Community Economic Analysis
Kathy Tweeten
North Dakota State University
Alan Barefield
Southern Rural Development Center
Randy Reynolds
Piedmont Community College
Overview
One of the basic tenets of economic
development is knowing where you are
at and the foundations of the
community’s economy
The tools presented in this session will
provide a snapshot view of the
community’s economic makeup and its
issues and opportunities
Trade Area Capture
Provides an estimate of the number of people
drawn to a community for retail purchases of
a particular good
Assumptions


Local people will buy goods at the same rate as
the state average
Income causes a variation in spending
Drawback: Easy to measure capture for
Apparel, Automotive, Food, Furniture, General
Merchandise, Lumber and Building Materials,
and Unclassified (Retail Sales only)
Trade Area Capture
Actual Retail Sales of
Merchandis e Type Y in the Community
Trade Area 
 State Expenditur e for 
Capture
 Merchandis e Type Y   Community Per Capita Income

  
State Per Capita Income
 State Population  


Sales and sales tax data from state Dept of Revenue:
http://www.dor.state.nc.us/publications/FY0203SalesUseStats.pdf
Per capita income from Regional Economic Information
System:
http://www.bea.doc.gov/bea/regional/reis/
State Population from Census estimates:
http://www.census.gov/popest/archives/2000s/



Trade Area Capture
Persons County Example
Data:





2002-2003 Person County Furniture Sales:
$8,083,909
2002-2003 North Carolina Furniture Sales:
$4,725,403,007
North Carolina 2002 Population: 8,320,146
Person County 2002 Per Capita Income: $23,690
North Carolina 2002 Per Capita Income: $27,785
Person County Example
Trade Area
Capture

$8,083,909
 16,694 Customers
 $4,725,403 ,007   $23,690 



 8,320,146   $27,785 
The estimate is that 16,694 customers will buy
furniture in Person County
Compare this to the 2002 population estimate for
Person county of 36,610 (27,764 over 18 years of
age)
What does this tell us about the spending
patterns in Person County?
Pull Factor
Pull Factor for Item Y 
Trade Area Capture Estimate for Item Y
Municipal Population
The Pull Factor measures the proportion of the population
of an area that purchases the good locally
If the Pull Factor is greater than 1.0, then the area is
attracting customers from outside the geographic area
If the Pull Factor is less than 1.0, then the area is not
filling the wants and desires of its locally-based
customers. These customers are going outside the area
to fulfill their needs.
Pull Factor
16,694 persons
Person County Pull Factor (Furniture ) 
 0.456
36,610 persons
The Pull Factor measures the proportion of the population
of an area that purchases the good locally
If the Pull Factor is greater than 1.0, then the area is
attracting customers from outside the geographic area
If the Pull Factor is less than 1.0, then the area is not
filling the wants and desires of its locally-based
customers. These customers are going outside the area
to fulfill their needs.
Reilly’s Law of Retail Gravitation
Provides estimate of maximum distance
customers will travel to shop for a specific
good or service
Premise is that people are attracted to larger
places to shop, but time and distance
influence these decisions
The town being analyzed should be the
largest in the analysis
Works best for goods and services where
quality, price, etc., are factors influencing
purchases
Reilly’s Law
Distance from

Smaller Community (Y)
Distance Between City X and City Y 
Population of Larger Community (X)
1
Population of Small Community (Y)
Distance data can be obtained from Internet mapping
sites such as MapQuest, Yahoo, etc.:
http://www.mapquest.com
State Population by Place from Census estimates:
http://www.census.gov/main/www/cen2
000.html
Roxboro Community Map
Distance Data (Mapquest)
Distance between
Roxboro and:
Mileage
Danville, VA
30.11
South Boston, VA
24.39
Oxford, NC
26.30
Durham, NC
30.16
Population Data
City
Population
Roxboro, NC
8,696
Danville, VA
48,411
South Boston, VA
8,491
Oxford, NC
8,338
Durham, NC
187,035
Reilly’s Law
Roxboro vs. Oxford, NC
Distance Oxford residents 
Will Travel to Roxboro
26.30 miles 
Roxboro Population  8,696
1
Oxford Population  8,338
 13 miles
Roxboro will draw residents from 13 miles toward
Oxford (this would put the trade boundary around
Berea, NC)
What does this mean in practical terms?
Would this tool work to develop a retail boundary for
Roxboro in relation to Danville or Durham?
Roxboro Community Map
Reilly’s Law Limitations
Assumes homogeneous population
Only use for independent communities
surrounded by countryside
Should only be used for similar sized
communities
Assumes everyone shops locally –
overestimates shopping population
Estimate average trade boundary;
individual goods or services will have
different boundaries
Potential Sales
Commonly called a “Leakage Study”
Shows whether a community is
capturing its full sales potential or
whether that money is leaking out to
other communities
Potential Sales
 State Sales   Local Per Capita Income
Trade
Area



Potential Sales  

 Population   State Population   State Per Capita Income
State Population by Place from Census estimates:
http://www.census.gov/main/www/cen2000.
html
Sales and sales tax data from state Dept of Revenue:
http://www.dor.state.nc.us/publications/FY0
2-03SalesUseStats.pdf
Per capita income from Regional Economic
Information System:
http://www.bea.doc.gov/bea/regional/reis/



Potential Sales
Persons County Example
Data:






2002 Person County Population: 36,610
2002-2003 Person County Furniture Sales:
$8,083,909
2002-2003 North Carolina Furniture Sales:
$4,725,403,007
North Carolina 2002 Population: 8,320,146
Person County 2002 Per Capita Income: $23,690
North Carolina 2002 Per Capita Income: $27,785
Potential Sales
 $4,725,403 ,007  $23,690
Potential Sales  36,610   
 $17,728,10 4

 8,320,146  $27,785
Given the state per capita sales average of $568
($4,725,403,007 sales / 8,320,146 persons) of
furniture sales per year and the relative proportion
Person County income to the state’s income, the
potential furniture sales in Person County is
$17,728,104
The actual furniture sales in Person County in 2002
was $8,083,909
What inference can be drawn from this?
Location Quotient
Indicates if a community produces more
than is needed for its own use and is
selling the excess to nonlocal markets
Also indicates which businesses are not
meeting local demand and is a source
of dollar leakage from the community
Location Quotient
% of Local Employment in Activity X
Location Quotient 
% of National Employment in Activity X
Data:

Local and national employment data for
particular industries: County Business
Patterns:
http://www.census.gov/epcd/cbp/vi
ew/cbpview.html
Location Quotient
Person County Furniture
2002 Person County Furniture and Home
Furnishing Stores employment: 54
2002 Person County Total Employment:
9,901
2002 North Carolina Furniture and Home
Furnishing Stores employment: 19,869
2002 North Carolina Total Employment:
3,431,554
Location Quotient
Person County Furniture Store
 54 


9,901 
Location Quotient  
 0.94
 19,869 


 3,431,554 
The location quotient of 0.94 tells us
that the furniture and home furnishings
sector of the Person County economy is
likely just self-sufficient. It could be
difficult for another furniture store to
compete given similar service, products,
customer tastes, etc.
Population-Employment Ratio
Measures the number of people
(customers) who support a trade or
service activity
Quotient is the number of customers
per trade or service sector employee
No critical value; must be used in
relation to other communities of similar
size and demands
Population-Employment Ratio
Must use in comparison to other
communities
Should use other communities of
comparable size and characteristics
Uses the entire population in its
estimate; could yield biased results if
the population is either young or old
Population-Employment Ratio
Population of a Locality
Population - Employment Ratio 
Number of Employees in a Particular
Trade or Service Activity in that Locality
Data:


Census 2000 Data Highlights:
http://www.census.gov/main/www/cen20
00.html
Local and national employment data for particular
industries: County Business Patterns:
http://www.census.gov/epcd/cbp/view/cb
pview.html
Population-Employment Ratio
Person County vs. Granville County
Furniture Store Example
36,864
Person County

 683 persons per employee
Population-Employment Ratio
54
51,582
Granville County

 1,032 persons per employee
Population-Employment Ratio
50
Person County has one furniture store
employee per 683 residents
Granville County has one furniture store
employee per 1,032 residents
What does this tell us about the feasibility of
a new furniture store in Person County?
Comparison and Analysis
Location Quotient  0.94
Population-Employment Ratio  683 for
Person County vs. 1,032 for Granville
County
Potential Sales  $17,728,104 vs.
$8,083,909 in Actual Sales
Shift Share Analysis
Helps to measure the efficiency of local
firms
Measures the movement of the
economy into faster or slower growth
sectors
Also measures the community’s portion
of the growth occurring in a particular
economic sector
Shift Share Analysis
This analysis is performed in three steps:



The National Growth Component –
isolates the national economic growth factor
from the analysis
The Industrial Mix Component –
isolates the growth of the individual industry
or sector
The Competitive Share Component –
measures the efficiency of local firms
Shift Share Disaggregation
2000 Furniture
Employment
Employment Change is Indicative of
Growth Or Shrinkage in an Industry
Change Can Be Disaggregated
Into 3 Components
2001 Furniture
Employment
National Growth – A Changing Tide
Raises (or Lowers) All Ships
Industrial Mix – A Changing National
Industry Affects Local Firms
Competitive Share – Isolates the Competitive
Advantage or Disadvantage of Local Firms
National Growth Component

 Nat' l Emp Y - Nat' l Emp 1  


 
n
National
Nat' l Emp 1




Base
Year
Employment
Local
Sector
i


Growth


Y
Local Sector i1




Where:




Sector i is the individual economic sector
n is the total number of economic sectors
Y is the final year (in ordinal terms) in the
analysis
1 is the initial year in the analysis
Avg National Emp Growth Rate
1998-2001
 Nat' l EmpY - Nat' l Emp 1 


Nat' l Emp1
Avg Nat’l Emp



Growth Rate
Y
Data:

Local and national employment data for
particular industries: County Business
Patterns:
http://www.census.gov/epcd/cbp/vi
ew/cbpview.html
Avg National Emp Growth Rate
1998-2001
Avg Nat’l Emp
Growth Rate
 115,061,18 4 - 108,117,73 1


108,117,73
1
  2.14% Annual Growth

3
Data:

Local and national employment data for
particular industries: County Business
Patterns:
http://www.census.gov/epcd/cbp/vi
ew/cbpview.html
National Growth Component
Person County (Base=2000)
Sector
Construction
2.14%
2.14%
18
…
…
2
…
…
Totals
73
…
…
Unclassified
818
…
…
Furniture
Stores
2000 Emp
Nat’l Comp
Nat’l Rate
Change
6
2.14%
0
10,787
2.14%
231
Industrial Mix Component
Local
   Nat' l Growth    Avg Nat' l Economic 
 
 
 

Growth Rate
 Employment Sector i   Rate Sector i  

Industrial Mix
Component
Nat' l Growth Rate Sector i 





Sector i EmpY - Sector i Emp1 


Sector i Emp1

Y
Data:

Local and national employment data for particular
industries: County Business Patterns:
http://www.census.gov/epcd/cbp/view/cb
pview.html
National Growth Rate Sector i





Furniture Store Emp2001 - Furniture Store Emp1998 


Furniture Store Emp1998

Nat' l Growth Rate Furniture Stores 
3





567,318 - 509,699 


509,699


 3.77%
3
The national growth rate for furniture
and home furnishings store employment
is 3.77%
Industrial Mix Component
Person County (Base=2000)
Sector
Construction
818
4.00% - 2.14%
15
1
…
11.84% - 2.14%
…
3.77% - 2.14%
…
6
…
73
…
…
Unclassified
Nat’l Comp
Change
…
…
Furniture Stores
2000 Emp
Industrial
Mix Rate
1
Competitive Share Component
 Sector i EmpBase Year 
Competitive
 Sector i EmpAnaly sis Year -   Nat' l Growth Comp 
  Industrial Mix Comp 
Share Component


The Competitive Share Component shows the
growth due to local firm efficiency after
accounting for the level of total economic
growth and the rise (or fall) of the particular
industry
Data:

Local and national employment data for particular
industries: County Business Patterns:
http://www.census.gov/epcd/cbp/view/cb
pview.html
Competitive Share Component
Person County (Base=2000)
Sector
Construction
785
851
-66
…
7
0
-22
…
76
…
…
54
…
…
Unclassified
Agg Term
…
…
Furniture Stores
2001 Emp
Competitive
Share
0
Gross County Product
Data


Gross State Product Estimates:
http://www.bea.gov/bea/regional/gsp/
County Employment and Cash Receipts Data:
Regional Economic Information System:
http://www.bea.gov/bea/regional/reis/
Gross County Product
Prorate the BEA estimated industryspecific GSP by local industry
employment for nonagricultural sectors
Prorate the BEA estimated ag
production GSP using cash receipts
from marketings for the county
Proration Formulas
 Local Employment Sector i 
Non ag Industry

 GSPSector i  
GCP Proration
 State Employment Sector i 
 Local Cash ReceiptsAgriculture 
Production

 GSPAgriculture  
Ag Proration
 State Cash ReceiptsAgriculture 
Production agriculture must be dealt with
separately due to no reporting of production
ag employment by Federal data sources
Cash Farm Receipts


North Carolina - $8,204,748
Person County - $17,365
Gross County Product
Person County Example
2001
GSP
Agriculture
Mining
Construction
Manufacturing
Transportation
TCPU
Wholesale Trade
Retail Trade
FIRE
Services
Federal Govt
S&L Govt
5,218
511
14,101
58,923
7,285
11,544
16,766
25,113
52,309
47,977
10,683
25,185
Person Co
Proportion
2001
GCP
0.21%
0.00%
0.31%
0.50%
0.07%
2.17%
0.14%
0.34%
0.36%
1.67%
0.18%
0.38%
11
0
44
292
5
251
23
86
189
802
19
96
Total
1,818
Sources
Hustedde, Ronald J., Ron Shaffer, and Glen
Pulver. Community Economic Analysis: A
How To Manual. North Central Regional
Center for Rural Development. Ames, IA.
November 2001.
Snead, Mark C. and Tim C. Ireland.
Oklahoma Regional and County Output
Trends: 1980-1999. Oklahoma Business
Bulletin. Stillwater, OK. October 2002.
Questions?