Currently, there is an abundance of data on industry growth in the Rural Capital Area (RCA) during 2021. Regional dashboards show that employment grew by more than six percent in 2021, bouncing back from a decline in 2020. A quick click through the RCA Headlight dashboard reveals that many industries rebounded from 2020 with huge growth rates; for example, employment in the leisure and hospitality industry grew 14 percent while financial activities grew 11 percent. Recently compiled data now uncovers the elements contributing to that growth. It is possible to isolate the components of employment change to understand what caused certain industries to grow so quickly using a technique called shift share analysis.

Shift share analysis is a methodology that helps regional analysts understand how much job growth is due to local competitiveness as opposed to general employment gains across the country. There are three main components.

  1. The national effect: This explains how much industry growth is due to the health of the overall economy. If the nation’s economy grows, there will likely be changes at the industry level for every region.
  2. Industry shifts: This represents the amount of employment change that is due to industry trends. If an industry is declining nationally, as leisure and hospitality did during the pandemic, then there will also be corresponding changes at the local level.
  3. The regional effect: This change represents a region’s competitiveness. Employment changes that cannot be attributed to national trends or industry trends are attributed to unique factors at the regional level.

Combined, these three factors represent total industry growth. These components may create negative or positive changes. For example, an industry that is in decline overall may still increase locally if many new residents in a region boost demand, and therefore employment.

In the RCA, total employment grew by roughly 21,000 jobs in 2021. Half of this growth can be attributed to the national effect and half can be attributed to the regional effect. (There are no industry shifts at the regionally aggregated level). This means that, based on national trends, the RCA should only have gained 10,600 new jobs in 2021. Instead, an additional 10,300 jobs were added because of the RCA’s own competitiveness and advantages during the 2021 economic recovery.

A similar story unfolds at the industry level.

National trends show that in 2021 every local industry gained jobs due to the general economic recovery. Manufacturing grew the most, with the national effect accounting for 135 percent of total industry growth in 2021 (791 jobs). Note that contributions of components can be greater than 100 percent if another component has a negative effect. See the chart below. For the chart below and all others, the industries are listed in order of highest, net employment growth to the least.

Rural Capital Area Shift Share National Effect 2021

In fact, some components did have a negative industry effect. Not every industry is trending towards growth in the United States. Manufacturing, overall, is on the decline. Industry shifts caused total manufacturing employment in the RCA to decline by 63 percent (368 jobs). Natural resources and mining took the largest hit from industry trends, accounting for a job loss worth 136 percent (187 jobs) of the total change in employment.

Industries that grew more than 40 percent in the RCA due to industry shifts included leisure and hospitality (2,649 jobs) and jobs in unclassified industries (67 jobs). Interestingly, according to EMSI, unclassified businesses are “mostly newer businesses who have not yet determined their proper NAICS code” (i.e., classification). This finding coincides with previous analysis showing the number of new businesses in the RCA increased during the pandemic. See the chart below.

Rural Capital Area Shift Share Industry Shift 2021

Lastly, with national and industry trends accounted for any remaining change in employment is due to unique regional traits. The RCA had a positive effect on every industry during 2021, even entirely making up for the industry losses in national resources and mining. Financial activities saw the next largest increase from regional effects, with local competitiveness accounting for 83 percent of total industry growth (1,370 jobs). See the chart below.

Rural Capital Area Shift Share Regional Effect 2021

This consistent regional effect may be due to the fact that in the last two years (2020 and 2021) the RCA has experienced population increases larger than at any other point in the last decade. Population growth would certainly be a regional advantage capable of overcoming general industry trends. Even if an industry is declining nationally, more people moving into the RCA boosts both demand for goods and services and also, generally, increases workforce supply.

The chart below combines these three components, showing the employment change for each industry.

Rural Capital Area Shift Share Employment Change 2021

Soon, annual data will be available for 2022, and it will be possible to see how 2021 trends carried over for the most recent year.