1. Community Economic Analysis Kathy Tweeten North Dakota State University Alan Barefield Southern Rural Development Center Randy Reynolds Piedmont Community College

2. 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

3. 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)

4. Trade Area Capture Sales and sales tax data from state Dept of Revenue: http://www.dor.state.nc.us/publications/FY02- 03SalesUseStats.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

5. 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

6. Person County Example 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? Trade Area Capture

7. Pull Factor 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.

8. Pull Factor 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.

9. 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

10. Reilly’s Law Distance from Smaller 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

11. Roxboro Community Map

12. Distance Data (Mapquest) Distance between Roxboro and:Mileage Danville, VA30.11 South Boston, VA24.39 Oxford, NC26.30 Durham, NC30.16

13. Population Data CityPopulation Roxboro, NC8,696 Danville, VA48,411 South Boston, VA8,491 Oxford, NC8,338 Durham, NC187,035

14. Reilly’s Law Roxboro vs. Oxford, NC Distance Oxford residents Will Travel to Roxboro 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?

15. Roxboro Community Map

16. 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

17. 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

18. Potential Sales 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/

19. 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

20. Potential Sales 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?

21. 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

22. Location Quotient Data: Local and national employment data for particular industries: County Business Patterns: http://www.census.gov/epcd/cbp/vi ew/cbpview.html

23. 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

24. Location Quotient Person County Furniture Store 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.

25. 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

26. 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

27. Population-Employment Ratio 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

28. Population-Employment Ratio Person County vs. Granville County Furniture Store Example 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? Person County Population-Employment Ratio Granville County Population-Employment Ratio

29. 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

30. 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

31. 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

32. Shift Share Disaggregation 2000 Furniture Employment 2001 Furniture Employment Employment Change is Indicative of Growth Or Shrinkage in an Industry Change Can Be Disaggregated Into 3 Components 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

33. National Growth Component 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 National Growth

34. Avg National Emp Growth Rate 1998-2001 Avg Nat’l Emp Growth Rate Data: Local and national employment data for particular industries: County Business Patterns: http://www.census.gov/epcd/cbp/vi ew/cbpview.html

35. Avg National Emp Growth Rate 1998-2001 Avg Nat’l Emp Growth Rate Data: Local and national employment data for particular industries: County Business Patterns: http://www.census.gov/epcd/cbp/vi ew/cbpview.html

36. National Growth Component Person County (Base=2000) Sector2000 EmpNat’l Rate Nat’l Comp Change Construction8182.14%18 … ……… Furniture Stores732.14%2 ………… Unclassified62.14%0 Totals10,7872.14%231

37. Industrial Mix Component Data: Local and national employment data for particular industries: County Business Patterns: http://www.census.gov/epcd/cbp/view/cb pview.html Industrial Mix Component

38. National Growth Rate Sector i The national growth rate for furniture and home furnishings store employment is 3.77%

39. Industrial Mix Component Person County (Base=2000) Sector2000 Emp Industrial Mix Rate Nat’l Comp Change Construction8184.00% - 2.14%15 … ……… Furniture Stores733.77% - 2.14%1 ………… Unclassified611.84% - 2.14%1

40. Competitive 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

41. Competitive Share Component Person County (Base=2000) Sector2001 EmpAgg Term Competitive Share Construction785851-66 … ……… Furniture Stores5476-22 ………… Unclassified700

42. 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/

43. Gross County Product Prorate the BEA estimated industry- specific GSP by local industry employment for nonagricultural sectors Prorate the BEA estimated ag production GSP using cash receipts from marketings for the county

44. Proration Formulas 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 Non ag Industry GCP Proration Production Ag Proration

45. Gross County Product Person County Example

46. 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.

47. Questions?