Interpreting Calculated Location Quotients

nterpreting the Location Quotient is very simple. Only three general outcomes are possible when calculating location quotients. These outcomes are as follows:

LQ < 1.0

LQ = 1.0

LQ > 1.0

LQ < 1.0 = All Employment is Non-Basic
A LQ that is less than zero suggests that local employment is less than was expected for a given industry. Therefore, that industry is not even meeting local demand for a given good or service. Therefore all of this employment is considered non-basic by definition.

A LQ = 1.0 = All Employment is Non-Basic
A LQ that is equal to zero suggests that the local employment is exactly sufficient to meet the local demand for a given good or service. Therefore, all of this employment is also considered non-basic because none of these goods or services are exported to non-local areas.

A LQ > 1.0 = Some Employment is Basic
A LQ that is greater than zero provides evidence of basic employment for a given industry. When an LQ > 1.0, the analyst concludes that local employment is greater than expected and it is therefore assumed that this "extra" employment is basic. These extra jobs then must export their goods and services to non-local areas which, by definition, makes them Basic sector employment.