Colorado in Bottom Third of States for Output Manufacturing Location Quotient

Manufacturing is critical to the state of Colorado; however, the state’s manufacturing output lags other states.

One way to evaluate the Bureau of Economic Analysis state output data is to compare the industry specialization index or the location quotient (LQ) to show which states have a higher concentration of manufacturing relative to the other industries. A LQ > 100.0 means there is a higher concentration and a L.0  < 100.0 means there is a lower concentration.

In the first group of states (17 states) the manufacturing sector has a LQ is greater than 118.0. In other words, manufacturing is a significant export industry for these states.

In the second group of states (15 states) the LQ is greater than 85.0 and less than 115.0. In these states manufacturing is an important industry. Because Minnesota, Illinois, and Idaho have LQs greater than 110.0 it is likely that manufacturing is a significant export industry.

The LQ for the final group of states (18 states + District of Columbia) is less than 85.0. In these states manufacturing may be an important part of the economy and there may be pockets where there are high concentrations of exports. Manufacturing does not drive the fortunes of the state in the same way it does in the states with higher LQs.

Colorado is a perfect example. Manufacturing has a LQ of 60.1 and the industry accounts for 8.4% of private sector output. The state has competencies in food and beverage and computer and other high-tech manufacturing. By contrast, Oregon has substantially fewer manufacturing workers and appreciably greater manufacturing output. (The Portland-Vancouver MSA manufacturing output is $47.3 billion vs. almost $20 billion for the entire state of Colorado). In Oregon manufacturing accounted for 31.3% of total private sector GDP in 2012.