|
The Delaware Valley Regional Planning Commission (DVRPC) is an interstate,
intercounty and intercity agency serving the Philadelphia-Camden-Trenton
metropolitan area. As the region's metropolitan planning organization
(MPO), the Commission provides technical assistance and services to its
member state and local governments, the private sector and the public.
Delaware Valley Data is our periodic series of free data bulletins and
analytical data reports. This analytical report describes job growth and
decline in the Delaware Valley over the past three decades, based on sectoral
data from the Bureau of Economic Analysis' Regional Economic Information
System (REIS).
Regional Economic Information System
In May of 2002 the Bureau of Economic Analysis released its latest
employment estimates; this data set is known as the Regional Economic
Information System (REIS) and spans the last three decades (1969-2000).
REIS divides the economy into broad sectors including construction, finance,
retail trade, wholesale trade, services, transportation and others, and
then estimates various types of employment, including wage earners, salaried
employees, and full and part time workers in each of these sectors. REIS
employment data is not an absolute count of people employed, but REIS
is a good estimation of jobs. Unlike the 2000 Census, REIS data are based
on place of work rather than place of residence.
One can answer many questions from this data, drawing at least rudimentary
conclusions about regional job growth, economic specialization,
and industry diversification, but most queries can be reduced
to two simple questions: "What does our region do?" and "How well do we
do it?"
Methodological Background: Economic Base Theory and Location Quotients
Both of these questions can be answered with the assistance of economic
base theory and location quotient analysis. Economic base theory assumes
that most industries can be divided into basic and non-basic sectors.
Basic sector firms draw money into the local economy. They create wealth
and feed the region's growth by producing a surplus that can be exported
outside the region. They are "basic" in that they are essential to a region's
economic development. Non-basic sectors are important contributors to
the local economy as well; non-basic sectors, however, are mostly consumed
by the region itself and, according to economic base theory, do not achieve
economic development.
Location quotient analysis is a simple method for determining if an economic
sector is basic. It is a useful method for answering the question " what
does the region do?". This analysis measures the degree of activity in
a given sector in the local economy by judging it against the degree of
activity in the same sector in a larger reference economy. The two percentages
of activity are divided by each other to form the ratio known as the location
quotient. Many kinds of data can be used to derive a location quotient.
The most common measure is the number of jobs, as is provided in the REIS
data. When an industry or a sector in the REIS data has a ratio above
<1> it is generally said to be basic, meaning compared to the larger
reference economy the local economy has a greater number of jobs than
would be expected. There are sectors which may have a high local demand
and a ratio above one - such as construction - which are locally consumed
and not an export sector, but in most sectors a location quotient above
<1> indicates a greater degree of specialization.
The first step in location quotient analysis is to choose the reference
economy with which to compare the Delaware Valley's performance; the second
is to calculate the ratio and to reveal leading industries, meaning the
industries that achieve a ratio above <1>. Depending on the level
of geography chosen, location quotients can be quite different. For example,
when comparing the Delaware Valley's financial services sector employment
to the financial service sector employment of the greater Mid-Atlantic
economy we are competing with New York City, a world center for financial
services. The location quotient calculated based on the Mid-Atlantic economy
may mask our true strength in this industry. To compare this industry
to the entire nation may produce a better indicator. To determine basic
employment in the Delaware Valley this report has therefore created a
location quotient by dividing the percent of jobs in our region for each
sector by the percent of jobs in the nation in that sector. Location quotients
above one for the 9-county region are illustrated in Table 1. This report
will later compare the Delaware Valley Regional Economy to other metropolitan
areas.
Table
1: Four Decades of Location Quotients above <1> by Sector
and County |
|
1969 |
1979 |
1989 |
1999 |
| Bucks County |
Construction |
1.21 |
1.34 |
1.48 |
1.55 |
| |
Manufacturing |
1.29 |
1.31 |
1.26 |
1.37 |
| |
Transportation and public utilities |
|
|
|
|
| |
Wholesale trade |
|
|
1.05 |
1.24 |
| |
Retail trade |
1.22 |
|
|
|
| |
Finance, insurance, and real estate |
|
|
|
|
| |
Services |
|
|
|
|
| |
Government enterprises |
|
|
|
|
|
| Chester County |
Construction |
1.00 |
1.16 |
1.36 |
1.21 |
| |
Manufacturing |
1.16 |
1.31 |
1.21 |
1.18 |
| |
Transportation and public utilities |
|
|
1.03 |
1.08 |
| |
Wholesale trade |
|
1.11 |
1.04 |
1.05 |
| |
Retail trade |
|
|
|
|
| |
Finance, insurance, and real estate |
|
|
1.12 |
1.25 |
| |
Services |
|
|
|
|
| |
Government enterprises |
|
|
|
|
|
| Delaware County |
Construction |
1.23 |
1.34 |
1.22 |
1.20 |
| |
Manufacturing |
1.12 |
|
|
|
| |
Transportation and public utilities |
|
|
1.12 |
1.21 |
| |
Wholesale trade |
|
|
|
|
| |
Retail trade |
1.14 |
1.20 |
1.14 |
1.12 |
| |
Finance, insurance, and real estate |
|
1.02 |
|
|
| |
Services |
1.09 |
1.08 |
1.08 |
1.08 |
| |
Government enterprises |
|
|
|
|
|
| Montgomery County |
Construction |
1.47 |
1.49 |
1.28 |
1.20 |
| |
Manufacturing |
1.24 |
1.27 |
1.30 |
1.40 |
| |
Transportation and public utilities |
|
|
|
|
| |
Wholesale trade |
1.08 |
1.08 |
1.11 |
1.15 |
| |
Retail trade |
1.04 |
1.05 |
1.00 |
|
| |
Finance, insurance, and real estate |
|
1.08 |
1.20 |
1.28 |
| |
Services |
|
|
|
|
| |
Government enterprises |
|
|
|
|
|
| Philadelphia County |
Construction |
|
|
|
|
| |
Manufacturing |
|
|
|
|
| |
Transportation and public utilities |
1.28 |
1.41 |
1.23 |
1.15 |
| |
Wholesale trade |
1.29 |
1.05 |
|
|
| |
Retail trade |
|
|
|
|
| |
Finance, insurance, and real estate |
1.22 |
1.16 |
1.07 |
|
| |
Services |
1.08 |
1.12 |
1.12 |
1.18 |
| |
Government enterprises |
|
|
|
|
|
| Burlington County |
Construction |
|
|
1.10 |
|
| |
Manufacturing |
|
|
|
|
| |
Transportation and public utilities |
|
|
|
1.15 |
| |
Wholesale trade |
|
|
|
1.42 |
| |
Retail trade |
|
1.08 |
1.10 |
1.10 |
| |
Finance, insurance, and real estate |
|
|
|
1.20 |
| |
Services |
|
|
|
|
| |
Government enterprises |
3.03 |
1.84 |
1.47 |
1.23 |
|
| Camden County |
Construction |
1.20 |
1.13 |
1.16 |
1.08 |
| |
Manufacturing |
|
|
|
|
| |
Transportation and public utilities |
|
|
1.02 |
1.04 |
| |
Wholesale trade |
1.01 |
1.36 |
1.29 |
1.20 |
| |
Retail trade |
1.25 |
1.21 |
1.15 |
1.11 |
| |
Finance, insurance, and real estate |
|
|
|
|
| |
Services |
|
|
|
|
| |
Government enterprises |
|
|
|
1.16 |
| |
| Gloucester County |
Construction |
1.12 |
1.23 |
1.42 |
1.42 |
| |
Manufacturing |
1.06 |
1.12 |
1.06 |
1.07 |
| |
Transportation and public utilities |
|
|
|
|
| |
Wholesale trade |
|
|
|
1.53 |
| |
Retail trade |
1.07 |
1.21 |
1.41 |
1.40 |
| |
Finance, insurance, and real estate |
|
|
|
|
| |
Services |
|
|
|
|
| |
Government enterprises |
1.00 |
1.11 |
1.15 |
1.19 |
| |
| Mercer County |
Construction |
|
|
|
|
| |
Manufacturing |
1.03 |
|
|
|
| |
Transportation and public utilities |
|
|
|
|
| |
Wholesale trade |
|
|
|
|
| |
Retail trade |
|
|
|
|
| |
Finance, insurance, and real estate |
|
|
|
|
| |
Services |
1.19 |
1.10 |
1.04 |
1.02 |
| |
Government enterprises |
1.19 |
1.56 |
1.69 |
1.86 |
|
| 9 County Region |
Construction |
|
|
|
|
| |
Manufacturing |
1.19 |
1.08 |
|
|
| |
Transportation and public utilities |
|
|
|
|
| |
Wholesale trade |
1.10 |
1.07 |
1.12 |
1.08 |
| |
Retail trade |
|
|
|
|
| |
Finance, insurance, and real estate |
|
|
|
|
| |
Services |
|
|
|
|
| |
Government enterprises |
|
|
|
|
| |
|
|
|
|
|
| Source: DVRPC, November, 2002.
Derived from Bureau of Economic Analysis 2000 REIS Dataset.
Note: Only years with location quotients above
1.0 are shown. |
Table 1 indicates that by the end of the 1990's our region had
location quotients above <1> in services at 1.21, in financial services
at 1.14 , in government enterprises at 1.14 and in wholesale trade at
1.08, when compared to the nation. It is evident from this data
that the region's strongest private sectors are the professional and financial
services. Figure 1 tracks these changes in location quotients
from 1969 to 1999. The number of jobs these higher location quotients
may indicate is still unclear. If the sector with the
larger location quotient does not employ many people in absolute terms,
it may not be as important to the region's economy. It instead may indicate
an area of comparative advantage that should be supported in local economic
development policy.

To evaluate the significance of a given sector to the Delaware
Valley's employment base, Figure 2 shows the percentage of employment
for each of the REIS sectors in the Philadelphia PMSA in the last year
of the past four decades. In Figure 2, the shift from manufacturing to
the service sector is clear. Also of interest is the fact that some industries
(such as construction or retail and wholesale trade) maintained similar
levels of employment relative to the rest of the economy while government
services declined along with manufacturing. Financial services gained
employment along with other professional services. Neither government
or financial service employment, however, changed as much as manufacturing
and professional services.
Figure 3 illustrates the shift from manufacturing to
service jobs, indicating that the crossover point occurred in 1974. In
that year the region had an equal portion of manufacturing jobs to service
jobs. By 2000 the service sector accounted for roughly 40% of the region's
employment while manufacturing accounted for only 10%. By 2000 the service
sector was both our greatest employer and our greatest wealth generating
sector.

Shift Share Analysis
The location quotient analysis shows that the Delaware Valley's
economy is involved heavily with services, but we still do not know how
well this sector is performing. Shift-share analysis is one technique
for gaining a better understanding of how the Delaware Valley is faring
in services as well as determining if our lackluster growth in other areas
is a national or local phenomena.
Local economic growth or decline could be due to different factors. Local
employment is generally more concentrated in certain industries than is
employment in the nation as a whole. Local employment growth is sometimes
spurred by industries unique to the region while other times it is simply
a reflection of national trends. In our location quotient analysis we
divided these local and national employment concentrations by each other
to quantify the disparity. Shift-share analysis goes one step further
and attempts to separate local growth factors from national growth factors
by asking the three following questions:
-
What part of the growth is attributable simply to the fact the overall
economy is growing? For example, if the nation is experiencing growth,
is it reasonable to assume that this growth will positively influence
the region?
-
Did the difference between national growth and local growth in an
industry arise because of a different mix of industries? For example,
Detroit may have a strong automotive industry and therefore stronger
growth in manufacturing even though manufacturing is declining nationally.
-
Did the difference in growth between the national and local economies
arise because of a disparity between the performance of local firms
compared to their national counterparts; namely, what growth was attributable
to the competitive nature of local industries? For example, the mix
of Services to Manufacturing may be moving towards Services in both
the local economy and national economies, but some regions will be
more successful at growing their Service economies than others.
Questions one and two proportion local growth into industry and national
components and are often referred to as proportional shift. Question three
is the most useful for economic policy in that it reveals the competitive
advantage or disadvantage of the region. It should reveal how much the
Delaware Valley is growing or declining in important sectors compared
to the nation and is often referred to as differential shift.
Rather than focusing on the shift aspect of shift-share analysis, however,
in this report we will focus on employment share. Of our three questions,
therefore, question one will be referred to as the National Growth
Share of employment change in our region, question two as the
Industrial-mix Share of employment change in our region and question
three as the Local Share of employment change in our
region. For a complete set of shift-share tables, see Appendix A (page
15).
In order to determine the relative shares of employment growth in the
region we must first measure employment percent and net change in both
the region and the nation. Tables 2A and 2B calculate this change (first
for the nation and then the Delaware Valley) for eight key industries
represented in the REIS data for the years 1989 and 1999. The specific
years chosen can color shift-share analysis. These two years were chosen
because they were the last two years of the past two decades of historic
economic growth and they were both years of expansion rather than decline.
| Table
2 A : National Job Growth from 1989-1999 |
| |
Absolute
number |
Change |
Sectors |
1989 |
1999 |
Percent |
Net |
Construction |
7,293,500 |
9,254,000 |
27% |
1,960,500 |
Manufacturing |
19,992,500 |
19,252,700 |
-4% |
(739,800) |
Transportation, Utilities |
6,361,600 |
7,970,300 |
25% |
1,608,700 |
Whole sale trade |
6,704,300 |
7,464,700 |
11% |
760,400 |
Retail trade |
22,687,600 |
26,910,000 |
19% |
4,222,400 |
Finance, Insurance, Real Estate |
10,663,400 |
12,978,700 |
22% |
2,315,300 |
Services |
37,170,900 |
51,669,000 |
39% |
14,498,100 |
Government Enterprises |
20,745,000 |
22,256,000 |
7% |
1,511,000 |
| Total |
131,618,800 |
157,755,400 |
20% |
26,136,600 |
| Table 2 B: Job Growth
in the Delaware Valley from 1989-1999 |
|
Absolute
number |
Change |
Sectors |
1989 |
1999 |
Percent |
Net |
Construction |
143,086
|
137,075
|
-4%
|
(6,011)
|
Manufacturing |
381,671 |
309,962 |
-19% |
(71,709) |
Transportation, Utilities |
111,158 |
126,131 |
13% |
14,973 |
Whole sale trade |
151,573 |
140,741 |
-7% |
(10,832) |
Retail trade |
428,161 |
447,282 |
4% |
19,121 |
Finance, Insurance, Real Estate |
250,448 |
259,160 |
3% |
8,712 |
Services |
833,933 |
1,083,615 |
30% |
249,682 |
Government Enterprises |
347,122 |
316,701 |
-9% |
(30,421) |
| Total |
2,647,152 |
2,820,667 |
7% |
173,515 |
Source: Delaware Valley
Regional Planning Commission, November, 2002 (see Appendix A: Shift
Share Analysis of the Delaware Valley) |
In total, the Delaware Valley grew by 7% percent during this period while
the nation grew by 20%. If the local economy had grown at the same rate
as the national economy, the Delaware Valley would have grown by 529,000
jobs (see Appendix A: National Growth Share Table). Since the region realized
an increase of only 173,000 jobs, however, it is clear that employment
growth in the Delaware Valley did not keep up with this national rate.
Despite the stimulus of the national job expansion, the region did not
fully participate in this growth. The key exception is the service sector,
which increased by 250,000 jobs.
Due to local conditions and national industry trends, local changes in
employment will obviously not exactly follow national trends. Despite
trailing the absolute national growth rates in all sectors, our region
was weighted more towards construction, finance & real estate, transportation
and services than the nation, while manufacturing, government and to a
lesser extent wholesale and retail trade were less prominent in our region.
The services sector is by far the strongest sector (see Appendix A: Industrial
Mix Share Table).
Local growth share is represented in Table 3 (also see Appendix A: Local
Growth Share Table). Determining the local growth share should indicate
if local industries are growing faster or slower than similar industries
at the national level. In other words, we know there is a growth engine
in services in our region, but what is its speed? Is it faster or slower
than the growth of services nationally? The calculation of the local growth
share simply requires multiplying our base year of employment, 1989, by
the difference between local sector growth and national sector growth.
| Table 3: Local Share
of Job Growth in the Delaware Valley |
| Sectors
|
Delaware
Valley
Employment in base
year of 1989
|
Delaware
Valley
Sector Growth
1989-1999
|
National
Sector
Growth
1989-1999
|
Growth
Difference
|
Local
Growth
Share
by 1999 |
Construction |
143,086 |
-4% |
27% |
-31% |
-44,357 |
Manufacturing |
381,671 |
-19% |
-4% |
-15% |
-57,251 |
Transportation/ Utilities |
111,158 |
13% |
25% |
-12% |
-13,339 |
Wholesale trade |
151,573 |
-7% |
11% |
-18% |
-27,283 |
Retail trade |
428,161 |
4% |
19% |
-15% |
-64,224 |
Finance, Insurance, Real Estate |
250,448 |
3% |
22% |
-19% |
-47,585 |
Services |
833,933 |
30% |
39% |
-9% |
-75,054 |
Government Enterprises |
347,122 |
-9% |
7% |
-16% |
-55,540 |
| Total |
2,647,152 |
7% |
20% |
-13% |
-344,130 |
Source: Delaware Valley Regional
Planning Commission, November 2002 (see Appendix A: Shift-Share
Analysis of the Delaware Valley) |
From Table 3 we can conclude that little of the job
growth in our region can be attributed to local factors. In shift-share
analysis a completely negative local share is indicative of a region in
decline, meaning the region was growing at a slower rate or declining
more rapidly than the nation in nearly all sectors. Our growth
engine is decelerating rather than accelerating. In particular, manufacturing
and government enterprises, two traditional sources of employment in our
region, have been declining faster in the Delaware Valley than in the
nation as a whole. Unfortunately, shift-share analysis does not give insight
into why manufacturing and government enterprises have been in exceptional
decline in our region.
The shift-share analysis concurs with the location quotient analysis in
concluding that by 2000 only the service sector produced a significant
surplus of employment to generate wealth in the region. The Delaware Valley
clearly has its greatest concentration and highest growth rates in the
service sector, but the rate of growth did not keep up with services nationally,
suggesting some weakness in our specialization within this sector. In
response to our earlier questions of what do we do and how well do we
do it, while the regional economy is diverse, the Delaware Valley
gets a poor grade overall in job growth and specialization.
Rather than harping on why the Delaware Valley has lost so much
of its former job base, a better question is what can be done for the
region's future job growth. Despite being a poor economic performer nationally,
as shown earlier in this report, there is a degree of specialization occurring
in the region in sectors that are growing nationally.
Regardless of its lack of success relative to the nation, it is clear
that the region's service sector is experiencing exceptional growth. Where
the national economy grew by 20% and our Region's economy grew by 7%,
the Delaware Valley's service sector grew by 30%. This rate may be 9%
less than the 39% growth of the service sector nationwide, but it may
also indicate potential for future success. Clearly, the region's comparative
advantage lies in supporting and expanding the service sector.
Dissecting the Delaware Valley's Service Sector
The Economic Census is a statistical survey conducted every five years
by the US Census Bureau. It measures business establishments and their
activities, including sales and employment. Like REIS data, one can derive
location quotients and other analytical measures from it; the main difference
between them, relevant to this discussion, is that the Economic Census
measures both sectors and more specific classifications within sectors,
making it possible to understand the components of the Delaware Valley's
service sector base.
The Economic Census breaks all jobs into classifications known as NAICS
codes. The number of digits in a NAICS code indicates the level of detail
of the classification. The broadest categories are two digits. The manufacturing
sector, for example, is represented by NAICS codes beginning with 3, such
as NAICS 31, 32 and 33.
The service sector is denoted primarily by NAICS codes that begin with
5. For example, non-technical, information-related businesses such as
publishing or broadcasting begin with 51, financial and insurance services
begin with 52, and professional, scientific, and technical services begin
with 54. NAICS 54 has been under increasing scrutiny. There is a growing
view that the industrial economy is undergoing a fundamental shift not
just from manufacturing to services, as was shown in our analysis of the
REIS data, but to knowledge-based services. This shift is often referred
to as the New Economy.
Some people may associate the term New Economy with the high-tech stock
bubble of the late 90's or with the dot-com craze which never lived up
to its hype. The New Economy is actually a more fundamental change. According
to The Encyclopedia of the New Economy, some definitions of the New Economy
include:
A world in which people work with their brains instead of their hands…a
world in which communications technology creates global competition…a
world in which innovation is more important than mass production… a world
in which investment buys new concepts or the means to create them, rather
than machines…a world in which rapid change is constant.
Whatever one's definition, it is hard to deny that NAICS code 54
(professional, scientific and technical services) will be critical to
new economic policy. To understand a region's potential for future success
one should start with an analysis of this key classification.
Figure 4 applies location quotient analysis to the 1997
Economic Census data for employment in the Philadelphia PMSA (the Philadelphia
PMSA includes Salem rather than Mercer County in the DVRPC 9-county region).
Almost all of the region's leading industries in the service sector are
in NAICS category 54 (professional, scientific and technical services).
Moving from the broad two-digit designation to a four-digit designation
reveals that within NAICS 54, the Delaware Valley has strengths
in the fields of legal services with a location quotient of 1.06;
architectural and engineering services with a location
quotient of 1.19; computer services with a location quotient
of 1.25; and consulting services with a location quotient
of 1.20. Since these numbers are not much beyond 1, they are not strong
exporting sectors. For stronger location quotients it is necessary to
break these classifications down to five and six digit classifications.
It is important to note that at the scale of more narrowly defined sectors,
location quotients will show greater variance. Nevertheless, the analysis
will still highlight the relative clusters and strengths of the regional
economy.
At the lower classification levels of five and six digits there are a
number of job categories with a strong regional showing. The region's
strength in architecture and engineering is revealed as entirely an engineering
advantage. Engineering services has a quotient of 1.41, whereas architecture's
quotient is just 0.87.
Specialized design, a service area that did not show up as a strong exporting
industry in the aggregate two digit NAICS level, has the region's strongest
location quotient of 2.80 in industrial design. This
is most likely a reflection of our manufacturing history. The blue collar
manufacturing jobs may have moved to lower cost locations, but the knowledge-based
jobs in industrial design have remained.
As for the region's computer services industry, it is mostly a locally
consumed industry with location quotients in computer programming and
other computer services at or below a quotient of 1. However, in the area
of systems design, the Delaware Valley is an exporter. The systems design
advantage is concentrated in systems integration, with
its very high location quotient of 2.19.
Moving on to consulting, rather than human resources and marketing advantages,
which are both below 1, the region's consulting strength is revealed as
a general management expertise with a location quotient
of 1.52 and an environmental consulting know-how expressed
by a quotient of 1.48.
Finally, some of the most interesting results are at the bottom of Figure
4. Although the field of research and development overall is
not strong in our region, the area of life sciences (within research and
development) is extremely strong. Market research is also very strong.
Life science R & D has a quotient of 1.87, and market
research has a quotient of 1.57. The marketing data seems odd
since marketing and advertising services are generally weak within the
region.
More significant than the numbers is what these quotients suggest for
economic policy. The fact that there are strengths across different service
sector classifications can be interpreted both positively and negatively
for the region. The good news is that the Delaware Valley's service
sector is diversified. Diversity in the regional economy is positive
when local needs are met and the region is able to export across a wide
range of sectors. Additionally, the region's diversity means there are
kernels of opportunity on which greater economic strength could be built
. The bad news is that there are few places where interrelated
industries feed each other, suggesting that even though there
is diversification it might be easy for other regions to usurp our strengths.
To understand why requires an understanding of two terms often seen today
in discussions of regional economies: clusters and synergies. Earlier
we suggested that economic base for most of the nation has shifted to
knowledge-based industries, the so-called New Economy. One of the premises
of the New Economy is that the strongest regional economies are those
where knowledge workers can mingle in interrelated industries.
Sometimes these connections become so strong that they form an iron triangle
of interlocking industries that can block other regions from forming similar
strengths or that can attract isolated industries of other regions into
their triangle. To envision such a scenario, think of Silicon Valley in
the 80's and 90's. For at least two decades, the Valley was a Mecca for
technical talent as well as entire industries. It had both industry clusters
and industry synergies.
According to the Harvard Business School Institute for Strategy and Competitiveness
(www.isc.hbs.edu) a cluster is a geographically centralized group of interconnected
companies and associated institutions in a particular field, including
product producers, service providers, suppliers, universities, and trade
associations. Synergies are related to clusters but arise out of linkages
that span across industries in a particular location. Looking simplistically
at Figure 4, one could say that clusters would be the
line items of each four-digit NAICS code box and synergies would be connections
between items in different boxes.
The data in Figure 4 suggests some existing synergies
in the Delaware Valley as well as some possibilities that could be nurtured.
For example, an existing synergy can be seen in the Region's strong
economic base in industrial design and engineering services. There is
also a synergy visible in both our strengths in Environmental Consulting
at 1.48 and research and development in the life sciences at 1.87.
It is common knowledge that between the major medical and life science
research institutions in Philadelphia and the pharmaceutical companies
in Central New Jersey, the area has been a top-ten leader in biotechnology.
The region's synergy in biotechnology is an obvious candidate for policy
focus; however, there are other potential synergies as well as some clusters
the region may not be exploiting that could strengthen our economic base.
For instance, we are an engineering services leader, but we do not have
a strong quotient in engineering research. Marketing research is strong
as is consulting in general but we lag in marketing consulting. In the
technology fields we have strong quotients in integrating computer systems
as well as in general management consulting, yet our computer consultants
are not quite to a basic level. The region would enhance its strengths
by focusing on these areas.
Synergies could also be nurtured between sectors. Table 4
illustrates strong location quotients in financial services (NAICS 52)
and educational services (NAICS 61). The Delaware Valley has an extensive
insurance industry, with 80,000 jobs and a location quotient of 1.31.
While we do not employ many people in the educational services sector,
we have strong quotients in both computer training (with a location quotient
of 1.30) and fine arts schools (with a location quotient of 1.18), suggesting
we train more individuals in these fields than most regions.
| Table 4: NAICS 52
& 61 for the Philadelphia PMSA |
NAICS |
Job Description |
Employment |
LQ |
522
|
Credit intermediation
|
51,943
|
0.73
|
523 |
Securities intermediation |
19,111 |
1.04 |
524 |
Insurance |
79,399 |
1.31 |
525 |
Funds & Trusts |
583 |
0.63 |
|
6114
|
Business & Computer Schools (taxable)
|
1,353
|
1.10
|
61141 |
Business Schools (taxable) |
183 |
0.74 |
61142 |
Computer Training (taxable) |
851 |
1.30 |
61143 |
Professional Development (taxable) |
319 |
0.99 |
6115 |
Technical & Trade Schools |
1,392 |
0.91 |
61161 |
Fine Arts Schools |
1,159 |
1.18 |
Source: Delaware Valley Regional
Planning Commission, derived from the United States Census Bureau's
1997 Economic Census. |
These strengths in finance and education could be coupled with strengths
in research and development and professional, scientific and technical
services. For the most potent regional synergies, strengths in financial
services and education are very important. More specifically, a region
that has solid science and technology institutions that teach students
how to turn discoveries into products and a region that has venture capitalists
who are committed to finding and commercializing local breakthroughs are
usually the most successful in harnessing their economic base in other
professional services.
Comparing the Delaware Valley's Strengths to Similar Regions
To this point in our location quotient analysis we have compared the Delaware
Valley to the entire nation. Perhaps a better measure of our economic
performance would be to evaluate the region against similar metropolitan
regions. We could juxtapose our clusters and synergies to benchmark our
successes and to assess our competition. Note again that at the regional
scale of comparison, there may be greater variance in location quotients,
but the comparison can still highlight relative strengths and weaknesses.
To select regions for comparison, we considered similar population size,
absolute population change and percent population change. Additionally
the criteria of geographic proximity, no greater than roughly 500 miles,
and of history have been added. A city that developed before World War
II and experienced the same decentralization and development of the past
50 years is likely to have more in common with the Delaware Valley than
a distant and recently developed Sunbelt city such as San Diego or Phoenix.
Based on these criteria, three other regions were chosen for this analysis,
as illustrated in Table 5: the Washington, DC metropolitan
area, about 140 miles to the South; the Boston area, nearly 300 miles
to the North; and the Detroit area, approximately 550 miles to the West.
Calculating location quotients in NAICS Code 54 (professional, technical
and scientific services) uncovers some interesting patterns between our
chosen regions. Figure 5 compares the location quotients
of NAICS 54 in the Delaware Valley to these regions. We have already discussed
how the Philadelphia region's service sector strengths in NAICS 54 are
scattered across the spectrum of classifications. When compared to the
location quotients of other regions, however, the Delaware Valley's economic
base looks less impressive. We underperform comparable regions
not just in the number of industries in which we rank above a location
quotient of 1, but also in industries above 2 or higher. Additionally,
we have much weaker clusters and synergies.
| Table 5: Comparable
Regions to the Delaware Valley |
| Regional Characteristics
|
Philadelphia |
Detroit |
Boston |
Washington DC |
Distance (Miles From Philadelphia)
|
0
|
550
|
300
|
150
|
CMSA |
|
|
|
|
Population Size 1990 |
5,899,345 |
4,665,236 |
4,171,643 |
6,305,746 |
Population Size 2000 |
6,188,463 |
5,456,428 |
5,819,100 |
7,608,070 |
% Population Change 1990-2000 |
5% |
17% |
39% |
21% |
Absolute Change 1990-2000 |
289,118 |
791,192 |
1,647,457 |
1,302,324 |
|
|
|
|
|
PMSA |
|
|
|
|
Population Size 1990 |
4,856,881 |
4,382,299 |
2,870,669 |
NA |
Population Size 2000 |
5,100,931 |
4,441,551 |
3,406,829 |
4,923,153 |
% Population Change 1990-2000 |
5% |
1% |
19% |
NA |
Absolute Change 1990-2000 |
244,050 |
59,252 |
536,160 |
NA |
Source: United States Census Bureau.
Note: See Appendix B for CMSA and PMSA definitions. |
Although the city of Detroit is notoriously under-performing, the Detroit
area as a region has a number of NAICS 54 service sector strengths. Detroit
has both clusters and synergies not seen in the Delaware Valley. Its advertising
industry, for example, has basic employment in agencies, display advertising,
direct mail, and ad distribution. Its synergies are also stronger. Just
like the Philadelphia area, Detroit has some of the leftover knowledge-based
industries of an industrial economy, but at much stronger levels due to
the continuing automotive industry. Coupled with a location quotient of
3.03 in industrial design, Detroit's strengths in industrial engineering
(with a quotient of 1.56) are higher than Philadelphia's engineering base.
Detroit also has a quotient in drafting of 4.89. More impressive is that
further down the value chain of getting manufactured products to market,
Detroit has strengths of 3.12 and 3.45 in the specialties of marketing
and product logistics and distribution consulting.
Both Boston and Washington DC metro areas are stronger in synergies and
clusters than Philadelphia. Although neither area has strengths in industrial
related knowledge, both economies are arguably stronger. Boston has cluster
strengths in advertising, research and development, computer services,
and consulting services. DC has clusters in R & D, computer services
and consulting as well. In both of these regions the extent of the data
suggests a higher order of clusters and synergies.
The economies of both Boston and DC, but especially the latter, reflect
the concept of an iron triangle locking other regions out of the competition
for technology jobs. The first leg of their triangle begins with research
and development. This in turn feeds into the second leg of their triangle,
the computer services industry. Closing the triangle is the third leg
of higher demand for consulting services for the technology industries.
As more capital migrates to this triangle there is less capital available
for other regions, including the Delaware Valley. Research and development
jobs are perhaps the best indicator in this data of how capital is flowing
and these triangles are being created. Both DC and Boston have
R&D location quotients above 2. Philadelphia's is only 0.74,
well below the level of what the region theoretically consumes. Indeed,
if it weren't for the Delaware Valley's success in life science research
this quotient would be a sober 0.26.
Other indicators of a region's success in forming these iron triangles
are in NAICS classification 52 (financial services) and NAICS classification
61 (educational services). As discussed earlier, Philadelphia has basic
employment in computer training, fine arts schools and the insurance industry.
When compared to the same educational and financial services in Boston,
DC, and Detroit, however, we lag behind all three regions in both sectors.
Table 6 uses location quotients from NAICS 52 and 61
to benchmark our region against others in the potential for forming key
synergies within the financial and educational service industries.
| Table 6: Location
Quotients for NAICS 52 & 61 by Region |
| NAICS |
Job Description |
Philadelphia |
Detroit |
Boston |
DC |
522
|
Credit intermediation
|
0.73
|
1.05
|
0.65
|
1.21
|
523 |
Securities intermediation |
1.04 |
0.49 |
2.81 |
0.71 |
524 |
Insurance |
1.31 |
1.09 |
0.82 |
0.83 |
525 |
Funds & Trusts |
0.63 |
1.22 |
2.98 |
2.20 |
6114 |
Business & Computer Schools (taxable) |
1.10 |
1.84 |
1.55 |
1.24 |
61141 |
Business Schools (taxable) |
0.74 |
2.14 |
0.59 |
0.22 |
61142 |
Computer Training (taxable) |
1.30 |
1.31 |
1.62 |
1.93 |
61143 |
Professional Development (taxable) |
0.99 |
2.70 |
2.15 |
0.63 |
6115 |
Technical & Trade Schools |
0.91 |
1.04 |
0.68 |
0.52 |
61161 |
Fine Arts Schools |
1.18 |
0.92 |
0.80 |
0.68 |
Source: Delaware Valley Regional
Planning Commission, derived from the United State's Census Bureau's
1997 Economic Census. |
Finally, in response to our questions of what do we do within the service
sector and how well we compare to similar regions, this analysis suggests
that the Delaware Valley has a number of strengths but unlike
similar regions lacks clusters and synergies between these strengths.
Economic development policy must consider a wide range of actions to improve
both the economic climate for businesses and the quality of life of the
region for the workforce, but it appears that there is an opportunity
to support and build upon existing strengths.
Based on the regional analysis of service sub-sectors as compared to other
regions, it is recommended that we build on our success in life
science research, computer systems integration, industrial design and
management consulting. In addition, regional strengths in environmental
consulting and engineering provide continuing opportunities in these growing
sectors. Finally, the Delaware Valley's successes in education including
professional training, technical training and fine arts schools provide
a mechanism to link these creative forces with technical and knowledge
workers to create the new synergies of the New Economy.
Formulating economic development policy which shores up these strengths
quickly will be critical, since the solitary character of our successes
- although providing diversity and economic breadth to our employment
scene - makes our industries vulnerable to other regions that may have
stronger clusters and synergies that can more successfully attract capital
and talent. Moreover, we must also develop our strong points before new
clusters around these industries gel somewhere else, potentially locking
us out of the next big economic expansion. A more comprehensive regional
economic analysis and strategy is needed to develop policies to support
quality growth and expansion of the regional economy. DVRPC will continue
to explore these issues and work with our partners to cooperatively develop
such an approach.
Appendix A: Shift Share Analysis of the Delaware Valley
| National Job Growth
from 1989-1999 (Table 2 A) |
Sectors |
Absolute number 1989 |
1999 |
Percent Change |
Net |
Construction
|
7,293,500
|
9,254,000
|
27%
|
1,960,500
|
Manufacturing |
19,992,500 |
19,252,700 |
-4% |
-739,800 |
Transportation, Utilities |
6,361,600 |
7,970,300 |
25% |
1,608,700 |
Whole sale trade |
6,704,300 |
7,464,700 |
11% |
760,400 |
Retail trade |
22,687,600 |
26,910,000 |
19% |
4,222,400 |
Finance, Insurance, Real Estate |
10,663,400 |
12,978,700 |
22% |
2,315,300 |
Services |
37,170,900 |
51,669,000 |
39% |
14,498,100 |
Government Enterprises |
20,745,000 |
22,256,000 |
7% |
1,511,000 |
Total |
131,618,800 |
157,755,400 |
20% |
26,136,600 |
| Job Growth in the
Delaware Valley from 1989-1999 (Table 2 B) |
Sectors |
Absolute number 1989 |
1999 |
Percent Change |
Net |
Construction
|
143,086
|
137,075
|
-4%
|
-6,011
|
Manufacturing |
381,671 |
309,962 |
-19% |
-71,709 |
Transportation, Utilities |
111,158 |
126,131 |
13% |
14,973 |
Whole sale trade |
151,573 |
140,741 |
-7% |
-10,832 |
Retail trade |
428,161 |
447,282 |
4% |
19,121 |
Finance, Insurance, Real Estate |
250,448 |
259,160 |
3% |
8,712 |
Services |
833,933 |
1,083,615 |
30% |
249,682 |
Government Enterprises |
347,122 |
316,701 |
-9% |
-30,421 |
Total |
2,647,152 |
2,820,667 |
7% |
173,515 |
| National Growth Share
of Job Growth in the Delaware Valley |
Sectors |
Delaware Valley
Employment 1989
|
National
Growth |
Actual
Growth |
National
Growth
Share |
Construction
|
143,086
|
20% |
-6,011
|
28,617
|
Manufacturing |
381,671 |
20% |
-71,709 |
76,334 |
Transportation, Utilities |
111,158 |
20% |
14,973 |
22,232 |
Whole sale trade |
151,573 |
20% |
-10,832 |
30,315 |
Retail trade |
428,161 |
20% |
19,121 |
85,632 |
Finance, Insurance, Real Estate |
250,448 |
20% |
8,712 |
50,090 |
Services |
833,933 |
20% |
249,682 |
166,787 |
Government Enterprises |
347,122 |
20% |
-30,421 |
69,424 |
Total |
2,647,152 |
20% |
173,515 |
529,430 |
| Industrial Mix Share
of Job Growth in the Delaware Valley |
Sectors |
Delaware
Valley
Employment
1989 |
National
Sector
Growth |
Overall
National
Growth |
Growth
Difference |
Industrial
Mix Share |
Construction
|
143,086
|
27%
|
20% |
7%
|
10,016
|
Manufacturing |
381,671 |
-4% |
20% |
-24% |
-91,601 |
Transportation, Utilities |
111,158 |
25% |
20% |
5% |
5,558 |
Whole sale trade |
151,573 |
11% |
20% |
-9% |
-13,642 |
Retail trade |
428,161 |
19% |
20% |
-1% |
-4,282 |
Finance, Insurance, Real Estate |
250,448 |
22% |
20% |
2% |
5,009 |
Services |
833,933 |
39% |
20% |
19% |
158,447 |
Government Enterprises |
347,122 |
7% |
20% |
-13% |
-45,126 |
Total |
2,647,152 |
20% |
20% |
-- |
24,380 |
| Local Share of Job
Growth in the Delaware Valley (Table 3) |
Sectors |
Delaware
Valley
Employment
1989
|
Delaware
Valley
Sector
Growth |
National
Sector
Growth |
Growth
Difference |
Local
Growth
Share |
Construction
|
143,086
|
-4%
|
27%
|
-31%
|
-44,357
|
Manufacturing |
381,671 |
-19% |
-4% |
-15% |
-57,251 |
Transportation, Utilities |
111,158 |
13% |
25% |
-12% |
-13,339 |
Whole sale trade |
151,573 |
-7% |
11% |
-18% |
-27,283 |
Retail trade |
428,161 |
4% |
19% |
-15% |
-64,224 |
Finance, Insurance, Real Estate |
250,448 |
3% |
22% |
-19% |
-47,585 |
Services |
833,933 |
30% |
39% |
-9% |
-75,054 |
Government Enterprises |
347,122 |
-9% |
7% |
-16% |
-55,540 |
Total |
2,647,152 |
7% |
20% |
-13% |
-344,130 |
Source: Delaware Valley Regional
Planning Commission, January 2003. All tables derived from the Bureau
of Economic Analysis REIS 2000 data |
Appendix B: PMSA and CMSA Definitions (see Table 5)
| The "Philadelphia-Wilmington-Atlantic
City CMSA" consists of the Philadelphia PMSA region, the
Atlantic City -Cape May PMSA, the Vineland-Millville-Bridgeton PMSA,
and the Wilmington- Newark PMSA. |
-
The "Philadelphia PMSA" consists of Bucks, Chester,
Delaware, Montgomery and Philadelphia counties (PA) and Burlington,
Camden, Gloucester and Salem counties (New Jersey).
-
The "Atlantic City-Cape May PMSA" consists of Atlantic
and Cape May counties (New Jersey).
-
The "Vineland-Millville-Bridgeton PMSA" consists
of Cumberland County (New Jersey).
-
The "Wilmington-Newark PMSA" consists of New Castle
County (Delaware) and Cecil County (Maryland).
| The "Detroit
CMSA" consists of the Detroit PMSA, the Ann Arbor PMSA
and the Flint PMSA. |
-
The Detroit PMSA consists of Lapeer, Macomb, Monroe,
Oakland, St. Clair and Wayne counties (Michigan).
-
The Ann Arbor PMSA consist of Lenawee, Livingston
and Washtenaw counties (Michigan).
- The Flint PMSA consists of Genesee County (Michigan).
| The "Boston-Worcester-Lawrence
CMSA" consists of the Boston MA-NH PMSA; the Brockton,
MA PMSA; the Fitchburg-Leominster, MA PMSA; the Lawrence MA-NH PMSA;
the Lowell MA-NH PMSA; the Manchester NH PMSA; the Nashua, NH PMSA;
the New Bedford, MA PMSA; the Portsmouth-Rochester NH-ME PMSA; and
the Worcester MA-CT PMSA. |
-
The Boston MA-NH PMSA consists of parts of Bristol
County, MA (Berkley, Dighton, Mansfield, Norton and Taunton); Essex
County, MA (Amesbury, Beverly, Danvers, Essex, Gloucester, Hamilton,
Ipswich, Lynn, Lynnfield, Manchester-by-the-Sea, Marblehead, Middleton,
Nahant, Newbury, Newburyport, Peabody, Rockport, Rowley, Salem, Salisbury,
Saugus, Swampscott, Topsfield and Wenham); Middlesex County, MA (Acton,
Arlington, Ashland, Ayer, Bedford, Belmont, Boxborough, Burlington,
Cambridge, Carlisle, Concord, Everett, Framingham, Holliston, Hopkinton,
Hudson, Lexington, Lincoln, Littleton, Malden, Marlborough, Maynard,
Medford, Melrose, Natick, Newton, North Reading, Reading, Sherborn,
Shirley, Somerville, Stoneham, Stow, Sudbury, Townsend, Wakefield,
Waltham, Watertown, Wayland, Weston, Wilmington, Winchester and Woburn);
Norfolk County, MA (Bellingham, Braintree, Brookline, Canton, Cohasset,
Dedham, Dover, Foxborough, Franklin, Holbrook, Medfield, Medway, Millis,
Milton, Needham, Norfolk, Norwood, Plainville, Quincy, Randolph, Sharon,
Stoughton, Walpole, Wellesley, Westwood, Weymouth and Wrentham); Plymouth
County, MA (Carver, Duxbury, Hanover, Hingham, Hull, Kingston, Marshfield,
Norwell, Pembroke, Plymouth, Rockland, Scituate and Wareham); Suffolk
County, MA (the City of Boston, Chelsea, Revere and Winthrop); Worcester
County, MA (Berlin, Blackstone, Bolton, Harvard, Hopedale, Lancaster,
Mendon, Milford, Millville, Southborough and Upton); and Rockingham
County, NH (Seabrook and South Hampton).
-
The Brockton, MA PMSA consists of parts of Bristol
County, MA (Easton and Raynham); Norfolk County , MA (Avon); and Plymouth
County (Abington, Bridgewater, Brockton, East Bridgewater, Halifax,
Hanson, Lakeville, Middleborough, Plympton, West Bridgewater and Whitman).
-
The Fitchburg-Leominster, MA PMSA consists of parts
of Middlesex County (Ashby) and Worcester County (Ashburnham, Fitchburg,
Gardner, Leominster, Lunenburg, Templeton, Westminster and Winchendon).
-
The Lawrence, MA-NH PMSA consists of parts of Essex
County, MA (Andover, Boxford, Georgetown, Groveland, Haverhill, Lawrence,
Merrimac, Mathuen, North Andover and West Newbury) and Rockingham
County, NH (Atkinson, Chester, Danville, Derry, Fremont, Hampstead,
Kingston, Newton, Plaistow, Raymond, Salem, Sandown and Windham).
-
The Lowell, MA-NH PMSA consists of parts of Middlesex
County, MA (Billerica, Chelmsford, Dracut, Dunstable, Groton, Lowell,
Pepperell, Tewksbury, Tyngsborough and Westford) and Hillsborough
County, NH (Pelham).
-
The Manchester, NH PMSA consists of parts of Hillsborough
County (Bedford, Goffstown, Manchester and Weare); Merrimack County
(Allenstown and Hooksett); and Rockingham County (Auburn, Candia and
Londonderry).
-
The Nashua, NH PMSA consists of parts of Hillsborough
County (Amherst, Brookline, Greenville, Hollis, Hudson, Litchfield,
Mason, Merrimack, Milford, Mont Vernon, Nashua, New Ipswich and Wilton).
-
The New Bedford, MA PMSA consist of parts of Bristol
County (Acushnet, Dartmouth, Fairhaven, Freetown and New Bedford)
and Plymouth County (Marion, Mattapoisett and Rochester).
-
The Portsmouth-Rochester, NH-ME PMSA consists of
parts of York County, ME (Berwick, Eliot, Kittery, South Berwick and
York); Rockingham County, NH (Brentwood, East Kingston, Epping, Exeter,
Greenland, Hampton, Hampton Falls, Kensington, New Castle, Newfields,
Newington, Newmarket, North Hampton, Portsmouth, Rye and Stratham);
and Stafford County, NH (Barrington, Dover, Durham, Farmington, Lee,
Madbury, Milton, Rochester, Rollinsford and Somersworth).
-
The Worcester, MA-CT PMSA consists of parts of Windham
County, CT (Thompson); Hampden County, MA (Holland); and Worcester
County, MA (Auburn, Barre, Boylston, Brookfield, Charlton, Clinton,
Douglas, Dudley, East Brookfield, Grafton, Holden, Leicester, Millbury,
Northborough, Northbridge, North Brookfield, Oakham, Oxford, Paxton,
Princeton, Rutland, Shrewsbury, Southbridge, Spencer, Sterling, Sturbridge,
Sutton, Uxbridge, Webster, Westborough, West Boylston, West Brookfield
and Worcester).
| The "Washington-Baltimore,
DC-MD-VA-WV CMSA" consists of the Washington, DC-MD-VA-WV
PMSA; the Baltimore, MD PMSA; and the Hagerstown, MD PMSA. |
-
The Washington, DC-MD-VA-WV PMSA consists of the
District of Columbia; Calvert, Charles, Frederick, Montgomery and
Prince George's counties in Maryland; Arlington, Clarke, Culpeper,
Fairfax, Fauquier, King George, Loudoun, Prince William, Spotsylvania,
Stafford and Warren counties in Virginia; the cities of Alexandria,
Fairfax, Falls Church, Fredericksburg, Manassas and Manassas Park
in Virginia; and Berkeley and Jefferson counties in West Virginia.
-
The Baltimore, MD PMSA consists of Anne Arundel,
Baltimore, Carroll, Harford, Howard and Queen Anne's counties in Maryland
and the City of Baltimore.
-
The Hagerstown, MD PMSA consists of Washington County,
Maryland.
Note: The Office of Management and Budget (OMB) changed
their definitions of CMSA and PMSA in 1992. While these changes have been
accounted for in this document, any other historical comparisons of data
should be done with caution.
Analytical report #10 is the latest in a series of bulletins designed
to complement our traditional data releases. For more information on Analytical
Data Reports, please visit the Delaware Valley Regional Planning Commission's
website (www.dvrpc.org) or contact DVRPC at the telephone number below.
The Delaware Valley Regional Planning Commission was established in 1965
by interstate compact between Pennsylvania and New Jersey to plan for
the orderly growth and development of the region, and to provide a variety
of planning and technical assistance services responding to regional issues.
DVRPC maintains a significant database for twenty-eight counties encompassing
New Jersey, Delaware, Pennsylvania and Maryland. Included in the database
are data profiles at the regional, county and municipal level and for
other census geography as requested. DVRPC produces a diverse range of
services, including demographic and economic data and projections; mapping
and aerial photography; computer assisted mapping; geographic information
systems; impact studies; and policy and program development.

[Disclaimer]
|