Exercise: Determine a Regional Industry’s Location Quotient (LQ)

As you’ve learned in this unit, the Location Quotient (LQ) analysis compares the local area economy to the reference area economy to measure relative concentration of each industry sector in the local area economy in comparison to the larger reference area. The result illustrates whether each industry sector in the local area is more/less concentrated than the reference area. Using the industry sector employment figure as an economic indicator, the LQ is calculated as shown below:

Remember:

LQ Greater than 1: The employment in that industry sector is more concentrated than the reference area.
LQ Less than or Equal to 1: The employment in that industry sector is less concentrated than the reference area.

For this exercise, we’ll return to the Orlando-Kissimmee-Sanford region we analyzed in the last example. This time, we’ll look at only the Leisure and Hospitality Industry for 2016–and we’ll compare to the industry concentration for the entire U.S.

• Total number of Leisure and Hospitality employment in the MSA:  247,860
• Total local area employment: 1,157,536
• Total number of Leisure and Hospitality employment in the U.S.: 15,556,625 
• Total U.S. employment: 141,870,066

LQ = (247,860/1,157,536) /  (15,556,625/141,860,066)

Where:

• 247,860 = ei
  (leisure and hospitality employment in the Orlando region),
• 1,157,536 = et
  (total employment in the region),
• 15,556,625 = Ei
  (leisure and hospitality employment in the U.S.), and
• 141,860,066 = Et
  (total employment in the U.S.).

Perform the calculation yourself to determine the Orlando region’s Leisure and Hospitality LQ. You’ll have an opportunity to see if you’re correct in the knowledge check that follows.