The State of IllinoisEconomic Profile April, 2017 This study was prepared under contract with the University of Illinois, with financial support from the Office of Economic Adjustment, Department of Defense. The content reflects the views of the University of Illinois and does not necessarily reflect the views of the Office of Economic Adjustment.State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile   State Economic ProfileThe Office of Economic Adjustment (OEA), an arm of the U.S. Department of Defense, initiated the Defense Industry Adjustment (DIA) Program to assist communities in planning for adjustments and resiliency in the face of defense industry changes

The State of IllinoisEconomic Profile April, 2017 This study was prepared under contract with the University of Illinois, with financial support from the Office of Economic Adjustment, Department of Defense. The content reflects the views of the University of Illinois and does not necessarily reflect the views of the Office of Economic Adjustment.
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile State Economic ProfileThe Office of Economic Adjustment (OEA), an arm of the U.S. Department of Defense, initiated the Defense Industry Adjustment (DIA) Program to assist communities in planning for adjustments and resiliency in the face of defense industry changes. As of the beginning of 2016, a project team made up of the University of Illinois Office of Vice President for Research (OVPR), the University of Illinois at Chicago (UIC) Voorhees Center, and the Quad Cities Chamber of Commerce, has begun work on the State of Illinois Defense Industry Adjustment Project to assess the impact of changes in defense industry spending in Illinois, and to assist impacted sectors in their efforts to develop plans and options to mitigate detrimental impacts.The State of Illinois was ranked number 48 of the 50 states for defense spending as a percentage of total state GDP in 2014 with only 0.8% of the state GDP attributable to it. Based on a recently released report, spending increased from $5.6 billion in 2014 to $7.0 billion in 2015, moving the state in ranking from 48th to 43rd of the 50 states between 2014 and 2015. In terms of absolute defense spending, the state’s position jumped from 23rd to 19th, i.e., from $5.6 Billion to $7 billion between 2014 and 2015. Measured both as a proportion of state GDP and total spending, there is1a significant increase in Illinois in 2015 ($7 billion) compared to 2014 ($5.6 billion). Illinois’increased share is notable given that during the same period, total national defense spending declined from $418 to $408 billion.In Fiscal Year 2015, while $4.8 billion of total defense spending was in the form of defense contracts, $2.2 billion consisted of spending on defense personnel. Defense contracts were largely for manufacturing of Supplies & Equipment (a category with 64% of annual defense contracts). The top direct defense spending locations in the state include: Lake, Cook, St. Clair, DuPage, Rock Island, Winnebago, Peoria, and Madison counties. These eight counties currently account for nearly $6 billion of annual defense spending in the state.As part of the project team, the UIC Voorhees Center for Neighborhood and Community Improvement analyzes data, conducts studies, and engages with stakeholders to inform and assist impacted sectors in their efforts to develop plans and strategies. The first series of these efforts involved compiling community and economic profiles, which were shared with community stakeholders in five regions of the state (Quad Cities, Rockford, Chicago Metro, Metro East, and Peoria) in order to inform the direction of the state DIA Project (these regional economic profiles can be accessed at http://www.illinoisdia.org/). Second, a summary analysis was conducted to establish a relative understanding of the economies of the five sub-state regions in terms of their current composition, changes in employment, and occupations. More recently, these initial efforts were followed by a detailed1Defense Spending by State reports (for FY 2014 and FY 2015) are available at http://oea.gov/defense- spending-state-fiscal-year-2015?utm_medium=email&utm_source=govdelivery. Note that Fiscal Year 2014 defense spending figures from this same source were used for the Regional Economic Profiles that have been completed for the five Illinois DIA regions. economic composition and change analysis with the purpose of providing a deeper understanding of the regions’ economies in terms of their current industrial composition and to identify drivers of changes in employment. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber2
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Similar to the regional profiles, the primary purpose of this state economic profile is to providebaseline economic and industry information for state-wide and regional defense adjustment and industrial diversification strategies. For example, identification of regionally concentrated industries and those that perform substantial amounts of DoD contracts would aid efforts in identifying industrial clusters and potentially making connections across manufacturers in related industries. Different from regional level analyses, this profile focuses on additional measures of economic growth and competitiveness such as establishment births and deaths, gross state2Each economic and industry-level indicator is analyzed in comparison with the national average to provide a better understanding of local conditions and trends. A comparative understanding of a state’s economy in terms of compositional change and performance informs policy makers and analysts to better position the state in the national economy. To the extent that data is available,product, state per capita income, wages by occupation groups, and international trade statistics. the profile analyzes changes over a period of 10 years—long enough to reveal important dynamics, but short enough to focus on the kinds of local changes that may be malleable through state-level policy and planning activities. Drawing on local and national data sources, this profile considers both the fundamental economic conditions and sectoral drivers of the state economy. The economic indicators/industrial data items analyzed are divided into five main groups:Basic economic indicators: Indicators that measure economic conditions and help evaluate economic performance: (1) Employment and its sectoral distribution, (2) Unemployment rate, (3) Unemployment insurance claims, (4) Annual wages, and (5) Occupations. Descriptive analysis of these indicators help determine how the state economy is faring relative to its position in the past, or its current position as measured against the national economy.Defense related industrial activities: The profile identifies specific manufacturing and professional/technical services industries in which businesses may be performing defense contract work or are part of the defense industry supply chain. By analyzing employment trends in these industries in comparison with the nation, the profile explores the “defense activity-industrial performance” nexus. Finally, the state’s share of national defense contracts is analyzed, and local industries that perform substantial work originating from the Department of Defense are identified. Industrial Specialization: This analysis identifies industry sectors in which the state economy is specialized relative to the national economy. For this purpose, we calculate employment-based location quotients (LQs). In addition to indicating how specialized a local economy is relative to the larger economy, location quotients are essential in determining the economic base of a local economy. In the analysis of LQs, particular attention is given to specific manufacturing and professional/technical services industries in which businesses may be performing defense contract2 These extra measures were not included in regional economic profiles because either data was not available at sub-state level (e.g., international trade) or that most regions are too small for their fluctuations to be meaningful. work or are part of the defense industry supply chain. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber3
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Drivers of State Employment Change: We analyze all industry sectors at the 2- and 3-digit NAICS level for employment change from 2005 to 2015. A shift-share analysis is conducted to better understand how the local area economy is changing, and in which industries it is most competitive. By disaggregating the portions of change that result from local factors versus broader changes in the national economy or in the particular industry, the shift-share analysis sheds light on the sources of growth and decline in the state economy.Export Performance of State Industries: Foreign trade statistics provide an trade situation – and market development and penetration studies. They also constitute a measure of the impact of competition faced by state exporting firms/industries. Analysis of foreign trade data might also inform the state transportation and logistics industry in the critical area ofappraisal of the general anticipating the need for – future facilities and equipment. Notes on definitions and data sources may be found at the end of this document. If there are any questions, please contact Yittayih Zelalem, Co-director of the Nathalie P. Voorhees Center for Neighborhood & Community Improvement at the University of Illinois at Chicago at 312-996-6674 or e-mail at: yittazel@uic.edu. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber4
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile State Economic Highlights The state population grew approximately 2.0% from 2005 to 2015, a much slower rate than the nation as a whole, which grew nearly 9% during the same period. Relatively slow population growth rate in the state is reflected in employment and economic output trends.  The state economy is not performing as well as the national economy. Current state employment is still below the pre-recession level. Although the state economy continues to expand after the recession ended in 2010, unlike the trend in the country, current state employment has not reached the pre-recession level yet. Shift-share analysis shows that if the state economy’s growth rate were identical to that of the national economy, then the number of jobs in the state should have grown by 346,028 between 2005 and 2015; instead, the state gained only 100,096 jobs during the same period.  Health care, retail trade, and manufacturing accounted for the largest shares of any sector in 2015, representing 13.3 percent, 10.5 percent, and 10.0 percent of employment in the state, respectively. The sectors that created the most jobs from 2005 to 2015 were health care, accommodation and food services, and professional and technical services. These sectors respectively added 119,040; 60,858; and 56,870 jobs to the state economy. Manufacturing and construction experienced the largest job losses during the same period. From 2005 to 2015, manufacturing lost more than 110,000 jobs while the construction sector lost nearly 55,000 jobs. The manufacturing sector is declining faster in Illinois than nationally. In 2015, Illinois had a per capita personal income (PCPI) of $50,295. This PCPI ranked 15th in the United States and was 105 percent of the national average ($48,112). The 2015 PCPI reflected an increase of 10 percent from 2005 (nearly the same as the change at the national level). In 2005, the PCPI of Illinois was $45,689 and ranked 16th in the United States.  The state Gross Domestic Product (GDP) grew 6.8 percent from 2005 to 2015 in real terms, lagging the national growth metric of 13.3 percent. The largest sectoral contributor to real GDP growth in Illinois was finance, insurance, and real estate. This sector accounted for approximately 3 percentage points of the total growth in real GDP. The second largest contributor was professional and business services, which accounted for 2 percentage points of the total growth in real GDP.  The current (2015) unemployment rate in the state (5.9%) is slightly higher than the national unemployment rate (5.3%). After rising sharply during the recession years of 2009 and 2010, the unemployment rate has fallen in recent years.  The current average wage for all industries in the state is $55,889 (2015). This figure is above the national figure. (According to Bureau of Labor Statistics 2015 estimates, the average annual wage across all industries was $52,942 in the U.S.). There has not been a significant change in the gap between state and national wages during the last ten years.  The state is specialized in various manufacturing, financial, and business service industries. Among those, machinery manufacturing (NAICS 333), fabricated metal product manufacturing University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber5
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile (NAICS 332) and professional and technical services (NAICS 541) are closely related to defense. State employment in fabricated metal product manufacturing declined substantially during the recession and has not completely recovered yet. While national employment increased in the last five years, local employment remained the same. State employment in professional and technical services closely follows the national trend and surpassed the pre-recession levels. More than $60 billion worth of goods were exported from Illinois in 2015. These exports supported 333,674 jobs (nearly 6% of total state employment) and helped sustain a total of 23,252 companies. Eighty-six percent (86%) of these jobs are attributable to manufactured goods exports. Major export categories are machinery, chemicals, transportation equipment, electronic products, and electrical equipment.  Illinois’s share of U.S. exports is shrinking in recent years (Table 10). This is explained in part by the state’s contracting manufacturing sector and the fact that Illinois’s share of the U.S. population has been declining during the same period. In 2015, $5.3 billion worth of DoD contracts were performed in Illinois. Businesses operating in manufacturing, wholesale trade, construction, and professional and technical services received the most contract dollars obligated in FY 2015; the top industries include: Medical equipment merchant wholesalers ($472 million); Construction ($387 million); Search, detection, and navigation instruments ($384 million); Heavy duty truck manufacturing ($379); Engineering services ($229 million); Aircraft manufacturing ($223 million).  Department of Defense (DoD) contracts in the state of Illinois are concentrated in two regions: Northeast Illinois and Southwest Illinois. In 2015, nearly 80 percent of Illinois DoD contracts (or 4.3 out of 5.3 billion dollars’ worth of DoD contracts) were performed in these two regions. As a share of regional gross regional product (GRP), – DoD contracts are most important to the Southwest Illinois Region, where they constituted around 4 percent of GRP in 2015. In the same year, defense contracts accounted for less than 1 percent of GRP in the Northeast Illinois Region.  Defense contracts in the Rockford and Greater Peoria regions are concentrated in a few industries. While contracts in the Rockford region are concentrated in electrical apparatus- equipment wholesale (55%) and aircraft manufacturing (20%), in the Greater Peoria region, they are heavily concentrated in machinery manufacturing (73%). Heavy concentration in a few industries may make these regions more vulnerable to reductions in defense spending as a result of either cuts in defense programs related to these industries or the regions losing their competitive advantage in those industries over time. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber6
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile PopulationIllinois currently has an estimated 12,859,995 residents, making it the fifth largest state in the U.S. The state population grew approximately 2.0% from 2005 to 2015, a much slower rate than the nation as a whole, which grew nearly 9% during the same period (Table 1 and Figure 1). As discussed in the following pages, the relatively slow population growth rate in the state is reflected in employment and gross domestic product trends.Table 1: Population, 2005-2015 Year 2005 2007 2009 2011 2013 2015Change (2005-2015)Illinois12,610,000 12,696000 12,797,000 12,862,000 12,890,000 12,860,0002.0%United States295,517,000 301,231,000 306,772,000 311,719,000 316,427,000 321,419,0008.8% 2006 12,644,000 298,380,000 2008 12,747,000 304,094,000 2010 12,841,000 309,347,000 2012 12,875,000 314,103,000 2014 12,882,000 318,907,000 14,000,000 12,000,000 10,000,0008,000,000 6,000,000 4,000,000 2,000,000350,000,000 300,000,000 250,000,000 200,000,000 150,000,000 100,000,000 50,000,000Figure 1: Population, 2005-2015 –2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Illinois U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber7IllinoisU.S.
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Employment and Gross Domestic Product by SectorsHealth care and social assistance is the largest industry by employment in Illinois. The health care sector employed more than 778,000 workers in 2015, approximately 13.3 percent of total employment in the state (Figure 2). After health care, retail trade and manufacturing are the two largest sectors. These three sectors together constituted more than one third of total state employment in 2015. These sectors are also dominant sectors at the national level. However, manufacturing accounts for a slightly larger share of employment in Illinois than in the U.S. (Table 2). The share of manufacturing in state employment is 10.0% while it is 8.8% of national employment.Similar to the pattern observed for the national economy, industries display different growth rates (Figure 3). Sectors that created the most jobs in the state from 2005 to 2015 were health care, accommodation and food services, and professional and technical services. These sectors respectively added 119,040; 60,858; and 56,870 jobs to the state economy. Manufacturing and construction experienced the largest job losses during the same period. From 2005 to 2015, manufacturing lost more than 110,000 jobs while the construction sector lost nearly 55,000 jobs in Illinois. Overall, state industries with relatively large employment shrank at a faster rate than the industries in the national economy or they did not grow as fast as the national industrial average. Educational services, 9.1%Manufacturing, 10.0%Retail trade, 10.5%Health care and social assistance, 13.3%Mining, 0.2%Agriculture, 0.3% Utilities, 0.4%Professional and technical services, 6.9%Wholesale trade, 5.2%Finance and insurance, 4.9%Transportation and warehousing, 4.8%Public administration, 4.4%Construction, 3.7% Other services, 3.5%Information, 1.9%Management of companies, 1.6%Arts, entertainment, and recreation, 1.4%Figure 2: Sectoral Distribution of Employment, 2015Accommodation and food services, 8.4%Administrative and waste services, 7.3% Real estate, 1.3% University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber8
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Table 2: Top Industries by Employment, 2015 IndustryHealth care and social assistanceManufacturingIllinoisRank Employment Share1 778,941 13.3% 3 582,196 10.0% 492,878 8.4% 403,699 6.9% 287,488 4.9% 260,142 4.4%13 202,022 3.5%15 94,566 1.6% 17 77,544 1.3% 19 17,830 0.3%21 8,133 0.1%5,811,911 99.4% 5,848,451 100.0%United StatesRank Employment Share1 20,282,539 14.5% 4 12,339,633 8.8% 3 13,030,233 9.3% Retail trade 2 615,216 10.5% 2 15,704,487 11.3% Educational services 4 534,856 9.1% 5 12,313,741 8.8%Accommodation and food services 5Professional and technical services 7Finance and insurance 9Public administration 117 11 81316 17 18218,725,796 6.3% 5,770,137 4.1% 7,242,529 5.2%4,348,055 3.1%2,197,652 1.6% 2,136,255 1.5% 1,255,846 0.9%240,460 0.2%139,486,998 100.0% 139,491,699 100.0% Administrative and waste services 6 426,882 7.3% 6 8,874,589 6.4% Wholesale trade 8 301,313 5.2% 10 5,874,599 4.2% Transportation and warehousing 10 283,508 4.8% 12 5,542,106 4.0% Construction 12 215,002 3.7% 9 6,603,670 4.7%Other services, except public administrationManagement of companies and enterprisesReal estate and rental and leasingAgriculture, forestry, fishing and huntingUnclassifiedTotal with data suppression Total without data suppression Information 14 111,601 1.9% 14 2,897,488 2.1% Arts, entertainment, and recreation 16 84,672 1.4% 15 2,546,157 1.8% Utilities 18 24,134 0.4% 19 808,885 0.6% Mining, quarrying, and oil and gas extraction 20 9,288 0.2% 20 752,141 0.5% *Industries for which employment data is suppressed. Shares are calculated using total without data suppression. University of Illinois, Nathalie P. VoorheesCenter, Quad Cities Chamber9
40.0%30.0%20.0%10.0%0.0%-10.0%-20.0%-30.0%State of Illinois Defense Industry Adjustment (DIA) Program, State Economic ProfileFigure 3: Industry Employment Growth Rates, 2005-2015University of Illinois, Nathalie P. Voorhees Center, Quad Cities ChamberIllinois U.S.In terms of contribution to the gross domestic product (GDP), the largest industry in Illinois was finance, insurance, and real estate in 2015. This industry accounted for nearly 23 percent of Illinois GDP in 2015. The second largest industry was professional and business services, which accounted for 14 percent of Illinois GDP. The third largest industry was manufacturing, which accounted for 13 percent of Illinois GDP. This pattern is slightly different from the national economy in that the shares of these three industries in the U.S. GDP are smaller than in the state. This suggests that trends in these sectors largely determine the health and growth of the state economy.The real state GDP grew 6.8 percent from 2005 to 2015, lagging the national growth rate of 13.3 percent. The largest contributor to real GDP growth in Illinois was finance, insurance, real estate. This industry accounted for approximately 3 percentage points of the total growth in real GDP. The second largest contributor was professional and business services, which accounted for 2 percentage points of the total growth in real GDP.In 2015, Illinois had a per capita personal income (PCPI) of $50,295. This PCPI ranked 15th in the United States and was 105 percent of the national average ($48,112). The 2015 PCPI reflected an increase of 10 percent from 2005 (nearly the same as the change at the national level). In 2005, the PCPI of Illinois was $45,689 and ranked 16th in the United States.10
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Table 3: Top Industries by Gross Domestic Product, 2015 (2009 million dollars) IndustryFinance, insurance, and real estate ManufacturingEducational services and health care Retail tradeIllinois Rank Employment 1 156,6383 88,284 5 57,605 7 36,584 9 25,090Share Rank22.7 1 12.8 4 8.4 5 5.3 7 3.6 8 3.5 9United States Employment Share3,189,329 19.82 1,912,044 11.9 1,354,416 8.4969,407 6.0 854,581 5.3 623,855 3.9 Professional and business services 2 97,517 14.1 3 2,039,290 12.7 Government and other services 4 82,183 11.9 2 2,289,596 14.2 Wholesale trade 6 53,394 7.7 6 983,610 6.1 Arts and entertainment 8 25,637 3.7 10 623,427 3.9InformationConstructionAgricultureTotal 690,187 Transportation and warehousing 10 24,047 3.5 11 445,820 2.811 23,978 13 4,7000.7 14 146,405 0.9100.0 16,088,249 100.0 Utilities 12 11,840 1.7 13 264,359 1.6 Mining and oil extraction 14 2,690 0.4 12 392,110 2.4 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,00018,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000Figure 4: Gross Domestic Product, 2005-2015 –2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Illinois U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber11Illinois, in million dollars (2009)U.S., in million dollars (2009)
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile 60,000 50,000 40,000 30,000 20,000 10,000-Figure 5: Per capita Personal Income, 2005-2015 2005 20062007 2008 20092010 20112012 2013 2014 2015Illinois U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber122015 Constant dollars
Year 2005 2007 2009 2011 2013 2015Change (2005-2015)Illinois5,748,355 5,869,157 5,551,930 5,566,648 5,687,541 5,848,4511.7%United States131,571,623 135,366,106 128,607,842 129,411,095 133,968,434 139,491,6996.0%State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Trends in Employment, Unemployment, and Initial Unemployment Insurance ClaimsFor both the state and the country, 2010 marks the lowest level of employment in the last ten years. Unlike nationwide, state employment has not yet reached its pre-recession level, though the state economy continues to expand. (Table 4). Differences in employment growth can also be seen in Figure 6 where employment levels for Illinois and the U.S. are shown as shares of 2005 employment.Table 4: Employment, 2005-2015 2006 5,821,022 133,833,834 2008 5,841,692 134,805,659 2010 5,502,322 127,820,442 2012 5,636,918 131,696,378 2014 5,762,156 136,613,609 1.10 1.05 1.00 0.95 0.90 0.85 0.80Figure 6: Indexed Employment, 2005-2015 2005 20062007 20082009 20102011 2012 2013 2014 2015Illinois U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber13
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Current unemployment rate in the state (5.9%) is slightly higher than the national unemployment rate (5.3%). After rising sharply during the recession years of 2009 and 2010, the unemployment rate has fallen in recent years. However, it is still higher than pre-recession levels (Table 5 and Figure 7).Table 5: Unemployment Rate (%), 2005-2015 2005 2006 Illinois 5.7 4.5 U.S. 5.1 4.62007 2008 20095.0 6.3 10.2 4.6 5.8 9.32010 201110.4 9.7 9.6 8.92012 2013 2014 20159.0 9.1 7.1 5.9 8.1 7.4 6.2 5.3 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%Figure 7: Annual Unemployment Rate, 2005-2015 2005 2006 20072008 2009 2010Illinois2011 2012 2013U.S.2014 2015 After peaking during the recession (2009), recent unemployment insurance claims in the state have3returned to below their pre-recession levels. Overall, the trend for the state is very similar totrends observed for the U.S. Similar to the national trends, the state experienced a higher number of claims during the recession years of 2008, 2009, and 2010, but the most recent claims are below pre-recession levels.In Figure 8, initial unemployment claims for Illinois and the U.S. are shown as a share of 2006 initial unemployment claims. Current initial claims in the state have returned to their pre-recession levels in 2014 and below the pre-recession level in 2015. 3are a leading indicator of economic conditions and are used in the New claims anticipate subsequent movement in the economy,Initial unemployment insurance claims analysis of current unemployment trends. primarily measuringUniversity of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamberemerging unemployment. 14
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile 25,000 20,000 15,000 10,0005,000600,000 500,000 400,000 300,000 200,000 100,000Figure 8: Average Weekly Unemployment Insurance Claims, 2005- 2015 –2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Illinois U.S. 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00Figure 9: Indexed Unemployment Insurance Claims, 2005-2015 2005 20062007 20082009 20102011 20122013 2014 2015Illinois U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber15IllinoisUnited States
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Trends in Private Sector Employment and EstablishmentsAlthough the overall level of volatility in the labor market in Illinois appears to be largely the same as in the U.S., private sector establishments created more new net jobs at the national level than in the state in the last decade (relative to baseline). While the births of new establishments were offset by the deaths of existing establishments in the state, private sector establishments continue4to increase in net numbers in the country (Figures 10, 11, 12, 13). 400,000 350,000 300,000 250,000 200,000 150,000 100,00050,000 -Figure 10: Private sector job gains and losses, Illinois, 2005-2015 2005 20062007 2008 2009 2010Gains2011 2012Losses2013 20142015 2016 4 Quarterly statistics in private sector establishment and employment helps assess the business cycle, the level of labor market volatility, and the effect of establishment employment changes on aggregate employment. These data are also useful in highlighting the forces behind the net changes in employment. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber16March September March September March September March September March September March September March September March September March September March September March September March
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,0000Figure 11: Private sector job gains and losses, U.S., 2005-2015 2005 2006 20072008 2009Gains2010 2011 2012Losses2013 20142015 2016 12,000 10,000 8,000 6,000 4,000 2,000 0Figure 12: Private sector establishment births and deaths, Illinois, 2005-2015 2005 20062007 20082009 2010Births2011 2012Deaths2013 2014 2015 2016 University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber17March September March September March September March September March September March September March September March September March September March September March September MarchMarch September March September March September March September March September March September March September March September March September March September March September March
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile 300,000 250,000 200,000 150,000 100,00050,000 -Figure 13: Private sector establishment births and deaths, U.S., 2005-2015 2005 2006 20072008 2009Births2010 2011 2012Deaths2013 20142015 2016 University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber18March September March September March September March September March September March September March September March September March September March September March September March
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Annual WagesThe current average wage for all industries in the state is $55,889 (2015). This figure is above the national figure (according to BLS 2015 estimates, average annual wage for all industries was5$52,942 in the U.S.).Figure 15 examines average annual wages for just the manufacturing sector. Different trends are observed in terms of changes in wages for the economy as a whole and the manufacturing sector. While the average annual wages for all industries have been stable both at the state and national levels, the annual wages for the manufacturing sector have risen notably. Another observation is that while the state wage average for the manufacturing sector has been closer to the national average (relative to the wages for the economy as a whole), wages in the manufacturing sector in Illinois are increasing slightly higher than the U.S.Figure 14 depicts average annual wages for the economy as a whole while 60,000 50,000 40,000 30,000 20,000 10,000-Figure 14: Annual Average Wages, 2005-2015 2005 2006 2007 20082009 2010Illinois2011 2012 2013 2014 2015U.S. 5 Annual wages are a key to understanding what the standard of living is in the local economy. Earnings from employment in the form of wages remain the primary source of income for individuals to support themselves and their families. Industry-level annual wages are also considered as an indicator of a state’s competitiveness. All monetary figures are in 2015 dollars. Previous year wages are adjusted for inflation using Consumer Price Index (CPI) deflators published by the U.S. Bureau of Labor Statistics (BLS). University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber19
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000-Figure 15: Annual Average Wages in Manufacturing Sector, 2005- 2015 2005 20062007 20082009 2010Illinois2011 2012U.S.2013 2014 2015The following three graphs examine average wages for three sectors that drive the state economy: health care; accommodation and food services; and professional and technical services. While average wages in the first two sectors are very close to national averages, the state wage average for professional and technical services is higher than the national average. It is worth noting, however, that the difference between state and national wage averages for professional services appears to be getting smaller over time. 60,000 50,000 40,000 30,000 20,000 10,000-Figure 16: Annual Average Wages in Health Care Sector, 2005-2015 2005 20062007 2008 2009 2010Illinois2011 2012 U.S.2013 2014 2015 University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber20
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile 25,000 20,000 15,000 10,0005,000 -Figure 17: Annual Average Wages in Accommodation and Food Service Sector, 2005-2015 2005 20062007 2008 2009 2010Illinois2011 2012 2013 2014 2015 U.S. 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000-Figure 18: Annual Average Wages in Professional and Technical Services Sector, 2005-2015 2005 20062007 2008 2009Illinois2010 2011 2012 2013 2014 2015 U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber21
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Local Industrial Concentration Ten out of thirty-two locally concentrated industry sectors are manufacturing sectors (a reflection of the fact that manufacturing accounts for 10% of local employment) (Table 6).The following three industries and businesses operating in these industries are either performing defense related contract work or are part of the defense industry supply chain: machinery manufacturing (NAICS 333); fabricated metal products manufacturing (NAICS 332); professional and technical services (NAICS 541). Among these locally concentrated industries, the professional and technical services industry is a major source of employment in the state, accounting for approximately 7% of total statewide employment in 2015. Many of the industries (except those indicated with symbol † below) are locally concentrated based on both employment and establishment counts. For these industries, local employment per establishment is close the equivalent national ratio. For instance, the employment-to- establishment ratio for fabricated metal products manufacturing (NAICS 332) is 27 in the state while it is 25 at the national level. The average size of establishments may have implications for the strength of the state’s relationship with defense industry and prospects of growth. Industries that are heavily concentrated within large firms may wield greater political or supply chain power. Yet this may also mean the local strength and health of the industry is dependent on the fortunes of just a few firms, often businesses that are not owned or led locally. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber22
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Table 6: Concentrated Industry Sectors: Employment-Based LQs6 NAICS Code 333323 326 813 519 523 425 322 482 488 484 331 561 522 446 541Industry State U.S. LQ 481 Air transportation 34,771 457,788 1.81Machinery manufacturingPrinting and related support activities Plastics and rubber products manufacturing Membership associations and organizations Other information servicesSecurities, commodity contracts, investments Electronic markets and agents and brokers Paper manufacturingRail transportationSupport activities for transportationTruck transportationPrimary metal manufacturingAdministrative and support servicesCredit intermediation and related activities† Health and personal care stores†75,997 1,115,478 1.6227,007 451,227 1.43 40,779 686,517 1.42 79,713 1,365,167 1.39 21,538 378,206 1.36 51,018 903,933 1.35 47,633 911,685 1.25 19,304 371,234 1.2438 745 1.22 36,031 724,182 1.19 71,655 1,444,317 1.18 19,361 392,441 1.18411,742 8,445,060 1.16 121,562 2,573,457 1.13 47,943 1,031,294 1.11403,699 8,725,796 1.105,811,911 139,486,998 N.A. 5,848,451 139,491,699 N.A. 332 Fabricated metal product manufacturing 94,833 1,456,264 1.55 335 Electrical equipment and appliance mfg. 22,817 381,635 1.43 493 Warehousing and storage† 49,129 831,905 1.41 325 Chemical manufacturing 46,345 806,111 1.37 485 Transit and ground passenger transportation 41,060 724,453 1.35 424 Merchant wholesalers, nondurable goods 108,290 2,030,897 1.27 311 Food manufacturing 78,809 1,509,267 1.25 324 Petroleum and coal products manufacturing 5,628 109,715 1.22 524 Insurance carriers and related activities 113,032 2,266,509 1.19 713 Amusements, gambling, and recreation 91,445 1,838,671 1.19 423 Merchant wholesalers, durable goods 145,390 2,932,016 1.18 339 Miscellaneous manufacturing 28,832 587,713 1.17 921 Executive, legislative and general government 145,549 2,998,048 1.16 491 Postal service† 28,310 602,924 1.12 443 Electronics and appliance stores† 23,925 515,063 1.11Professional and technical services Total Employment with Data Suppression Total Employment without Data Suppression 6 Note that locally concentrated industries are identified in this analysis by LQs exceeding 1.10. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber23
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Given their size in the state economy and potential supply-chain linkages to the defense industry, the following figures examine state employment levels in these industries in comparison with national trends. State employment in machinery manufacturing declined substantially during the recession years and has not fully recovered (Figure 19). Similarly, state employment in fabricated metal product manufacturing declined considerably during the recession and has not completely recovered. While national employment increased in the last five years, state employment remained the same (Figure 20). State employment in professional and technical services closely follows the national trend and surpassed the pre-recession levels (Figure 21). Figure 19: Employment in Machinery Manufacturing, 2005-2015100,000 1,400,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,0001,200,000 1,000,000 800,000 600,000 400,000 200,000 –2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Illinois U.S. 140,000 120,000 100,00080,000 60,000 40,000 20,0001,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000Figure 20: Employment in Fabricated Metal Product Manufacturing, 2005-2015 –2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Illinois U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber24Illinois Employment Illinois EmploymentU.S. EmploymentU.S. Employment
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,00050,00010,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000Figure 21: Employment in Professional and Technical Services, 2005-2015 –2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Illinois U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber25Illinois EmploymentU.S. Employment
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Components of State Employment Growth The state economy is not performing as well as the national economy. The national growth component (national shift in the box below) shows that, if the state’s economic growth rate were identical to that of the national economy, then the number of jobs in the state should have grown by 346,028 between 2005 and 2015. However, the state gained 100,096 jobs from 2005 to 2015. The industry mix component of 1,663 means that the state has 1,663 more jobs than it would have if its structure were identical to the nation. This figure is minimal compared to the other components, implying that the state industrial composition does not generate differences in growth from the nation. According to the local share component, a shift of -247,594 jobs in the state is attributable to its relative competitive position. That is, a loss of nearly two hundred forty-seven thousand jobs is attributable to characteristics specific to the local economy. National Shift (RS) = 346,028 Industry Mix (IM) = 1,663Local (Competitive) Shift (LS) = -247,594 Figure 22 below graphically summarizes the results for individual industries. In this graph, the location quotient (the employment concentration relative to the nation) appears on the vertical axis and the local component of the change in employment from 2005 to 2015 appears on the horizontal axis. The size of the circles represents current employment levels. Industries that appear in the upper right quadrant (high LQ-high competitive shift) represent solid strengths. For example, educational services and information are both locally concentrated andlocal factors, specific to the state of Illinois, contributed to the growth of theindustry. Industries that appear in the upper left quadrant (high LQ-low competitive shift) represent current industrial strengths that are struggling. Manufacturing and construction are located in this quadrant. Negative competitive shifts mean that these industries are nota negative competitive shift for this industry indicates that it is declining faster locally than nationally. Industries that appear in the lower right quadrant (low LQ-high competitive shift) represent potential emerging local industrial strengths. Although they are growing faster than national industry trends suggest, these industries are relatively small and are not expected to continue growing in the future. growing locally faster than the national industrial average. Positive competitive shifts suggest that growing at the same rate as the national industrial average. In fact, because employment in manufacturing is declining at the national level, University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber26
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile  The lower left quadrant (low LQ-low competitive shift) is the least interesting of the four quadrants. Industries that appear in this quadrant are not locally concentrated and the local economy does not exhibit a competitive advantage to support employment growth in these sectors. In order to see the quadrant locations for industries at a fine-grained level, Figure 23 replicates the information from Figure 22 with 3-digit NAICS industries but excluding outliers (industries with LQ > 2 or competitive shift > 50%) and without displaying industry size. According to Figure 20, the greatest number of industries are located in the upper and lower left quadrants. However, a considerable number of industries are located in the upper right quadrant of the graph. Industries such as electronic markets and agents and brokers (NAICS 425), air transportation (NAICS 481), and support activities for transportation (NAICS 488) represent solid strengths while apparel manufacturing (NAICS 315) and transportation equipment manufacturing (NAICS 336) show emerging local industrial strengths. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber27
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Figure 22: Regional Concentration and Regional Effects Construction struction Manufacturing-30% -20% -10%1.60 LQ Con1.401.201.000.800.600.400.200.00CS -50% -40%0% 10% 20% Utilities University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber28
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Figure 23: Regional Concentration and Regional Effects -50% -40%-30%454 312512-20%926-10% 442 511444574282 611623551446 8127128111 532CS40% 50%923922 721 483315 924928316449425 441 453624238 711 531327 452 5189994860.5113 525 0211-0.5-1331 921339 561 517522 491 4432 LQ Co 333 3321.5485 335 323813nstruction481 523493326 325 424423 541 713322 484 48831132410% 20% 30%524 451 562 621482 515 447533622 212 233634492337 2210%487 111 321237314 336115 114 213 521313112425 University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber29
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile OccupationsThere are four major growth occupation groups: Business and financial operations occupations; Architecture and engineering occupations; Sales occupations; and Construction and extraction occupations (Table 7). Occupation groups with increased occupational employment LQ values over time indicate that industries that demand these occupations are probably growing and might demand equivalent or similar occupations in the future (Table 8). Understanding the current and changing occupation mix of a state informs policy makers and analysts about occupational requirements of local industries. Specifically, they could inform educational and workforce training policies and programs for growing and/or specialized industries. For example, employment growth in professional and technical services (NAICS 541) discussed above is probably related to growth in architecture and engineering occupations. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber30
Table 7: Changes in Major Occupation Groups in Illinois, 2010-2015State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Illinois2015 Change388,500 29.5%169,580 33.3%32,760 -3.5%46,920 7.0%68,810 -1.7%159,210 3.1%482,170 9.2%168,830 31.6%919,450 4.4%178,580 -13.3%437,840 5.8% 473,270 9.2%U.S. Occ. Code13-000017-000021-000025-000029-000033-000037-000041-000045-000049-000053-000000-0000Occupation TitleBusiness and Financial Operations Occupations Architecture and Engineering Occupations Community and Social Service Occupations Education, Training, and Library Occupations Healthcare Practitioners and Technical Occupations Protective Service OccupationsBuilding and Grounds Cleaning and Main. Occ.Sales and Related OccupationsFarming, Fishing, and Forestry OccupationsInstallation, Maintenance, and Repair OccupationsTransportation and Material Moving OccupationsAll Occupations2010299,890127,26033,94043,85069,980154,460441,480128,310880,460205,920413,970 433,26020106,022,860 3,283,950 1,064,510992,650 1,716,640 3,962,93011,027,3403,425,22021,503,8005,072,5308,236,340 8,547,98020156,936,990 4,005,250 1,146,110 1,062,370 1,843,600 3,989,91012,577,0804,307,50021,846,4205,477,8209,073,290 9,536,610Change15.2%22.0%7.7%7.0%7.4%0.7%14.1%25.8%1.6%8.0%10.2% 11.6% 11-0000 Management Occupations 5,528,420 5,852,710 5.9% 127,097,160 137,896,660 8.5% 15-0000 Computer and Mathematical Occupations 313,360 316,070 0.9% 6,090,910 7,032,560 15.5% 19-0000 Life, Physical, and Social Science Occupations 83,630 87,700 4.9% 2,305,530 2,475,390 7.4% 23-0000 Legal Occupations 74,910 74,620 -0.4% 1,901,180 1,972,140 3.7% 27-0000 Arts, Design, Entertain., Sports, and Media Occ. 405,940 385,700 -5.0% 8,457,870 8,542,670 1.0% 31-0000 Healthcare Support Occupations 320,770 332,380 3.6% 7,346,580 8,021,800 9.2% 35-0000 Food Preparation and Serving Related Occupations 140,030 150,250 7.3% 3,187,810 3,351,620 5.1% 39-0000 Personal Care and Service Occupations 184,030 178,810 -2.8% 4,175,550 4,407,050 5.5% 43-0000 Office and Administrative Support Occupations 583,370 593,750 1.8% 13,437,980 14,462,120 7.6% 47-0000 Construction and Extraction Occupations 5,170 7,580 46.6% 408,040 454,230 11.3% 51-0000 Production Occupations 184,440 199,930 8.4% 4,928,960 5,374,150 9.0% University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber31
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Table 8: Occupational Employment Location Quotients, Illinois, 2015* Occ. CodeOccupation Title2010 20151.15 1.320.89 1.000.73 0.671.02 1.040.94 0.880.90 0.940.92 0.900.86 0.920.94 0.990.93 0.771.16 1.14 1.17 1.17 11-0000 Management Occupations 1.00 1.0013-0000 Business and Financial Operations Occupations 17-0000 Architecture and Engineering Occupations21-0000 Community and Social Service Occupations 25-0000 Education, Training, and Library Occupations 29-0000 Healthcare Practitioners and Technical Occupations 33-0000 Protective Service Occupations37-0000 Building and Grounds Cleaning and Maintenance Occ. 41-0000 Sales and Related Occupations45-0000 Farming, Fishing, and Forestry Occupations49-0000 Installation, Maintenance, and Repair Occupations53-0000 Transportation and Material Moving Occupations00-0000 All Occupations*Reference region in LQ calculations is U.S. 15-0000 Computer and Mathematical Occupations 1.18 1.06 19-0000 Life, Physical, and Social Science Occupations 0.83 0.8323-0000 Legal Occupations 0.91 0.89 27-0000 Arts, Design, Entertainment, Sports, and Media Occ. 1.10 1.06 31-0000 Healthcare Support Occupations 1.00 0.98 35-0000 Food Preparation and Serving Related Occupations 1.01 1.06 39-0000 Personal Care and Service Occupations 1.01 0.96 43-0000 Office and Administrative Support Occupations 1.00 0.97 47-0000 Construction and Extraction Occupations 0.29 0.3951-0000 Production Occupations 0.86 0.88 Looking at median annual wages for the state and the country, there do not seem to be large differences for different occupation groups. Regarding change over time, median wages declined at a greater rate in the state than in the U.S. (-2.1% versus -1.6%). While wages for workers with three occupations grew locally faster than the national average (computer occupations; protective service occupations; and construction occupations), for three other occupation groups, wages declined substantially compared to the national trend for that occupation (life and physical science occupations; legal occupations, and farming occupations). University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber32
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Table 9: Annual Median Wages for Major Occupational Groups (in 2015 constant dollars), 2010-2015 Occ. Code13-000017-000021-000025-000029-000033-000037-000041-000045-000049-000053-000000-0000Occupation TitleBusiness and Financial Operations Occupations Architecture and Engineering Occupations Community and Social Service Occupations Education, Training, and Library Occupations Healthcare Practitioners and Technical Occupations Protective Service OccupationsBuilding and Grounds Cleaning and Main. Occ.Sales and Related OccupationsFarming, Fishing, and Forestry OccupationsInstallation, Maintenance, and Repair OccupationsTransportation and Material Moving OccupationsAll OccupationsIllinois2010 2015 Change 201064,989 64,800 -0.3% 65,94674,239 74,700 0.6% 76,75043,272 42,100 -2.7% 42,69653,098 48,950 -7.8% 49,66363,870 61,680 -3.4% 63,57641,565 42,060 1.2% 39,84825,185 25,580 1.6% 24,44626,641 26,120 -2.0% 26,48929,761 27,270 -8.4% 21,33746,543 46,130 -0.9% 43,60930,870 30,360 -1.7% 30,870 38,130 37,320 -2.1% 36,783U.S.2015 Change65,710 -0.4%76,870 0.2%42,010 -1.6%47,220 -4.9%62,610 -1.5%37,730 -5.3%23,860 -2.4%25,660 -3.1%21,760 2.0%42,790 -1.9%30,090 -2.5% 36,200 -1.6% 11-0000 Management Occupations 94,837 93,910 -1.0% 99,391 98,560 -0.8% 15-0000 Computer and Mathematical Occupations 78,250 80,170 2.5% 80,130 81,430 1.6% 19-0000 Life, Physical, and Social Science Occupations 71,163 64,850 -8.9% 63,620 62,160 -2.3% 23-0000 Legal Occupations 95,152 76,620 -19.5% 81,065 78,170 -3.6% 27-0000 Arts, Design, Entertain., Sports, and Media Occ. 45,500 45,780 0.6% 46,598 46,160 -0.9% 31-0000 Healthcare Support Occupations 26,413 26,670 1.0% 26,913 27,040 0.5% 35-0000 Food Preparation and Serving Related Occupations 20,543 19,430 -5.4% 20,402 19,580 -4.0% 39-0000 Personal Care and Service Occupations 22,446 22,410 -0.2% 22,435 21,850 -2.6% 43-0000 Office and Administrative Support Occupations 34,120 33,680 -1.3% 33,380 33,200 -0.5% 47-0000 Construction and Extraction Occupations 59,326 61,160 3.1% 42,478 42,280 -0.5% 51-0000 Production Occupations 33,391 32,500 -2.7% 32,967 32,250 -2.2% University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber33
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile International TradeExports sustain thousands of businesses and support hundreds of thousands of jobs in Illinois. According to the International Trade Administration of the U.S. Department of Commerce, in 2015, a total of 23,252 companies exported from Illinois locations, and exports from those companies supported 333,674 jobs (nearly 6% of total employment). Eighty-six percent (86%) of these jobs are attributable to manufactured goods exports. Major export categories are machinery, chemicals, transportation equipment, electronic products, and electrical equipment. Illinois’s top five (5) export markets were Canada ($17.5 billion), Mexico ($9.1 billion), China ($4.9 billion), Germany ($3.1 billion), and Australia ($2.6 billion) in 2015. Similar to the trend observed for the nation as a whole, after rising sharply following the end of the recession in 2010, exports have declined in recent years (Figure 24). Illinois’s share of U.S. exports is shrinking in recent years (Table 10). This is explained in part by the state’s contracting manufacturing sector, and the decline in the state’s share of share of the U.S. population. 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,0001,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000Figure 24: Exports Originated from Illinois, 2007-2016 (2016 constant million dollars) –2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Illinois U.S. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber34IllinoisUnited States
State of Illinois Defense Industry Adjustment (DIA) Program, State Economic Profile Table 10: Top Products Exported from Illinois and Illinois’s Shares of U.S. Exports, 2013-2016 (2016 constant dollars) NAICS Code 120190 870324901890 851712 230330 870410 853710 840999870323 848180 210690 850440Product DescriptionSoybeans Passenger vehiclesIndustrial appliance for medical surgical dental and veterinary productsPhones for cellular ntwks. / for other wireless eq. Brewing or distilling dregs and wasteDumpers designed for off-highway use Controls, elect apparatus f elect cont.Spark-ignition reciprocating int. comPassenger vehicle spk-ig int. com rcpr. p eng. >1500Taps cocks etc. f pipe vat inc. thermos. control Food preparationsStatic converters; adp. power supplies Sub-total (Top 25)Export ($ million)2013 2014 2015 2016 2,214 1,818 1,545 2,375 1,368 1,611 1,595 1,090870 914 1,021 1,065318 656 847 886 1,119 811 709 6432,585 1,810 1,084 602 575 586 510 560 620 657 561 5311,008 933 877 498370 475 464 417 321 317 350 387 459 425 433 37522,176 23,630 21,563 20,171Share2013 2014 2015 2016 3.3 2.7 2.4 4.0 2.1 2.4 2.5 1.81.3 1.3 1.6 1.80.5 1.0 1.3 1.5 1.7 1.2 1.1 1.13.9 2.6 1.7 1.0 0.9 0.9 0.8 0.9 0.9 1.0 0.9 0.91.5 1.4 1.4 0.80.6 0.7 0.7 0.7 0.5 0.5 0.6 0.6 0.7 0.6 0.7 0.633.5 34.5 34.0 33.7 4.2 4.2 4.2 4.1% Change, 2013-20167.3 (20.4)22.5179.0 (42.5)(76.7) (2.7) (14.3)(50.6)12.720.7(18.4)(9.0) (9.7) 271012 Lt oils, preps gt 70% petroleum 3,931 5,059 2,648 2,838 5.9 7.4 4.2 4.7 (27.8) 300490 Medicaments, measured doses, retail pk. 378 550 1,031 1,217 0.6 0.8 1.6 2.0 221.8 880000 Civilian aircraft, engines, and parts 904 948 1,010 1,067 1.4 1.4 1.6 1.8 18.1 851762Machinery for recp./convr./trans/regn. of voice/image 527 736 801 998 0.8 1.1 1.3 1.7 89.3 870899 Parts and accessories of motor vehicles 892 940 832 745 1.3 1.4 1.3 1.2 (16.4) 300210Antisera, blood fractions & immunological products 526 555 1,050 615 0.8 0.8 1.7 1.0 16.9 851770 Parts of phone sets 214 327 777 593 0.3 0.5 1.2 1.0 177.1 843149 Parts and attachments for derricks 688 755 610 546 1.0 1.1 1.0 0.9 (20.7) 100590 Corn (maize), other than seed corn 658 1,008 709 507 1.0 1.5 1.1 0.8 (22.9) 842951 Mechanical front-end shovel loaders 659 583 586 456 1.0 0.9 0.9 0.8 (30.8) 381121 Additive for lub. oil cont. petro/bituminous mi 420 441 442 409 0.6 0.6 0.7 0.7 (2.6) 382200 Composite diagnostic/lab reagents, exc. pharma 427 392 448 383 0.6 0.6 0.7 0.6 (10.3) 284410 Natural uranium & compounds, alloys & ceramic 126 324 623 369 0.2 0.5 1.0 0.6 193.2 Total 66,21368,394 63,421 59,808 University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber35
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change Department of Defense ContractsTrends in Defense Spending in the U.S.In FY 2015, the Department of Defense (DoD) spent $408 billion on payroll and contracts in the United States, which corresponds to approximately 2.3% of U.S. GDP. Of this amount, $134.8 billion were on personnel and $273.5 billion were on contracts. Defense contracts spending has declined in recent years (Figure 25). From FY 2012 to 2013, DoD contract spending in the United States declined from $320.4 billion to $302.6 billion; in FY 2014 it further decreased to $281.8 billion before falling to $273.5 billion in FY 2015. In FY 2015, contract spending occurred in four major items: $129.8 were in supplies and equipment (47%), $104 were in services (38%), $28.9 were in research and development (11%), and $10.9 were in construction (4%). 40035030025020015010050 0Figure 25: DoD Contract Spending in the U.S. (in current dollars) 336.8 335.9331.4320.4302.6 311.7281.8273.5 2008 2009 2010 20112012 20132014 2015Trends in Defense Spending in IllinoisAccording to defense spending data measured based on the time of performance of contracts, $7.0 billion were spent in the state in 2015 (up from $5.6 billion in 2014). Of that amount, $129.8 were in supplies and equipment (64%); $104 were in services (24%); $28.9 were in research and development (6%); $10.9 were in construction (6%); $2.2 billion were on personnel and $4.2 billion on construction (Defense Spending by State Fiscal Year 2015). DoD purchases in Illinois is more concentrated on manufactured products than from other states. Compared to the distribution of spending at the national level, defense spending in Illinois is concentrated in supplies and equipment, an indication that manufacturing firms rely more on DoD contracts than non- manufacturing firms. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber36
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change According to defense spending data estimated based on dollars obligated, $5.3 billion were pentin the state in 2015 (up from $3.2 billion in 2014). Based on this estimate, since 2006, theDepartment of Defense has spent at least $3 billion dollars in contracts annually in Illinois (Figure723). Although these contracts constitute around 1 percent of the gross state product (which issubstantially less than in many other states), they support a large industrial base and are crucial for local businesses in certain industries (Table 11). Overall, the number of DoD contracts performed in the state closely tracks the national trend. However, it is worth noting that the state’s share in national defense spending appears to be trending higher in recent years; such is the case between 2013 and 2015 when contracts performed in Illinois increased from $3.2 billion to $5.3 billion. 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000Figure 26: Department of Defense Contracts by Place of Performance, 2006-2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Illinois U.S.Of the $5.3 billion worth of DoD contracts performed in Illinois in 2015, the most contract dollars were received by businesses operating in manufacturing, wholesale trade, construction, and professional and technical services (Table 11). The top five industries include: Medical equipment merchant wholesalers (NAICS 423450); Construction (NAICS 237990); Search, detection, and navigation instruments (NAICS 334511); Heavy duty truck manufacturing (NAICS 336120); Engineering services (NAICS 541330); and Aircraft manufacturing (NAICS 336411). As discussed above, businesses in professional and technical services (NAICS 541), fabricated metal product manufacturing (NAICS 332), and machinery manufacturing (NAICS 333) appear to be carrying out a substantial portion of DoD contracts performed in the state.7 Contracts spending data are not adjusted for inflation. Data are derived from USASpending.gov, which is a publicly available, searchable website operated by the U.S. Treasury Department’s Bureau of the Fiscal Service. Note that these figures for the regions could be a low-end or a high-end tally of contracting dollars because the data source includes only direct contracts and not subcontracts. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber37Illinois (current milions of dollars)U.S. (current millions of dollars)
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change Table 11: Illinois Industries with DoD Prime Contracts Valued $50 million or more, Fiscal Year 2015 NAICS Code 237990 336120 336411 423610 236220 541512 332992 517110 334111 424210 541519 423850 541511IndustryOther heavy constructionHeavy duty truck manufacturingAircraft manufacturingElec. equip. and wiring merchant wholesalers Commercial building constructionComputer systems design servicesSmall arms ammunition manufacturing Wired telecommunications carriers Electronic computer manufacturing Druggists’ goods merchant wholesalersOther computer related servicesService estab. equip. merchant wholesalers Custom computer programming servicesSum of dollars Share obligated (%)386,564,251 7.3 378,625,020 7.1 223,485,645 4.2 168,727,634 3.2 160,973,062 3.0 131,877,825 2.5 107,680,828 2.0 102,663,586 1.992,287,588 1.7 80,933,559 1.577,835,610 1.5 70,519,423 1.3 59,748,225 1.1 423450 Medical equipment merchant wholesalers 471,925,182 8.9 334511 Search, detection, and navigation instruments 383,627,578 7.2 541330 Engineering services 229,129,896 4.3 541712 Other physical and biological research 181,012,797 3.4 324110 Petroleum refineries 161,238,789 3.0 334419 Other electronic component manufacturing 153,326,575 2.9 332993 Ammunition, except small arms, manufacturing 128,331,901 2.4 333120 Construction machinery manufacturing 106,896,888 2.0 611430 Management training 99,295,629 1.9 336413 Other aircraft parts and equipment 86,210,588 1.6 541710 Research and Development in the Physical, Engineering, 79,104,670 and Life Sciences 1.5 722310 Food service contractors 72,353,674 1.4 334210 Telephone apparatus manufacturing 67,732,720 1.3 336992 Military armored vehicles and tank parts mfg. 58,416,876 1.1 Subtotal 4,320,526,022 81.5 Other Industries 977,727,842 18.5 General Total 5,298,253,864 100.0 Defense Spending in DIA Illinois RegionsDepartment of Defense (DoD) contracts in the state of Illinois are concentrated in two regions: the Northeast Illinois and Southwest Illinois. For example, in 2015, nearly 80 percent of Illinois DoD contracts (or 4.3 of 5.3 billion dollars’ worth of DoD contracts) were performed in these regions. As a share of regional gross regional product (GRP), DoD contracts constituted less than 1 percent of the gross regional product in the Northeast University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber38
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change 8Illinois Region. In relative terms, DoD contracts are more important to the Southwest9Table 12: DoD Contract Spending by Illinois DIA Regions, 2015 (in current dollars).Illinois Region, where they constituted around 4 percent of GRP in 2015.noting that spending within this region (the Southwest Illinois Region) appears to be mostly stable compared to spending in other regions.It is also worth RegionSouthwest IllinoisQuad CitiesSubtotal Illinois2007 2008 2009 2010508 716 585 750 303 427 389 4153,582 4,100 4,058 4,567 5,082 9,202 5,955 6,9242011 2012665 672 274 2934,433 5,178 6,074 7,6692013 2014 2015620 622 647 184 206 2083,143 3,948 4,943 3,221 4,306 5,298 Northeast Illinois2,347 2,427 2,590 2,990 2,884 3,520 2,014 2,763 3,657 Rockford 162 183 185 155 186 210 147 183 305 Greater Peoria262 346 309 257 424 483 177 174 127 In terms of sectoral distribution of defense contract spending, some regions display heavy concentration in a few industries. Table 13 shows the top five industries in each region with the largest amount of contracts in 2015. While electrical equipment and aircraft manufacturing is concentrated in the Rockford Region, the Greater Peoria Region has heavy concentration of machinery manufacturing. Defense spending in the other three regions appear to be more evenly distributed among different industries. Heavy concentration in a few industries may make these regions more vulnerable to reductions in defense spending as a result of either cuts in defense programs related to these industries, or regions losing their competitive advantage in those industries over time. 8 According to the U.S. Bureau of Economic Analysis, Chicago-Naperville-Elgin MSA’s gross regional product was $610.5 billion in 2014.9 The Southwest Illinois’ gross regional product was approximately $14.5 billion in 2014. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber39
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change Table 12: DoD Contract Spending by Top Industries in Illinois DIA Regions, 2015 (in current dollars). Region* NAICS Code 334511 336411 541512 541511 541712 541614 336413 236220 336413 541519 336310 335999IndustrySearch, detection, and navigation instruments Aircraft manufacturingComputer Systems Design ServicesCustom Computer Programming ServicesR &d in the Physical SciencesProcess, Physical Dist., and Logis. Con. Services Other Aircraft Parts and Auxiliary Equip. Manuf. Commercial and Institutional Building Const. Other Aircraft Parts and Auxiliary Equip. Manuf. Other Computer Related ServicesMotor Vehicle Gas. Engine Manuf.Misc. Electrical Equip. and Component Manuf.Sum of dollars Share obligated (%)383,511,003 10.5 222,142,596 6.1117,590,983 18.2 56,897,548 8.8 47,162,440 7.3 34,921,104 11.5 30,934,150 10.2 20,713,529 10.0 16,578,705 8.0 14,125,712 6.8 11,524,209 9.14,200,167 3.3 423450 Medical equipment merchant wholesalers 471,852,320 12.9 336120 Heavy duty truck manufacturing 378,625,020 10.4 541330 Engineering services 194,998,968 5.3 332992 Small Arms Ammunition Manufacturing 107,680,829 16.7 541519 Other Computer Related Services 52,368,575 8.1 423610 Electrical Apparatus and Equipment Wholesalers 167,229,375 54.9 336412 Aircraft Engine and Engine Parts Manufacturing 30,940,358 10.2 325998 Misc. Chemical Product and Prep. Manuf. 10,813,098 3.5 561210 Facilities Support Services 18,755,763 9.0 541330Engineering Services 15,889,533 7.6 333120 Construction Machinery Manufacturing 93,225,512 73.5 236220 Commercial and Institutional Building Const. 6,073,174 4.8 333618 Other Engine Equipment Manufacturing 2,123,706 1.7 *Regions are ordered according to their share of DoD contracts spending in Illinois. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber40Greater Quad Cities Rockford Southwest Northeast Peoria Illinois Illinois
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change Appendix: Definitions, Methods & Data SourcesCensus Bureau midyear population estimate. Estimates for 2010-2015 reflect Census Bureaumidyear state population estimates available as of December 2015.The U.S. Bureau of Economic Analysis, Personal Income, Population, Per Capita Personal Incomehttps://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=8#reqid=70&step=29 &isuri=1&7003=900&7022=21&7023=0&7024=non-industry&7001=421&7002=1&7090=70Unemployment Rate(BLS).Illinois Department of Employment Security, Economic Information and Analysishttp://www.ides.illinois.gov/LMI/Pages/Annual_Average_Data.aspxUnemployment Insurance (UI) ClaimsUI claims data is widely used as an indicator of labor market conditions. Unemployment insurance (UI) programs are administered at the state level and provide assistance to jobless people who are looking for work. Workers who lose their jobs may file applications to determine if they are eligible for UI assistance. These applications are referred to as “initial claims.” Claimants who meet the eligibility requirements must file “continuing claims” for each week that they seek benefits. While the UI claims data provides useful information, they are not used to measure total unemployment because they exclude several important groups. Not all workers are covered by UI programs. For example, self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several other small (primarily seasonal) worker categories are not covered. Over the past decade, only about one-third of the total unemployed, on average, received regular UI benefits.Illinois Department of Employment Security, Economic Information and Analysishttp://www.ides.illinois.gov/LMI/Pages/Unemployment_Insurance_Program_Data.aspxThe U.S. Department of Laborhttp://workforcesecurity.doleta.gov/unemploy/claims.asp.Population The unemployment rate is the percentage of the labor force that is unemployed. People are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. The labor force is made up of the employed and the unemployed (16 years of age and over). The remainder—those who have no job and are not looking for one—are counted as not in the labor force. Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force. Since the mid-1990s, typically fewer than 1 in 10 people not in the labor force reported that they want a job Unemployment rate reported for the seven-county state is calculated using weighted average for seven counties that comprise the state. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber41
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change Personal IncomePersonal income is the income received by, or on behalf of, all persons from all sources: from participation as laborers in production, from owning a home or business, from the ownership of financial assets, and from government and business in the form of transfers. It includes income from domestic sources as well as the rest of world. It does not include realized or unrealized capital gains or losses. Per capita personal income is calculated as the total personal income of the residents of a state divided by the population of the state. In computing per capita personal income, BEA uses mid-quarter population estimates based on unpublished Census Bureau data.The U.S. Bureau of Economic Analysis, GDP & Personal Income.https://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=8#reqid=70&step=4&i suri=1&7003=900&7001=1900&7002=1&7090=70Gross Domestic ProductGross domestic product (GDP) is the value of the goods and services produced by the nation’s eco nomy less the value of the goods and services used up in production. GDP is also equal to the sum -of personal consumption expenditures, gross private domestic investment, net exports of goods and services, and government consumption expenditures and gross investment.The U.S. Bureau of Economic Analysis, GDP & Personal Income.https://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=8#reqid=70&step=4&i suri=1&7003=900&7001=1900&7002=1&7090=70WagesThe Quarterly Census of Employment and Wages (QCEW).http://www.bls.gov/cew/datatoc.htm Wages include bonuses, stock options, severance pay, profit distributions, cash value of meals and lodging, tips and other gratuities, and, in some States, employer contributions to certain deferred compensation plans such as 401(k) plans. Average annual wages reported for the seven-county state are calculated using weighted average for seven counties that comprise the state. EmploymentThe QCEW employment count is a total derived from quarterly contribution reports filed by almost every employer in the U.S., Puerto Rico and the U.S. Virgin Islands. It counts only filled jobs, whether full or part-time, temporary or permanent, by place of work. The quarterly reports include the establishment’s monthly employment levels for the pay periods that include the twelfth of the month. Because the QCEW data is based on an establishment census which counts only filled jobs, it is likely that a multi-job holder will be counted two or more times in QCEW data. The U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages (QCEW).http://www.bls.gov/cew/datatoc.htmPrivate Sector Establishment Births & DeathsBirths. These are establishments with positive third month employment for the first time in the current quarter with no links to the prior quarter, or units with positive third month employment University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber42
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change in the current quarter and zero employment in the third month of the previous four quarters. Births are a subset of openings not including re-openings of seasonal businesses.Deaths: These are establishments with no employment or zero employment reported in the third month of four consecutive quarters following the last quarter with positive employment. Business Employment Dynamics data is quarterly series of gross job gains and gross job losses statistics for the entire economy. These data track changes in employment at the establishment level, and thus provide a picture of the dynamics underlying aggregate net employment growth statistics. The microdata used to construct the gross job gains and gross job losses statistics are from the Quarterly Census of Employment and Wages (QCEW), or ES-202, program. These data include all establishments subject to State unemployment insurance (UI) laws and Federal agencies subject to the Unemployment Compensation for Federal Employees program. Each quarter, the State agencies edit and process the data and send the information to BLS in Washington, DC. The data covers approximately 98 percent of all employment; the major exclusions from UI coverage are the self-employed and certain nonprofit organizations. Establishments report employment for the pay period including the 12th of the month.Business Employment Dynamicshttps://www.bls.gov/bdm/bdmstate.htmOccupations An occupation is a set of activities or tasks that employees are paid to perform. Employees that perform essentially the same tasks are in the same occupation, whether or not they are in the same industry. Some occupations are concentrated in a few industries, while other occupations are found in the majority of industries. Occupations data derived from the occupational employment statistics (OES). The OES survey is a semi-annual mail survey of non-farm establishments. Note that Military Specific Occupations are not surveyed in OES. The U.S. Bureau of Labor Statistics, Occupational Employment Statistics (OES). http://www.bls.gov/oes/current/oessrcma.htm Exports Data on U.S. exports of merchandise from the U.S. to all countries, except Canada, is compiled from the Electronic Export Information (EEI) filed by the US Principal Party in Interest (USPPI) or their agents through the Automated Export System (AES). In 1985, a new field indicating the state where the export journey begins was added to export reporting requirements. This field allowed the compilation of the State of Origin of Movement (OM) Series. The OM series based on origin state, that became available in 1987, provides export statistics based on the state from which the merchandise starts its journey to the port of export; that is, the data reflect the transportation origin of exports. State Trade Data, Foreign Trade Data Collection Division of the U.S. Census Bureau https://www.census.gov/foreign-trade/statistics/state/origin_movement/index.html#2015Department of Defense Contracts University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber43
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change USA Spending reports two different locations for DoD contract awards: (1) The Recipient Location and (2) The Place of Performance. The recipient location is usually the headquarters of the entity receiving a federal award while the place of performance includes the location for the project being funded by the award or the location where products or services have been purchased for a project being funded by an award. Contract awards reported in this profile are based on the place of performance. And, local contracts figures are approximate as they are derived from congressional districts-level data points. Illinois congressional districts 1 through 11 are considered to be roughly representative of the seven-county Northeast Illinois State. Annual contract figures are an aggregation of awards that occurred in a single fiscal year. The federal government operates on a fiscal year that begins on October 1st and ends the following September 30th.The U.S. Treasury Department Bureau of the Fiscal Service.https://www.usaspending.gov/DownloadCenter/Pages/dataarchives.aspxThe personnel and payroll data was provided by the DoD’s Defense Manpower Data Center. The contract spending data is from Chmura’s proprietary FedSpendTOP data which is derived from USASpending.gov data. This database adjusts data from USASpending.gov to account for the time of performance.Location Quotient (LQ)Location quotient is an economic analysis technique used to identify the concentration of an industry sector in a local economy relative to a larger reference economy. The LQ can be considered as an index of specialization indicating the expected share of an industry in the local area given the size of this industry in the reference economy. For example, if a regional economy has 15% of its employment in the manufacturing industry and the nation (reference economy) has 10% of its employment in manufacturing, the location quotient is the ratio of first percentage to the second percentage, or 1.5 (0.15 is divided by 0.10). In addition to indicating how specialized a local economy is relative to the larger economy, the location quotient is essential in determining the economic base of a local economy. Although LQ values greater than 1 mathematically indicate local concentration, industries with LQs greater than 1.25 are interpreted in this analysis as substantially regionally concentrated. These are industries that are likely to be part of the export base of the region, the further growth of which will stimulate the overall economy.The formula for calculating the location quotient is as follows:𝑳𝑸=(𝑒𝑖 )÷(𝐸𝑖 ) 𝑒𝑡 𝐸𝑡Where: Office of Economic Adjustment, Department of Defense http://www.oea.gov/defense-spending-state-fiscal-year-2015 University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber44
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change 𝑒𝑖 = local employment in industry 𝑖𝑒𝑡 = total local employment𝐸𝑖 = reference (national) employment in industry 𝑖 𝐸𝑡 = total reference (national) employmentBesides employment, location quotients can be calculated using establishment counts. The location quotient is a static measure, depicting an industry at only one point in time. Therefore a single LQ measurement does not reflect whether an industry sector is growing or declining in10Shift-share analysis is a major tool for analyzing the changes in a local economy. Similar to the application of LQ, shift-share entails designation of a reference economy (state or nation). However, differently from the LQ, shift-share analyzes change over time, essentially disaggregating the growth of an industry into three contributing parts: (1) changes due to overall national growth, (2) changes due to growth or decline nationally in a particular industry, and (3) changes due to11Reference Region (National) Shift, also called the national growth effect, explains how much of the growth in a regional industry is attributable to overall growth of the national economy. It is based on the observation that national economic expansion or recession affects the entire economy.Industry Mix Term represents the share of regional industry growth explained by the growth of the specific industry at the national level. Industries that are growing faster than the overall national economy are more likely to proportionally contribute to the growth of a regional economy. Thus, this component identifies industries whose local concentrations or deficits are contributing to the growth or decline of the overall regional economy.Competitive Shift, also called the local or differential shift, is the difference in the rate of growthor decline in a local industry relative to the rate of growth or decline in that same industrynationally. This shift is the most interesting and useful of the three shifts. It explains how much ofthe change in a given industry is due to competitive advantages or disadvantages that the regionpossesses. A positive local shift means that employment in a regional industry is growing fasterthan the employment in that industry nationally or that the regional decline is less than the1210 Blakely, E.J. and Leigh, N.G. (2010). Planning Local Economic Development: Theory and Practice. 4th Edition. Sage, Thousand Oaks, CA.11 Shuffstall, W. Economic and Community Development. Penn State Extension. http://extension.psu.edu/community/ecd/understanding-economic-change-in-your-community/shift- share-analysis-helps-identify-local-growth-engines (Accessed July 20, 2016).12 Blakely, E.J. and Leigh, N.G. (2010). Planning Local Economic Development: Theory and Practice. 4th Edition. Sage, Thousand Oaks, CA.importance relative to the local economy.Shift-Share Analysislocal factors particular to the study area.national decline. University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber45
State of Illinois Defense Industry Adjustment (DIA) Program, Northeast Illinois State Economic Composition and Change Because shift share analysis deals with job growth over time, a time frame (start year and end year) is required to perform shift share analysis.∆𝑳𝒊 = 𝑅𝑆𝑖 + 𝐼𝑀𝑖+ + 𝐶𝑆𝑖𝑹𝑺𝒊 = 𝑅𝐴𝑡 − 𝑅𝐴𝑡−1 𝑅𝐴𝑡−1 𝑅 𝑖 𝑡 − 𝑅 𝑖 𝑡 − 1𝑰𝑴𝒊 = (𝑅 𝐴𝑡 − 𝑅 𝐴𝑡 − 1 𝑅𝐴𝑡−1𝑪𝑺𝒊 = (𝑡−1 𝐿𝑖𝑡−1 𝑅𝑖−−)) 𝑅𝑖𝑡−1𝑡 𝑡−1 𝑡 𝑡−1𝐿𝑖 − 𝐿𝑖𝑅𝑖 − 𝑅𝑖 Where:𝑅𝑆 = reference region shift, 𝐼𝑀 = industry mix term, 𝐶𝑆 = competitive (local) shift, 𝑖 = industry, 𝐴 = all of economy, 𝑡 = current time period, 𝑡 − 1= previous time period University of Illinois, Nathalie P. Voorhees Center, Quad Cities Chamber46

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