Northern Lehigh contains a diverse array of industry types, as well as natural and recreational assets that have yet to reach their full economic potential. Broader Lehigh Valley trends such as the increase of online retail, warehousing and the decline of the mining industry could have a significant impact on the economy, development pattern and quality of life of Northern Lehigh residents. The multi-municipal comprehensive plan will need to examine what type of economy local leaders and community members want to see for their region and develop strong policies and actions to guide appropriate growth and development.
An Economic Analysis was performed to better understand the local economic conditions. The analysis focused on the strengths and weaknesses of the economic sector and economic sector trends. These two analyses were compared to the community’s perceptions of the local economy, additional data on the commuting habits of Northern Lehigh residents and recent development trends of neighboring areas.
Economic Sector Strengths and Weaknesses
Analysis of strengths and weaknesses throughout economic sectors within the region measures relative concentration of an industry in a given region by comparing employment in that industry to that of a larger geographic area. In this analysis, employment by industry in the Northern Lehigh region is compared to Lehigh County, the Lehigh Valley and the nation. This analysis is also referred to as the “Location Quotient” analysis.
The analysis utilizes data categorized by the North American Industry Classification System (NAICS) three-digit code, which combines smaller economic sectors into broader categories. NAICS information is self-reported by the business to the federal government. This self-reporting can lead to businesses being placed into an industry that might not make sense to the general public. The difference between how a business identifies their industry and how community members view the business becomes more apparent when working with smaller geographies, smaller numbers of businesses or smaller numbers of employees. For this reason, it is best to look at the direction or scale of the results rather than the number itself when looking at a geography and population the size of the Northern Lehigh area.
The calculation is a relatively simple ratio between the percentage of local jobs and percentage of jobs for the same sector at the larger geography. A score above 1.25 is considered high. A score between 1.25 and 0.75 is considered medium. A score below 0.75 is considered low.
Industries with a high score and high employment numbers have a greater local concentration of those jobs compared to the larger geographies. This may indicate areas of specialization or surplus.
A medium score and medium employment numbers indicate that a sector employs a similar proportion of people. Medium scores tend not to indicate much, unless some other analysis is showing a potential for growth or decline.
A low score indicates that there are far fewer people employed in that sector, on a percentage of total jobs basis, compared to the county, region or nation. Low scores can indicate potential areas for targeted economic growth if there is some type of local need or advantage that can help spur development. However, a low score could also mean that the needs for that sector cannot be met in the area being analyzed.
The analysis is limited because it utilizes data from a static year, 2016, and thus only captures a specific moment in time. Interpretation of the score needs to be done in context of other analyses and with knowledge of the local economy.
The Economic Sector analysis for Northern Lehigh shows a diverse economy with high concentrations of employment in varying industries, such as various types of manufacturing, industrial businesses such as truck transportation and warehousing, tourism businesses such as museums and historical sites and sightseeing transportation, construction, and agriculture. High scores are shown in green, medium scores are shown in yellow and low scores are shown in red.
Northern Lehigh has 21 industries that have significantly high employment concentrations relative to Lehigh County, 13 industries with employment ratios comparable to Lehigh County and 50 industries that are significantly smaller compared to Lehigh County.
Several industries have much higher concentrations of employment in Northern Lehigh than in Lehigh County, Lehigh Valley and the nation, including lessors of nonfinancial intangible assets, fishing, hunting and trapping, printing, and food and beverage stores. Lessors of nonfinancial intangible assets comprise of owners to patents, trademarks, or franchise agreements that allow others to use or replicate for a payment and may have created those assets. Excluded are leasing real property and establishments involved with leasing tangible assets, like cars, consumer goods, and industrial machines and equipment.
These industries appear to be local specialties within the region:
Scenic and sightseeing transportation as well as heavy and civil engineering construction are important sectors within Northern Lehigh, employing a higher concentration of people compared to the County, but lower than the regional and national levels:
Mining (except oil and gas), support activities for agriculture and forestry, professional services and food services are strong economic sectors for Northern Lehigh relative to Northampton County and the Lehigh Valley, but weaker than the nation:
Stores that sell books, musical instruments, hobbies and sporting goods were on par compared to Lehigh County, but high compared to the region and the nation. Specialty trade contractors were very high compared to the nation as well. Several industries, such as gas stations, motor vehicle and parts dealers, and real estate nearly mirror Lehigh County, Lehigh Valley and the nation:
The remaining economic sectors have lower scores than Lehigh County, Lehigh Valley and the nation, with the exception of furniture manufacturing, merchant wholesalers of nondurable goods, fabricated metal product and miscellaneous manufacturing, nursing and residential care facilities, and non-store retailers, which were on par with the national sectors:
Economic Sector Trends
Economic Sector Trends analysis examines job growth of industries in a given region over a ten-year time period. It identifies attributes of industry growth comparing local competitive advantages to regional or national employment trends. In this analysis, industry employment changes within the Northern Lehigh region are compared to industry employment changes at the national level from 2007 to 2016, using data from the US Census 2016 Zip Business Patterns. This analysis is also referred to as a “Shift-Share Analysis”.
The Economic Sector Trends analysis is comprised of Expected Employment factors and Regional Growth factors:
Expected Employment identifies what current-day employment figures would be in a given industry based on the national growth of employment, overall and in that industry within the last ten years. This analysis then identifies two factors of national employment growth—the overall growth rate (also known as “National Share”) and growth rate within specific industries (also known as “Industry Mix”).
The rate of the nation’s overall employment growth in a given sector is significant because it reflects the growth of the American economy. The growth rate of specific industries reflects national changes related to specific industries. These two factors, when combined, show what employment would be within each Northern Lehigh industry if the local industries matched the national trends, and therefore, indicates the overall effect of national employment changes on the Northern Lehigh’s industries.
Regional Growth indicates how much growth is attributable to local conditions. This explains what proportion of the employment change in each of the Northern Lehigh’s industries is due to unique competitive advantages that the region possesses because the growth cannot be explained by national trends. This is found by subtracting Expected Employment from current employment.
The data for this analysis comes from the U.S. Census Bureau’s County Business Patterns, which is based on Business Register data that tracks U.S. business establishments by their Employer Identification Number (EIN) issued by the Internal Revenue Service. This is used by the company to report payroll taxes. Businesses operating without an EIN, or businesses with an EIN but without employees, are excluded from the dataset. The data for each industry is reported as number of establishments per size based on a range of employees (example: Utilities industry: 5-9 employees, 2 establishments). To estimate the number of employees for each industry, the midpoint of the range of employees was multiplied by the number of establishments.
A first glance at the Economic Sector Trends analysis shows that several industries have grown at far greater rates locally than nationally, such as finance and insurance, real estate and leasing, professional services, management, and accommodation and food service. These industries exhibit a local influence that caused them to grow independent of national trends. Despite a 5% loss in real estate and leasing employment nationally, the industry employment in Northern Lehigh nearly doubled. Growth in the health care and arts, entertainment, and recreation industries was close to on par with the national growth.
However, several industries have experienced decline since 2007. Agriculture and forestry, mining and information industries have all experienced significantly greater decline at the local level than the national level. Despite the growth of the transportation and warehousing industry nationally and regionally, employment in this industry decreased in Northern Lehigh. The decrease in construction employment is largely attributed to the decrease at the national level, although some local forces influenced that decrease as well.
The data shows a general shift towards white collar jobs, such as finance and insurance, real estate and leasing, professional services, management and health care, which may mean that these businesses are increasing in presence within Northern Lehigh. Employment in educational services decreased by a moderate amount, but increased substantially at the national level, which may indicate a need for teachers in the Northern Lehigh area.
Nearly 78% of all Northern Lehigh commuters are staying in the Lehigh Valley to work, but the highest concentration of workers are commuting to Allentown and its suburbs.
Just 1,228 of Northern Lehigh’s more than 10,500 workers stay in the Northern Lehigh area for employment, while more than 3,300 travel to Allentown, Upper Macungie Township and South Whitehall Township combined. Though area workers commute to 44 of the Lehigh Valley’s 62 municipalities, nearly 7,000 are of them are traveling to Lehigh Valley communities outside the Northern Lehigh area.
Northern Lehigh has a small amount of super commuters, with 67 working in Manhattan and 19 listing Pittsburgh as their place of employments. Nearly 230 work in Philadelphia – that’s more than work in any of the the townships of Lowhill, Lynn, Washington or Weisenberg.
While some may work from home, or travel to work a few times a week, many make long commutes daily. This shows that the region’s high quality of life has prompted some to travel long distances to remain residents of Northern Lehigh. It also highlights an opportunity that a more diversified job market could entice commuters to choose a local job if more options were available.
Northern Lehigh has several industries that have stronger employment locally than the same economic sectors for Lehigh County, the Lehigh Valley and the nation, as well as several industries that are stronger locally than one or more of the three larger economies. These industries, such as various types of manufacturing, industrial and tourism businesses, construction and agriculture provide a strong economic mix that could drive growth in these industries moving forward and spur growth in compatible industry sectors.
Overall, several industries in Northern Lehigh are growing or decreasing at a significant pace compared to national industries, indicating local influences on employment trends. The economic sector trends show a decline in mining, construction, wholesale trade, information and educational services. Transportation and warehousing employment decreased as well, despite increases seen at the regional and national levels. The data generally shows a trend towards certain professional industries such as finance and insurance, real estate and management. Growth in the accommodation and food services industry may indicate a growing tourism base in the area.
Ultimately, the multi-municipal comprehensive plan will need to assess what type of economy and land use pattern local leaders and community members want to see for Northern Lehigh. Strategically maximizing the resources and potential in Northern Lehigh industries can help increase the area’s long-term sustainability and preserve the quality of life. The development of strong policies and actions to guide growth appropriately will be key to supporting the future of Northern Lehigh and its residents.