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Your car has indicator lights that give you data on speed, fuel level, engine temperature and perhaps tire pressure. Local economic indicators at the state, county and Metropolitan Statistical Area (MSA) level such as employment, population and building permits can give you information on how your local market is running, too.
This month’s cover story, “Measuring Your Metros,” offers Electrical Wholesaling’s readers tips on how they can use the economic indicators mentioned above to develop basic economic profiles for the local market areas they serve.
I freely admit that I am a data nerd and enjoy working with this type of data to learn which markets are growing the fastest. When I first started analyzing these economic indicators, often available for free from government entities like the U.S. Census Bureau, Bureau of Labor Statistics and Bureau of Economic Analysis, I quickly saw that they not only gave me a snapshot of how a local market was performing in isolation, but also how it compared to other geographic areas in a state, like counties and sometimes even zip codes.
When you compare an economic indicator in a geographic area to the same data for its next largest geography, like the percentage a state accounts for of the United States’ total, or a county to its MSA or state, the data reveals some interesting patterns. It’s information that’s much more valuable than just being an interesting calculation for a data nerd like myself.
When you find out that a certain county, MSA or group of counties or MSAs account for the vast majority of business in a state, you must be sure that your company’s investment in sales personnel, selling time and branch locations are aligned with where the business really is in that state. For instance, there may be no need to have two branches in XYZ county if the data shows that the population, contractor employment, residential construction, and overall business output (measured by Gross Metropolitan Product (GMP)) has dramatically shifted to elsewhere in the state. I discovered two fascinating patterns by immersing myself in this type of data.
Percent-of-whole calculations are remarkably consistent. The percent-of-whole calculations for a geographic area when you measure against it against the next largest geography are surprisingly consistent across a broad range of economic indicators, including employment, residential construction, GMP and population. I found this to be particularly true at the state level when you divide a state’s level of economic activity by the national level for that same indicator. For example, California accounts for between 10% and 12% of the U.S. total in many of these economic indicators. I find that fascinating.
There’s an amazing concentration of employment, population and business activity in a relative handful of markets. The old 80/20 rule is very much in effect when you start analyzing data on a local basis, with a surprisingly small number of counties or metropolitan areas often accounting for the majority of a state’s economic activity, population, employment and sales potential.
For example, if you look at Electrical Marketing newsletter’s electrical sales potential estimates for “Core Electrical Potential” — the combined electrical contractor and industrial sales that easily account for more than 75% of all electrical products sold through electrical distributors — you will find that the 100 largest MSAs account for 80% of all these sales in the United States and that the 250 largest MSAs account for 90% of these sales.
The 80/20 rule is often in play at that state level, too. For example, metropolitan Phoenix and in particular Maricopa County, AZ, account for 70% to 80% or more for many of Arizona’s key economic indicators. It also applies in Colorado to a slightly less dramatic degree, where the Front Range (Fort Collins south through Boulder, Denver and Colorado Springs) accounts for the lion’s share of the state’s economic activity.
Hopefully, the economic indicators for local markets discussed in this month’s cover story will serve as guideposts in your strategic planning for 2020.