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Industrial Composition

Description: 

An area with a diverse industrial composition tends to experience less severe economic cycles. Combined with the occupational composition, the industrial composition in conjunction with a per employee economic measure provides information on the quality of jobs in a region.

The industrial composition as displayed on Arizona Indicators is expressed in two ways: as the share of total employment contributed by each of 20 sectors and as the share of total gross domestic product (GDP) contributed by each sector. The industrial composition is displayed for Arizona and for the nation for the latest year. Earnings per employee by sector also are presented. A diverse industrial composition with disproportionate shares in sectors with high earnings per employee is the ideal.

Data Source: 

The U. S. Department of Commerce, Bureau of Economic Analysis. GDP by state is released in June, consisting of advanced (preliminary) estimates for the preceding calendar year by sector, as well as revised estimates for the prior year by sector and subsector. Total employment and earnings by state and for the nation are reported nine months after the end of a year. All of the data can be accessed at http://www.bea.gov/regional/index.htm.

Data Quality Comments: 

The GDP estimates by state for the latest year are labeled as “advanced” — an abbreviated set of mostly preliminary data and a simplified methodology are used to generate these estimates. Even after the estimates are revised, some of the inputs to the calculation of GDP by state are estimated.

The annual employment figures are estimates. No distinction is made between full-time and part-time employment.

iconSectoral Share in Arizona, 2013

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Visualization Notes:

Note: Sectors are listed in order of the earnings per employee in the United States

Primarily due to large differences in the average wage across sectors, Arizona’s industrial composition looks different when measured by employment than when measured in dollars, such as by gross domestic product (GDP). The sectoral share based on GDP is higher in the real estate and rental, manufacturing, and wholesale trade sectors. In contrast, the sectoral share is higher based on employment in the accommodation and food services, administrative support, other services, retail trade, and health care and social assistance sectors.

iconSectoral Share, Arizona Less the National Average

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Visualization Notes:

Note: Sectors are listed in order of the earnings per employee in the United States

A diverse industrial composition, but with disproportionately large shares in high-paying sectors and relatively small shares in highly cyclical sectors, could be considered to be the ideal composition. The industrial composition in Arizona is moderately different than the national average based on employment, with a larger variance from the national average based on gross domestic product (GDP).

In general, sectoral shares in Arizona are smaller than the national average in high-paying sectors — particularly manufacturing; information; and professional, scientific and technical services — and larger in sectors paying average and below-average wages, including real estate and rental, administrative support, and retail trade. The result is an overall industrial mix that is tilted toward lower-wage jobs.

iconEarnings Per Employee by Sector in Arizona, 2013

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Visualization Notes:

Earnings per employee in Arizona in 2013 averaged $49,981. In four sectors — utilities, management of companies, manufacturing, and wholesale trade — the average is at least 50 percent higher than the overall figure. In the real estate and rental; accommodation and food services; and arts, entertainment and recreation sectors, the average is at least 45 percent below the overall figure.

A number of factors cause earnings per employee to vary considerably by sector — from less than $25,000 to a little more than $125,000. One cause is that the average annual number of hours worked varies by sector, but the major factor is that the nature of the typical job varies widely by sector. In particular, wages are highly correlated to educational attainment; the percentage of jobs requiring a university degree differs considerably by sector. For example, despite lower wages than in the private sector for the same occupation, earnings per employee is above the overall average in the government sector since the government’s workforce disproportionately consists of workers holding a bachelor’s or advanced degree.

Note: Sectors are listed in order of the earnings per employee in the United States

iconEarnings Per Employee by Sector, Arizona Less the National Average, 2013

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Arizona’s average earnings per employee in 2013 was 10.4 percent less than the national average. Arizona’s figure was less than the U.S. average in 10 of the 11 sectors in which earnings per employee nationally was above the overall average. Arizona’s figure was lower than the U.S. average in only three of the nine sectors in which earnings per employee was below the overall average.

The variations by sector in the differences in earnings per employee between Arizona and the nation are strongly affected by the industrial composition within a sector. For example, a disproportionate share of Arizona’s small manufacturing sector consists of high-tech industries, so the overall manufacturing average wage exceeds the national average.

Note: Sectors are listed in order of the earnings per employee in the United States

Data Source

The U. S. Department of Commerce, Bureau of Economic Analysis. GDP by state is released in June, consisting of advanced (preliminary) estimates for the preceding calendar year by sector, as well as revised estimates for the prior year by sector and subsector. Total employment and earnings by state and for the nation are reported nine months after the end of a year. All of the data can be accessed at http://www.bea.gov/regional/index.htm.