Location quotient (LQ) is a way of quantifying how concentrated a characteristic of a particular region is compared to the nation. These characteristics could be an industry's or occupation's share of employment, resident demographic, online profiles or job postings. The LQ is the calculation that reveals what makes that particular region “unique” in comparison to the national average.

For example, if the leather products manufacturing industry accounts for 2% of jobs in your area but 1% of jobs nationally, then the area's leather-producing industry has an LQ of (0.02 / 0.01) = 2.0 in your area (as compared to the nation). So in your area, leather manufacturing accounts for a larger than average "share" of total jobs -- the share is twice as big as normal, in fact. You could say the industry is "concentrated" in the area, or in other words, that it is one of your area's "specialties." Many economists consider an area's industry to be concentrated if its LQ is above 1.2.

Say registered nurses in a region account for 10% of all jobs, while in the nation they account for 9% of all jobs. The LQ of nurses in the region is thus (0.1 / 0.09) = 1.11. This means that the region’s employment concentration of nurses is just slightly higher than the national average.

LQs can calculate other regional characteristics as well. Suppose software developer job postings account for 3.9% of all job postings in Boise, ID, and 2.8% of all national job postings. Boise's LQ would be (0.039 / 0.028) = 1.4, meaning the demand in job postings for software developers are 1.4x more concentrated in the region than the rest of the nation on average.

One final example: let's say that actors and comedians account for 4% of all regional online profiles in Vancouver, and 1% of all national online profiles. Vancouver’s LQ for actors and comedians would be (0.04 / 0.01) = 4, meaning those jobs are 4x more concentrated in the region than the rest of the nation on average.

As long as a regional characteristic can be expressed as a percentage, an LQ can always be calculated. LQs can also be calculated using a geographic comparison area other than the entire nation (a state, group of states, or custom region), but this is less common.

For a more technical and broad definition of LQ: Location quotient is a ratio that compares a region to a larger reference region according to some characteristic or asset. Suppose X is the amount of some asset in a region (e.g., manufacturing jobs), and Y is the total amount of assets of comparable types in the region (e.g., all jobs). X/Y is then the regional percentage share of that asset in the region among all similar assets. If X’ and Y’ are similar data points for some larger reference region (like a state or nation), then the LQ or relative concentration of that asset in the region compared to the nation is (X/Y) / (X’/Y’).

Location Quotient is a powerful datapoint that reveals what makes a particular region “unique” in comparison to the national average. Because the name "LQ" is not descriptive of the type of regional characteristic it is calculating, Lightcast refers to the LQs in Analyst/Developer as specified concentrations.

For more on practical ways of thinking about LQ for industries and occupations, check out Lightcast’s blog post on the subject.