What is SWOT analysis, and how can it help you better understand your regional labor market?
SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. When applied to industry analysis—in this case using change in location quotient as the key metric—the highly visual SWOT framework allows economic developers and other local practitioners to segment industries into helpful buckets:
- Strengths: These are industries in which your region has a comparative advantage; they might also be driver industries, though we recommend analyzing earnings, exports, multipliers, and other data to determine that.
- Opportunities: These are emerging industries in your region, or at least industries to keep an eye on in coming years.
- Weaknesses and threats: These are at-risk or struggling industries, ones that may even be growing but are losing ground compared to other regions.
This information can help your region prioritize its economic development efforts and help foresee business expansion opportunities and business retention challenges before they arise.
Using the change in LQ (also known as concentration) from 2010 to 2015, we’ve prepared a layered industry SWOT analysis below for the state of Missouri, St. Louis metro, St. Louis County, and St. Louis city (a ZIP code region).
Note that a LQ that is higher than 1.0 means that an industry is more concentrated in the region than in the nation. How much more concentrated? If an industry has an LQ of 3.0, then that industry is three times more concentrated in the region than average. If the LQ is 2.0, it is twice as concentrated, and so on.
State of Missouri
Here’s a breakdown of this chart. The upper left-hand portion, where the concentration is lower than the national average but is growing, represents opportunities. The lower left-hand portion represents weaknesses because concentration is low and declining. The upper right-hand portion represents strengths; concentration is high and growing. The bottom right-hand portion shows threats; concentration is high but declining.
When just glancing at a scatterplot, it is common to notice the outliers first. In this chart, you can see that although the monetary authorities-central bank industry is small in Missouri (only about 1,800 jobs), it is five times as concentrated as it is in the nation. Leather and allied product manufacturing is also small but concentrated.
The outlier with the most jobs is the computer and electronic product manufacturing industry. Jobs in this industry grew 74% since 2010 and the LQ changed 88%, resulting in more than 10,000 jobs in 2015. While the LQ is still only .49, this industry may represent a great opportunity for the region, which would be a nice accompaniment to other manufacturing industries in Missouri, such as the state’s strong transportation equipment manufacturing industry.
This chart also shows that Missouri’s data processing, hosting, and related services may warrant some concern; it has grown slightly since 2010 but has a declining LQ. What does this mean? Although these jobs are growing in the state, they are growing faster elsewhere. If Missouri’s economic developers and community partners focus on cultivating expansion in this industry, they may be able to move it back into the strengths category.
St. Louis Metro
The above chart zeros in on the St. Louis metropolitan area, which includes counties in both Missouri and Illinois. The industries on this chart are grouped more tightly than they were at the state level.
Still, there are a number of industries that fall into the threat category, if only slightly. Hospitals; management of companies and enterprises; and data processing, hosting, and related services may be in need of help since their LQs are experiencing minor declines. The St. Louis metro is responsible for a good portion of the state’s job growth in data processing and hosting, so economic gardening at the state level may want to focus there.
The amusement, gambling, and recreation industries are in worse conditions than those discussed above, having experienced a significant jobs decline (-8.8%) and a LQ decline (-15%) since 2010.
But the St. Louis metro has many industries that are going strong, especially in manufacturing. The metro accounts for more than half of the state’s transportation and equipment manufacturing industry. Strengths also include chemical manufacturing and primary metal manufacturing, with opportunity in computer and electronic product manufacturing.
St. Louis County
St. Louis County, which is within the St. Louis metro, has three rising opportunities with significant job counts:
- Food manufacturing (LQ percent change 141%)
- Computer and electronic product manufacturing (94%)
- Electronic equipment, appliance, and component manufacturing (45%)
Note that the last two are closely related. This may mean that they share suppliers, supply to each other, or supply to similar companies—information that may help economic developers and community partners strategize about how to cultivate these industries.
Why might it be worth the effort to develop these industries? Because they both pay extremely well for the area. While the average earnings per job for all industries in St. Louis is $65,507, computer and electronic product manufacturing pays $86,107 on average, and electrical equipment, appliance and component manufacturing pays $101,040 on average. This means that these industries have the potential to create family-sustaining jobs and raise the quality of life in the county.
St. Louis City (ZIP Code 63141)
To construct this chart, we used EMSI’s ZIP code data for 63141. EMSI’s ZIP code employment estimates come from linking data from the Census Bureau’s ZIP Code Business Patterns to our county-level data.
This chart shows that the administrative and support services industry is a huge asset in St. Louis. It has seen 43% job growth since 2010 and 16% change in LQ.
In contrast, ambulatory health care services is losing ground in LQ because it has been growing so rapidly in other areas (due to increased demand after the Affordable Care Act). So even though St. Louis has had job growth in this industry (14.6%), it isn’t enough to maintain its level of concentration. Still, it wasn’t a huge decline (-3%) and may not be a big deal because health care services tend to stay fairly close to average concentration levels. The same goes for hospitals and education, which both have strong but declining LQs.