March 31st: Identifying Industry Clusters in New Jersey

This week we begin to look at New Jersey’s economic geography, showing the locations of industrial clusters across the state. 

Our analysis relies heavily on the location quotient, a calculation that shows the relative concentration of an industry at a small scale compared to the concentration at a larger scale. For example, if one were looking at agriculture, one would divide the number of agricultural jobs locally, say in each county, and by the total number of jobs locally. This quotient is then divided by the number of agricultural jobs statewide and divided by all jobs statewide. The formula is thus ((Industry Local)/(All Industries Local))/((Industry State)/(All Industries State)). A value greater than one means that industries are more concentrated locally than the state average. A value between zero and one means that the industry is less concentrated. Relative concentration suggests that a particular industry may have a comparative advantage in a given place, providing services that other regions do not provide.  A high concentration of jobs in a particular sector may indicate that that a sector pulls in outside revenue from the rest of the region or nation, which is crucial for stimulating a healthy local economy.  Mapping these values reveals hot spots of industrial clusters.

Our economy consists of many industries. These industries can be broken down through the North American Industry Classification System (NAICS), which describes every industry in the economy.  There are many industrial sectors, but we aggregated them into four big categories:

  1. Healthcare, education, and government
  2. Manufacturing, logistics, and agriculture
  3. Professional services
  4. Retail, hospitality, and other services.

We then apply the location quotient to each of these categories to find where these sectors are concentrated.  While these four categories are coarsely defined, the large categories make it possible to look at four maps simultaneously. 

Source: U.S. Census Bureau.

In the upper-left quadrant we see a cluster of manufacturing, logistics, and agricultural industries in Southwest New Jersey. Health care, education, and government jobs are concentrated in Mercer County, where the state capital of Trenton and Princeton University is located, but also to a lesser extent in Sussex and Ocean Counties.  Somerset and Morris Counties in central New Jersey are home to a strong cluster of professional services. Finally, Atlantic City has a strong cluster of hospitality and service sector jobs. 

In this graphic we show a bar chart for each county, giving a breakdown of jobs in each sector.  Healthcare, education, and government are the largest sectors in most counties.  Atlantic City’s predominant sector is hospitality and service by far.  Salem County has slightly more manufacturing, logistical, and agricultural jobs than government and health jobs.  Feel free to explore yourself by clicking on a county to reveal the breakdown of jobs.

Next week we will examine the location of these sectors in Newark, showing how the job sectors are distributed throughout the city.