2: Regional Needs Assessment

Why is an Up-Front Needs Assessment Important?

Sector partnerships are regional solutions that focus on the workforce needs of a key industry in a regional labor market. Designing a sector partnership requires answering two questions: 1) Which industry should be the target of our efforts?; and 2) What are the skilled workforce needs of that industry?

Conveners of a potential sector partnership must use the best available data to determine which industry in their regional labor market has the greatest need for sector efforts and the greatest potential for regional economic vitality. The decision will be based on many factors, including projected job growth, wages and benefits, business concentration, current job openings, and other data. Identification of a target industry will also begin to uncover the workforce needs or challenges within the sector.

A deep understanding of the specific workforce needs of the target industry (and the underlying causes of the challenges) is a critical factor to designing a solution that fits the need. The partnership is responsible, therefore, for asking the right questions that lead to informed decisions about the industry, its employers, its current and potential workforce, and relevant resources in the community (such as education and training providers). The ability of the partnership to answer these questions will depend on the collection and analysis of information, both quantitative and qualitative. (Watch this video for an overview of how sector initiatives can use data to answer these questions, along with some specific examples.)

In addition to information about the industry, employers, workers, and community resources, a scan should be conducted to identify efforts already underway in the region that focuses on the same industry, and/or related challenges. Sector partnerships should fill a specific gap, not duplicate existing work. This is especially valid if the potential to overuse certain stakeholders exists. For example, two duplicative efforts may rely on the same employers for input, or may request financial support from the same private foundation or local public funding source. As a result, the two efforts may experience employers that feel overextended (and therefore disengaged or less motivated), and may receive less financial support than if a single unified effort existed.

Who exactly is responsible for undertaking the regional needs assessment? If you are reading this toolkit, you are likely considering or already beginning to plan a sector partnership. You may be the “initial intermediary,” or may be part of a small group of individuals or organizations that see a potential fit for a sector approach in one of your region’s industries. You can consider this small group an early “planning committee.” 

It is the responsibility of the “initial intermediary” and “planning committee” to undertake an initial needs assessment in order to 1) identify the target industry; and 2) begin to uncover the greatest challenges within that industry. Keep in mind that the “initial intermediary” may not be the long-term partnership intermediary, and the “planning committee” will need to expand to a full sector partnership soon. This will require the convening entity and early planners to identify and convene partners.


Region Identification

Sector strategies can also be called “regionally targeted industry strategies.” The word region is an important one, and defining the right region to target is an important step in developing your sector initiative.

While you may begin from an existing defined region – such as a workforce investment area, WIRED region, MSA, etc – it is important to realize that industry sectors and employers do not tend to organize themselves neatly in these boundaries, and you should not limit your sector initiative to them. The right region for you might not be defined or limited by political boundaries such as city or county lines, workforce development areas, economic development regions, or public school districts. Instead, your region should be defined based on labor market analysis.

In thinking about your region, there are two main things to consider. These are the labor shed (for businesses in the target geography, where do the workers live?) and the commute shed (where do people who live in the target geography work?). The US Census Bureau offers a powerful and dynamic tool called OnTheMap, which can be used for assessing both labor and commute sheds for nearly all states in the US. Detailed instructions on using OnTheMap are out of the scope of this toolkit, but there are tutorials available on the website. OnTheMap was used to develop this sample labor market analysis for the City of Detroit.

In addition to or besides OnTheMap, you can look for local commuting or transportation studies to understand where workers and jobs are located in your region.

You will need to define a region in order to do the detailed data collection described in the target industry identification section that follows. But keep in mind that your region may vary depending on the target industry, so it will be important to review your geographic definition once you start to narrow down your list of potential industries. You may find that employment in that industry is concentrated in a smaller subset of your original region, or that there are important clusters of employment located just outside of your original region of analysis.

Target Industry Identification

There are many factors to consider in identifying a target industry or industries for your sector initiative. The ideal sector will make up a significant portion of the economic activity and/or employment in your region. However, one must be cautious – in many regions, the industry sector that employs the most people may not be one that offers good jobs or wages. For example, retail trade and restaurants both employ significant numbers of workers in many regions. But the jobs in those industries are generally low paying and part-time, with little opportunity for advancement. Although there are exceptions, industries such as these do not tend to offer much “bang” for your sector initiative “buck.”

Your initial research can help you to identify the “key” industries for your region – those that drive the local economy, through the workers they employ, the wages they pay, and their connections to other industries in the region. It can also help you to identify developing industries, underrepresented industries, and competitive-advantage industries.

What is an Industry Sector? 

We have an intuitive understanding of what kinds of industry sectors exist. We can easily identify sectors such as health care, manufacturing, accommodations. Asked to dig deeper, we might specify hospitals, automotive manufacturing, or bed and breakfasts as sub-sectors of these general industry descriptions.

When it comes to data, the US Census Bureau and Bureau of Labor Statistics use a much more formal structure to describe industry sectors. It organizes data based on a numerical classification structure called NAICS. At the top of the NAICS hierarchy are 2-digit sectors that describe industry sectors in very broad terms. Underneath this, the industry definitions get more and more specific, going all the way down to a 6-digit NAICS code.

For example: 

NAICS 31-33 Manufacturing (Sector)
NAICS 311 Food Manufacturing (3-digit subsector)
NAICS 3115 Dairy Product Manufacturing (4 digit)
NAICS 31151 Dairy Product, Except Frozen, Manufacturing (5 digit)
NAICS 311511 Fluid Milk Manufacturing (6 digit)

Before beginning your data analysis, you will need to think about what level of industry data you are targeting. Data availability decreases as the data becomes more specific, to avoid revealing confidential data about a specific company or its workers. So - from a purely practical point of view – it is important to choose a level of industry analysis where you can get good data on industries in your region. Also, when it comes to actually convening employers to launch a sector initiative, you will want to be sure you have targeted an industry sector that has enough unique employers to recruit from.

In most areas, data is readily available at the 3-digit NAICS level. In very large urban regions, there may be sufficient data and number of employers to consider looking at the 4-digit NAICS level.

Building a Data Table

Factors to Consider in Identifying a Target Sector 

One of the challenges in identifying your target industry is that all data collection must be viewed holistically, not independently. In other words, for each piece of data available, you need to ask: how does this piece make sense in the context of other pieces?

One way to be able to see all the pieces of the puzzle at the same time is to create a data table that contains the key data on all sectors, all in one place. The following section of the toolkit describes one set of factors, data and methodology for building that data table. You can find other examples and how-to guides for industry analysis here.

A data-driven analysis is an important starting point, but not the ending point. It will be equally important to take a qualitative look at your potential target industries, and there are tools and suggestions for that included in this module as well. And while we’ve laid them out in sequential order, you can and should move back and forth and consider both kinds of data at all points in the process.

Building a Data Table 

The rows of your data table will include all of the 3 or 4 digit NAICS sectors that are represented in your region. In this example, the columns of the table will include five factors, described below. Download this spreadsheet to follow along with the step-by-step development of a sample data table - each step below corresponds to a lettered tab or tabs on the spreadsheet. Be sure to read the comments in the spreadsheet to see how challenges in data collection were addressed.

Data availability and user-friendliness varies considerably from state to state. The "data source" section tells you the name of the name of the data series that has this data. How you get this data may vary. Some states have very easy to use web-interfaces that will generate this data for you. Some do not. In that case, the state labor market information (LMI) office is your friend – part of their job is to provide labor market information for planning purposes, and you may save significant time and effort by asking them to provide you with the data. In many cases publicly available data is only available at the county level, whereas the LMI office may be able to aggregate the data to a higher level, such as a workforce area or a multi-county area you define. Data aggregated at higher levels will be more complete, particularly if your region includes small counties where there may be significant suppression of data to protect employer and worker confidentiality. Unless you are very comfortable with the labor market information resources in your state, you should start by calling your LMI office – in many cases they will be able to send you much of this data directly, and then you can spend your time looking at and analyzing the data, rather than collecting it.

Another option is to use a 3rd party source of labor market information, such as data from Economic Modeling Specialists, Inc (EMSI). These data sources often use a variety of modeling techniques to attempt to give a more complete picture of employment, but these modeling techniques may also introduce errors. If any data looks too strange to be true, it’s worth calling your data provider and asking for an explanation.

Factor 1: Employment

Answers the question: How many people did this industry employ in the most recent year for which data is available?

Why is this important? Size matters. Your largest sectors are likely to be important to the economy of your region, and initiatives in these sectors have the chance to reach large numbers of workers. Even small percent changes in terms of industry growth and decline can translate into thousands of jobs in large employment sectors.

Data source: QCEW (Quarterly Census of Employment and Wages). Collect data from the most recent annual average (data is also collected quarterly, but because of seasonal flows, it can be more consistent to look at annual data). [Tabs A&B]

TabB preview

Factor 2: Wages

Answers the question: What’s the average wage for workers in this industry?

Why is this important? Sometimes industries can employ a lot of workers, but not pay them very much. Considering wages in the equation can help you identify industries where there are good options for career pathways and employee advancement. Alternately, many sector initiatives target low-wage workers, and in that case you can use wage data to identify industries where there may be a lot of those workers. Be aware that wage data are averages, and very high wages for a few workers can mask a lot of low paying jobs.

Data Source: QCEW. Collect data from the same year you are using for the “employment” number. [Tabs A&B]

Factor 3: Historical Growth Patterns

Answers the question: How has this industry performed in recent years?

Why is this important? Growing industries are potential economic drivers. Contracting industries may need help to stay competitive or attract the right workers. Both growing and contracting industries may be good targets for a sector initiative, but that will depend on other factors and the reasons for the industry growth and decline. Beware of growth numbers in very small industries – if an industry has grown from 50 employees to 100 over the last 5 years, they’ll have a 100% rate of growth – but they’re probably too small to be a good target for a sector initiative.

Data source: QCEW. Decide how far back you would like to compare. 3-5 years will give you a good sense of meaningful growth patterns. Collect data from the earlier year, and calculate the percent change from the start of the period to the employment data you collected under “employment” above. [Tabs C&D]

TabD image

Factor 4: Projected Future Growth

Answers the question: How is this industry expected to perform in the future?

Why is this important? Estimates of how an industry will perform are important for the same reasons that you want to look to see how an industry has performed. But remember that projections are just guesses – education guesses – and you should consider the numbers in terms of what else you know about the industry in your region.

Data Source: State specific projections. These are usually developed at the state-wide or workforce investment area level only, so if you are defining your region differently, you may need to look for the closest fit, or combine data from two or more workforce investment areas. Also, they are only developed every few years, so the dates used may not match your employment year – that’s okay. You can calculate a percent change in the same way as you did the historical growth, or your state projections may include some sort of calculation, such as an annualized growth rate. [Tab E]

 TabE image

Factor 5: Location Quotient

Answers the question: In which industries does my region have a competitive advantage? 

Location quotient is a ratio that compares the concentration of employment in a defined area to that of a larger area, such as the state or nation. A location quotient of “1” indicates that the rate of employment in a given industry in a given locality is equal to the rate of employment for that industry at the national level. Location quotients above “1” indicate an industry with a higher percentage of employment in the local area than across the nation. Most economists believe location quotients at or near 2.0 indicate strong competitive employment advantage in a local industry.

Why is this important? A high location quotient indicates an industry that is concentrated in the region. Think automotive manufacturing in Detroit, or software development in Silicon Valley. Such a concentrated industry is likely to be important to the economy of the region, and changes in these region-defining industries can have far reaching consequences.

Data Source: BLS offers a location quotient calculator. Data is available for state, county, and MSA geographies (scroll down to the bottom of the list for MSAs, they are not included in the state-by-state listings). Ideally, you would use the same year for which you have collected your base employment data. Data is available to the 3-digit NAICS level (choose “subsector”). Your state may also have location quotient data available directly from the LMI department. 

If you are using a regional geographic definition that does not correspond to an MSA, you can calculate the location quotient for yourself by following these instructions. [Tabs F-H]

Other Data

Depending on the focus and goals of your sector strategy, you may want to consider other data points. If they are numerical and quantifiable for each potential industry, then you can collect them and include them in your data table. If they are more anecdotal or qualitative, then you may want to hold on to those questions until you’ve narrowed down your list and industries and are looking at them more closely.

Understanding the Data Table

Now you’ve got all the important data on your industries all in one place [Tab I] , but there’s still a lot to get your mind around in terms of what the data is telling you.

Conditional Formatting

You can use conditional formatting to quickly get a visual of which industries are important. You can highlight the top 10 or 20 industries in your region for each factor, or those that are above the median, or in the top third. Instructions for conditional formatting will vary depending on what spreadsheet program you are using, so if you’re not familiar with it, search your program's help files for more information. [Tab J]

TabJ image

Average Ranking

A numerical way to see which industries go to the top is to determine where each industry ranks in a given factor compared to all the other industries. Then you can average these rankings to come up with an average ranking or “score” for that industry. If particular factors are especially important to the way you are approaching your strategy – like wages, or employment – you can use a weighted average to adjust the score to reflect these factors. [Tab K]

tabK image

Based on the data analysis you’ve done so far, and looking at the industries through the lens of either or both of these methods, some industries are probably emerging as important to your region. They might be very strong in one or two factors (like employment, or location quotient) or they’re a solid performer across all or most of the factors. Consider this list of industries as your short list, as you begin to look deeper at the suitability of these industries for a sector strategy in your region.

This is also a good time to see if some of the industries you’ve identified could or should be grouped together into larger clusters of similar industries.

Considering Other Factors

Now’s the time to think about one additional piece of hard data as well, and that’s the number of firms in any given industry sector. You can get this data through the same QCEW source you used for employment and wages in the data table you developed, but this time you only need to collect it for the industries on your short list.

But data analysis can only take us so far. The cardinal rule of labor market data is that it’s out-of-date as soon as it’s published! So it’s equally important to take into account what you and your partners know about the industries from living in the region. In addition to data, there are many other factors that will help determine if an industry is a good target for a sector initiative – many of them not very quantifiable, like political capital or the presence of a strong employer who might be willing to act as a champion.

For the industries (or groups of industries, if you’ve decided some clustering makes sense) on your short list, you can use something like this tool to identify and think about the other important factors that go into identifying a sector to target. You might want to add other items to reflect issues that are particularly important in your region or political environment, like green jobs or career pathways.

Needs Assessment of Chosen Industry

Once you have identified the industry, you must begin to learn more about its challenges and needs. By definition, a sector partnership focuses on solving workforce problems affecting multiple employers in a defined industry and region. In order to identify the workforce issues within an industry and region, a needs assessment should be performed. This process will begin with the use of labor market information, and continue through primary data collected from employers and other partners.

What exactly are you finding out about an industry? Sector partnerships are not only focused on new jobs, but can also consider career advancement, the workforce pipeline or additional skill and training requirements. The needs assessment typically consists of reviewing existing information and gathering new information through various means, such as surveying and interviewing.

Secondary Data

Once you’ve chosen your target industry, it’s time to start learning about those that will be the likely target of the activities of your sector initiative – the workers! You’ll want to know what types of occupations are employed in that industry and in what proportions, as well as how much those jobs tend to pay and what characteristics and skill requirements they have.

Staffing Patterns

A staffing pattern describes the distribution of occupations within a specific industry. Some states will publish state-specific staffing patterns, and some of the proprietary data providers will generate staffing patterns for any region. These are great resources if you can get them. But if you can’t, don’t worry – at the 3 digit NAICS level, your region probably has a similar employment pattern to other regions around the country, so you can simply use the national staffing patterns.

Staffing patterns are available for individual industries from BLS, and this is a quick and easy way to get a sense of the key occupations in the industry. For the most detailed information, in a format that’s easy to manipulate and sort, you can download the staffing patterns for all industries here. You want the file called “National 3-digit NAICS Industry-Specific estimates” (or 4-digit NAICS if you’re working at that level of data), for the most recent year available.

This is a VERY large file, so you’ll want to select only the rows that pertain to the industry or industries you’re interested in, and copy them into a new spreadsheet to work with. Once they’re there, you can construct a data table about those occupations, using the data points described below, following the technique described in the industry section, and illustrated in this sample table. Details on what all the columns and notes mean are included in a separate file from the dates, so be sure to review it to know which columns you are interested in and what the various non-numerical notations mean. (Tabs A & B)


The staffing pattern table includes several different wage options, including hourly and annual wages, available as medians or averages and at a variety of percentiles. This data is useful to gain a perspective on the relative pay scales of the different occupations within the industry, but remember that this is national data. The same occupation in that industry in your region might pay a higher or lower wage, depending on a variety of local factors, such as cost of living. (Tabs A & B)

TabB image

You can get occupational wage information for your region from the same labor market information source you used during the industry identification step. As with the industry data, you may have to look at a couple of different geographies if your region doesn’t exactly match up to what’s available.

Also, at the state or local level, in most cases the occupational wage data is only available for all workers in that occupation across all industries, not for a specific industry sector, so you should take that into account when looking at local data. The extent to which this matters will vary a lot by the occupation. For example, cashier wages might be fairly uniform across all industries, but wages of registered nurses or other health professions will generally be much lower in a residential care facility versus a hospital or doctor’s office.

Occupation and Worker Characteristics

BLS publishes data on the characteristics of workers employed in each occupation. This includes the likelihood of part-time employment, likelihood of unemployment, and data related to most significant source of education and training, as well as the educational attainment cluster of occupational holders aged 25-44. Data for the 2006-2016 time period are included on Tab C of the accompanying spreadsheet, and an explanation of the data can be found on the BLS website.

TabC image

The educational attainment cluster data is a relatively new addition to the data set, and is very helpful for understanding the various paths to an occupation. Historically, we tended to rely on the "most significant source of education" data piece as a proxy for worker education level requirements. However, this data only reflects the mostly likely form of training that will result in a worker becoming skilled for that occupation. The educational attainment cluster data looks at the actual educational attainment of workers in that occupation aged 25-44. Combining these two data sets together can yield important clues towards employer hiring practices. For example, the most significant source of training for an occupation might be "long term on the job training," leading one to conclude that this occupation would be a good choice for someone without a degree. However, if the educational attainment level of most occupation holders is "college/some college," then it is likely that a worker without higher education may find it hard to compete.

TabD image

Note that this data is national data, and cross-industry. So while it can give you some important clues towards the occupations in your target industry, you will want to review these assumptions with employers in the industry to understand how things may be different in your region or among your specific employers. (Tabs C & D)

Additional Occupational Characteristics and Requirements

The O*Net Center publishes detailed profiles of each occupation, including numerical measures of knowledge, skill and ability requirements, tools and technology used on the job, and specific job tasks.

Information about Labor Supply

You will also want to learn about the characteristics of potential workers in your region. This includes data on age, gender and educational attainment available from the US Census Bureau, as well as unemployment data. Another good source of labor supply data are labor shed studies published by economic development firms specializing in business attraction. These reports attempt to quantify not only the unemployed workers, but also the underemployed, and include a variety of other information about the region's labor market. Availability of these reports will vary from region to region - talk to your economic development partners to learn if one has been conducted in your area.

Primary Data Collection

In addition to the statistical data that is available, you should collect information about the workforce needs as perceived by employers in your region. It is highly recommended that you conduct at least some field research to collect information from employers in your targeted region and industry. There are several ways to do this:

  • Conduct individual interviews. For interviews, develop talking points and questions for employers about their current workforce, current skill shortages, future skill shortages, current training, recruiting, retention practices, and what they view as their most pressing needs. Use the information collected in developing the mission of the sector partnership.
  • Use surveys. Surveys can cover the same information described above, or may be more limited and used as an introduction and invitation to greater involvement.
  • Convene an industry meeting, or similar event. An industry meeting is an opportunity to: (1) validate data collected to date; (2) gain qualitative data through a roundtable discussion or through a focus group to learn how employers react to the data gathered thus far; and (3) begin to engage employers and other stakeholders around a planned process, initiative, or strategy. In addition to data collected at the actual event, this is an opportunity to identify employers who are willing to participate in additional activities, or eventually in the sector partnership. (See more information and tools for industry meetings.)
TAKE NOTE: You may have noticed that although this toolkit presents activities in steps and phases, the true timeline of a sector partnership will vary depending on the current knowledge of the initial convener and planning committee, the industry, the region, and other factors. You may collect information from employers as part of your regional needs assessment, or you may combine this activity with the Convening and Planning phase. The reality is that both activities (employer input on industry challenges and initial convening of the partnership) often happen in unison, or as parallel efforts.

All of these strategies for collecting information, both statistical and qualitative information directly given by employers, should be heavily relied upon at the start-up of the sector partnership and in routine operations.

This means that data collection and analysis is an on-going activity, and should be utilized even as a sector partnership matures and evolves over time.

Remember that the goal of the partnership is to better organize the workforce development system to meet the needs of employers, which can change. The best way to meet those needs is to accurately identify them as they change. The advantage of a sector partnership is the ability to be flexible to changes in the industry and its needs, based on the direct input from firms in the industry, and the ability to bring in new partners that can help meet current needs.

Finally, based on the information collected on the target industry, and its workforce needs, a scan of resources and stakeholders in the community should be conducted. Initial conveners and the “planning committee” should ask:

  • What organizations do employers and workers in this industry use, if any?
  • Who is providing education and training related to the needs of this industry?
  • Who are the other “players” or stakeholders that should be involved in a partnership to address the industry needs? For example: Economic Development, Workforce Development, Chamber of Commerce, Human Services, community-based organizations, etc.?

Find out more about how to Identify Partners in Chapter 3.

Data Sources

State Data Sources

Check the user console or visit your group page for a list of data sources specific to your state.

Other Data Sources

The Catalogue of Workforce Information Sources was recently released by the U.S. Department of Labor and serves as a 99 page guide to all things workforce information including a guide to federal data programs, private providers (including EMSI as referenced below) and web portals (including econdata.net referenced below).

There are numerous clearinghouses of information that provide users access to free and fee based information. One of the best may be econdata.net. This website allows users to query types of information by provider (e.g. Bureau of Labor Statistics) or data type (e.g. employment, quality of life, etc.) The clearinghouse includes links to both free information and fee-based information. The fee-based information is denoted by $ icons that make it easy for the user to know beforehand that there will be charge for data accessed through the site. Another diverse web portal/clearninghouse is found on the CareerOneStop site.

Strategic Advantage, a product of Economic Modeling Specialists (EMSI) provides fee-based labor market information at very specific levels of detail including multi-digit industry codes and zip code levels of geographic detail. EMSI includes modules on industries, occupations, and economic forecasting, and has a robust geographical information system package. However, there is a charge for the information, which is provided via an on-line account with twice-annual updates.

EmployOn uses spidering technology to aggregate online job postings, and has been used by some sector intitiatives to identify openings in targeted industries (see sample output).

There are several companies that specialize in developing industry profiles, which are typically used to give sales representatives a quick summary of the key issues faced by a particular industry they are targeting. These profiles can be very useful to sector initiative conveners as well, and are relatively inexpensive, especially compared to the amount of work required to collect comparable data on your own. First Research is an example of such a company. Free sources of similar information include globalEDGE, America's Career InfoNet and the BLS's Career Guide to Industries. These tend to be less comprehensive and less regularly updated, but are still excellent resources to understand an industry quickly.

Chapter 2 Review Questions

  1. Have you identified an industry of focus using labor market information?
  2. If so, what key information about the industry, its companies, its occupations, its skill requirements, its challenges, its labor pool do you have that convinces you and others to develop a sector partnership around it?
  3. If not, what data and information can you draw upon to identify the key industries in your region? i.e. what pieces of the plan to identify an industry can you put on paper today? What's missing?
  4. Based on what you know about a potential critical industry and its labor market, how are you thinking about the definition of the region of focus? Remember sector partnerships use a regional labor market as their geographic scope, not a county, workforce area or other geopolitical boundary.