URL
Geographies
- Nation
- State
- County
- MSA
Industry Detail
- NAICS 2-6 digit
Key Metrics
- Employment (with LQs)
- Establishments
- Wages
Timing
- Quarterly and Annual
- Lag ~ 5-6 months
Notes
- Excludes contractors, self-employed, some agriculture, and military
- High degree of data suppression
Census Bureau County/Zip Business Patterns
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URL
Geographies
- Nation
- State
- County or ZIP
- MSA
Industry Detail
- NAICS 2-6 digit
Key Metrics
- Employment
- Establishments
- Payroll
Timing
- Annual
- Lag ~ 18 months
Notes
- Data is based only on activity March, which means poor coverage of season work
- Less data suppression than in BLS QCEW
Proprietary Sources (e.g., Lightcast, IMPLAN)
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Geographies
- All are available
- Fees are often charged based on the geography accessed
Industry Detail
- NAICS 2-6 digit
Key Metrics
- Employment
- Establishments
- Wages
- Often include access to additional variables
Timing
- Depends on sources
- Often use statistical methods to provide current or future estimates
Notes
- Often based on federal data, supplemented by additional sources (such as job postings) and statistical methods
- May have unsuppressed data (may be through inference)
- Can be expensive (e.g., five-figure subscription rates)
State Data Portals
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Example
- Minnesota LQ Tool: https://mn.gov/deed/data/data-tools/qcew/qcew-location-quotient.jsp
Geographies
- State
- County (often)
- May have state-specific regions
Industry Detail
- Variable
Key Metrics
- Variable
Timing
- Depends on sources
Notes
- Can be useful for local or quick reference use
- May be unable to compare to out-of-state peers