Thank you for this opportunity. We realize that there are several consultants from which to choose when it comes to this kind of analysis. We trust you will find this summary report informative and hope you will consider us for future projects.
The most succinct answer to your question is this – Health Care. We almost wonder if this is a trick question to be honest. The demographics are clear and America is, as we all know, “graying.” Add to that the fact that Sarasota is in Florida, also known as “God’s waiting room,” and this became what we in the profession call a “no brainer.”
We approached this with a couple of assumptions in mind. First, that Sarasota’s economic and business development efforts are focused on “bringing in the jobs.” That, when you get down to it, is the most universal definition of why you engage in such a program in the first place. Second, that your efforts should also provide a needed good or service that will enhance the quality of life for your citizens.
In undertaking this project we looked at several areas and at least three of them make sense in terms of offering the potential for being successful. Besides being “God’s waiting room,” we are also in “America’s winter getaway.” The whole range of entertainment and lodging establishments could well be successful. The problem is that they do not offer the quality of jobs inherent in health care. Similarly, construction would be a solid investment but the jobs created are limited to a pretty narrow, and young, demographic. I must add, before getting into the details of the health care sector, that if you do receive a proposal from a light, high tech manufacturing operation you should look at it very closely. These are exactly the jobs that every community is seeking and if your due diligence shows a realistic business plan, these are the industries to court.
That said, health care is the clear “winner” for Sarasota. We reviewed the history of firms in the field using the information available through the U.S. Census Bureau, County Business Patterns reports. As we show in the attached exhibits, the trend is an increase regardless of which projection methodology we employed. We use the “2 Period Moving Average” and “3 Period Moving Average” approach to establish base lines and then apply an “Exponential Smoothing” and a “Trend Adjustment Exponential Smoothing” as a cross check. As you can see, all four approaches are quite positive.
The County Business Patterns data is for number of businesses. We always follow up with data for the actual employment by sector from the Bureau of Labor Statistics. Once again, using the same methodologies, the trends in the sector are clearly positive.
In doing these analyses, we first gather the data from published sources. We pulled the County Business Patterns and the Bureau of Labor Statistics data for all of the sectors you had indicated were showing an interest in Sarasota. In the attached files you will find such information for: Construction; Manufacturing; Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing; Professional, Scientific and Technical Services; Management of Companies and Enterprises; Administrative and Support and Waste Management and Remediation Services; and, Health Care and Social Assistance. We looked at each of these, at least to the first pass “rolling average” analysis.
The “2 period moving average” and the “3 period moving average” reviews are precisely what their titles imply. The raw data is averaged over a two or three “period” (in this case, “year”) span. When the results are graphed a trend can be seen. The minimum number of data points, then, for a three year “moving average” would be five, which is why we always go back at least five years when data is available. The two year approach is only used if there are only four periods of data available and is a much “rougher” approximation of trends.
The next two analyses involve statistical manipulation in order to “smooth” the trends and improve our confidence in them. For the “Exponential Smoothing” run we assign a value (“alpha”) which serves as an index against which the program checks each data set for deviations from expectations. The selection of the “alpha” value also has an impact on how “optimistic” or “pessimistic” forecasts are. For this run, in the cast of both the firm and the employment projections, we used an “alpha” value of .5. The actual change, expressed as a percentage, year to year was very close to 1 for both data sets. The .5 “alpha” is considered a “middle of the road” index and we have a high confidence in it.
A similar approach is taken for the final “Trend Adjustment Exponential Smoothing” run. This is, again, a statistical device to account for any outliers noted in the data. The “alpha” value serves the same function in this approach and, again, a value of .5 was used. A “beta” value checks the expected results against the trend line itself. Once again the value of .5 was used here. We ran the projections using a variety of both “alpha” and “beta” values, everything from .1 to .9 and the trend graph showed very little change. Therefore, in the case of Health Care, we offer this report with a very high confidence.
Our conclusion, then, is that you can expect your health care proposal to yield jobs at wages ranging from the entry level Certified Nursing Assistants to the Doctors with the various specialties associated with gerontology. You will be providing your citizens with jobs and improving their quality of life at the same time. In the profession we call that a “win-win.”
We need to offer one caveat. This analysis is still at the “gross” data level. We are presenting data at the two digit NAICS level (North American Industry Classification System). At this level virtually any business that is involved in health care shows up in the data. The world renowned Mayo Clinic is there alongside the local massage therapist making house calls. If you would like us to make a finer analysis please provide us with the name of the firm and the specific services it will provide.
Finally, please understand that this analysis is specifically and emphatically not offered as a complete review of this project. You will still need to do your due diligence. Does the business plan make sense? Are the key personnel competent? There are, as you well know, hundreds of detail questions to be answered before the city makes any commitment. But on the macro level, it is clear that health care is a good fit for Sarasota.
We are also including the data from which we draw these conclusions. The file labeled “BUS-660-RS-T5Forecasting by Firm” presents the data for health care drawn from the County Business Patterns reports. The file labeled “BUS-660-RS-T5Forecasting by Employment” presents the data for employment drawn from the Bureau of Labor Statistics. Finally, the file labeled “Sarasota Employment and Firm Data” provides data on the other sectors we looked at if you would like to do some in-house review. The graphs in the attachment are derived directly from those data sets.
We look forward to working with you in the future.
Attachment
Graphic Presentations
References
Quarterly Census of Employment and Wages. (2016). U.S. Bureau of Labor Statistics. Retrieved from https://data.bls.gov/cew/apps/data_views/data_views.htm#tab=Tables
ZIP Code Business Patterns (NAICS). (2016). U.S. Census Bureau. Retrieved from https://censtats.census.gov/cgi-bin/zbpnaic/zbpdetl.pl
NOTE: http://www.census.gov/econ/cbp/index.html is an obsolete URL.
