Financial analysts use many different metrics to gauge the performance and outlook for companies. They know that current performance is not necessarily an indication of future performance—overall economic trends, product demand, and competition can change quickly. Likewise, executives monitor their firm’s performance and external conditions regularly to look for early warning signs that could affect profitability or even their continued viability. 

In a similar fashion, communities should monitor their economic performance to maintain and enhance their prosperity. As several examples in this book attest, the sudden closing of a major employer can devastate a community overnight. While not as dramatic, the gradual decline of major industries and other job-providers in a community can have the same effect over time. As with companies, current performance is no guarantee for the future performance and prosperity of communities. Here are some ways communities can monitor their economic strength and vulnerability:

• Track key economic indicators such as the unemployment rate, personal income, and income per capita. Be aware of trends in these measures—up or down—and investigate their causes. Of course, much of the variation in these key indicators can be closely linked to national trends and this has to be factored into any assessment.
• Benchmark these economic indicators against other communities, your state and the nation to see how your community stacks up currently and also to spot trends.
• Track the performance of the industries in your community. Make a list of industries sorted by employment in the community. Data to do this are available from a number of sources such as the U.S. Department of Commerce and U.S. Department of Labor. How are the major industries in your community performing at the national or international level? Are they growing or declining? This will provide clues to the future performance of your local economy and need for diversification or even rebooting.
• Monitor your local economy from the ground up. Stay in touch with employers in your community to see if they are growing or declining. Most employers appreciate a visit from a local economic development professional or volunteer. Confidential surveys can add to the information gained through visits and direct contact.

Complacency can be dangerous. Smooth economic sailing today may mask turbulent waters ahead. Smart communities, like companies, watch for signs of danger—and opportunity—and plan accordingly. For more information on monitoring and measuring your community, see Phillips and Pittman, Chapter 21¹.

This content was originally published in Rebooting Local Economies: How to Build Prosperous Communities by R. Pittman, R. Phillips, and A. Sutt and is republished with permission from Business Expert Press, LLC, 2022.

¹R. Phillips, and R.H. Pittman. 2015. An Introduction To Community Development, New York, N.Y: Routledge.