Tag: Location quotient

Colorado Manufacturing Could be Stronger

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The Manufacturing Sector is critical to the Colorado economy because it is a source of primary jobs that pay higher than average wages. In addition, manufacturers bring in revenue from outside the state that is spent in Colorado and they export goods to domestic and international destinations.

In 1990, manufacturers accounted for 11.3% of total state employment. In 2014, only 5.6% of Colorado’s employees were in the manufacturing sector. Around 2000 the number of manufacturing workers in Colorado and across the U.S. declined as companies outsourced and off shored. As well, the back-to-back recessions in the 2000s forced manufacturers to become more efficient. They accomplished this by investing in capital expenditures rather than labor.

Compared to most other parts of the country, Colorado has never been a strong manufacturing state. It is the proud home to world-class manufacturers such as Ball Aerospace, Miller Coors, and Leprino Foods. Most manufacturers are small businesses that produce everything from tacos to optical mirrors.

The state’s manufacturing sector is concentrated in pockets along the Front Range:
• Boulder County is at the forefront for its high tech manufacturers.
• Weld and Pueblo Counties are strong in renewable energy. Vestas has been a significant source of manufacturing job growth over the past decade. In addition, Weld County is home to various ag-based manufacturers.
• A majority of the state’s manufacturers are located in Denver.

The location quotient for all wage and salary manufacturing workers, or the concentration relative to other industries, is well below 1.0. It trended downward from 1990 to 2001, but has been relatively flat since then.

Here’s to growth for the Colorado manufacturing sector in years to come.

colorado manufacturing

Colorado Manufacturing Employment Stronger than U.S.

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Since 1990 Colorado manufacturing employment has fared better than U.S. manufacturing employment. This has occurred in part because Colorado has grown off a much smaller base. Also the mix of companies in Colorado has not included some of the industries, such as textiles, that were hit hardest by outsourcing.

Colorado’s strength in manufacturing is beverages such as Coors/Miller and Budweiser. As well, the state has competencies in select high-tech sectors.

The bad news for Colorado is that the industry’s location quotient, or concentration, is well below 1.0 and trending downward.  In other words, Colorado has a lower concentration of manufacturers than the U.S.

U.S. vs. Colorado Manufacturing Employment
U.S. vs. Colorado Manufacturing Employment.

 

 

Colorado’s Concentration of Manufacturing is Lower than the U.S.

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Colorado manufacturers produce coffee (Boyer’s Coffee) and beer (Coors). These types of products are classified as nondurable goods. Durable goods products include satellites (Ball Aerospace), air safety devices (Particle Measuring Systems), or ice making machines (Ice-O-Matic).

Many manufacturers create primary jobs – that is an economic development term. Many primary job creators pay higher than average wages. In addition, they attract outside investment to our local communities. In other words, their products are exported outside the state. As well, they often have higher “multiplier” effects. In non-economic terms that means they have a local supply chain.

The concentration, or location quotient (LQ), for Colorado manufacturing was .65 in 2012 (calculated using the most recent QCEW data). In other words, Colorado has a much lower concentration of manufacturers than the U.S.

The majority of manufacturers are located in the Denver MSA; however, Northern Colorado and Boulder have the highest concentration of manufacturing employees.

Greeley and Boulder are the only MSAs with a concentration of manufacturing greater than 1.0.
Greeley and Boulder are the only MSAs with manufacturing location quotients greater than 1.0.

Colorado’s Dwindling Concentration of Manufacturers a Concern for the State

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Manufacturing is a critical part of Colorado’s economy.  Between 1998 and 2010 manufacturing employment decreased significantly in the state and the nation. Despite a slight rebound in jobs, Colorado’s concentration, or location quotient (LQ), of manufacturing workers has not bounced back.

A LQ is the local concentration of workers in a particular sector relative to the concentration in another area (typically the other area is the United States). If the local concentration is the same as the national concentration, the LQ=1.

The Colorado LQ for manufacturing is .645.

In December 2012:

  • 5.72% of Colorado employment was manufacturing
  • 8.87% of U.S. employment was manufacturing.
  • 5.72% / 8.87% = .645

Colorado has a lower concentration of manufacturing that the U.S. In short, this is important because many manufacturing jobs have higher than average pay. As well, segments of the manufacturing industry are critical components of the state’s high tech cluster.

For additional information on the state’s manufacturing sector check out Colorado Manufacturing Update Analysis of Employment Data Through 2012. It is available in the Special Reports section at https://cber.co.

©Copyright 2011 by CBER.

Decline in Employment of Information Sector Accompanied by Decline in Concentration of Workers

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One of Colorado’s more intriguing components of the state economy is the Information sector.  It includes telecommunication, printed media, broadcasting, Internet service providers, and software publishers.  As such many companies in this sector are part of Colorado’s advanced technology cluster.

Over the past decade technological advances and the Internet caused a decline in jobs in the media, particularly the printed media. As well consolidation occurred in telecommunications, the most recent being the acquisition of Qwest by Centurylink.

After peaking at 108,400 workers in 2000, the sector has declined steadily. In 2012, it had fallen to 69,700, about the same level as in the mid-1990s.

Over this period, technological advances and consolidation caused the sector to decline across the U.S. Unfortunately, the location quotient, or the concentration of local Information workers relative to the U.S. has dropped off at a faster rate in Colorado than the U.S.

In August 2000, Colorado’s location quotient for Information peaked at 1.84. By the end of 2012 it had fallen to 1.48.

The good news is the state still has a high location quotient of workers and the sector remains a major contributor to the Colorado Gross Domestic Product.

For additional information about the performanc of the Colorado economy refer to “Colorado Employment Review – 2012 “.

©Copyright 2011 by CBER.