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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.