Understanding the importance of different industries to the local economy has become increasingly important to economic development organizations. With limited resources, economic development professionals may consider how can they get the biggest return on their investment. Multipliers are one tool that can be used to help with this.
Each industry is linked to other industries that (1) provide the materials and inputs needed and (2) where the industry’s workers spend their income. This means that in addition to the direct jobs within and industry, there are indirect and induced jobs that are also supported by an industry. Multipliers can be used to quantify the indirect and induced impact of activity in an industry, and are one way to identify industries that play the largest role in your overall economy.
Multipliers are industry specific and are generally available and used at the most specific 6-digit NAICS industry level. There are three types of economic multipliers that can be used to measure the ripple effects of an industry:
This article focuses specifically on jobs multipliers.
Nationally, industries in the Utilities sector have the highest jobs multiplier among all sectors.[1] This means that the creation of jobs in the Utilities sector will result in the creation of more indirect and induced jobs than any other sector. In addition to Utilities, the Information and Manufacturing sectors all have jobs multipliers of at least 9.0. This means that, on average, the addition of a job in one of these sectors will result in the creation of at least nine total jobs in the national economy.
Among specific industries, Petroleum Refineries have the largest jobs impact, with 102.5 total jobs in the national economy associated with every one job in the industry. Industries with a high sales-to-labor ratio typically have a high jobs multiplier due to the large amount of investment in equipment, materials, and other inputs needed. Manufacturing accounts for 10 of the 15 industries with the largest jobs multipliers are in the manufacturing sector. Real Estate, Wholesale Trade, and Information are also represented.
[1] Source: Emsi. Multipliers are available at the 6-digit level. Sector-level multipliers are a weighted average of multipliers of all 6-digit industries in that sector.
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