How Zip Code Files are Estimated

We only create data for those zip codes for which we have one of the following: land area from the latest Decennial Census, population or household count from the latest American Community Survey (ACS), railroad employment from the latest Railroad Retirement Board report, or Census ZBP employment.  Having at least one of those allows us to distribute part of the county’s data to the zip code. 

Our main source of data for generating zip code files comes from the Bureau of Census County Business Patterns (CBP) program, as they release 6-digit NAICs employment data at the zip code level. Rather than employment counts, the CBP data provides information on the number of firms in each of 14 firm size classes (e.g., 1-4 employees, 4-9 employees, 10-19 employees, etc.) for each 6-digit NAICs sector. This allows the CBP to avoid disclosing the exact number of employees at a single firm.

To create our data, we take the mid-point of each of the size classes and multiply this by the number of firms in that size class (e.g. if there are 6 firms reporting under a single NAICS code for 4-9 employees, we get an estimate of ~39 employees for that NAICS code and class). By summing the estimated number of employees within a 6-digit NAICS specification, and aggregating the NAICS code employment values into their appropriate IMPLAN sector, we create an estimate of the employment for that sector at a zip code level. We also add together employment data for the all zip codes represented in a larger region (county or counties) to aid in distribution of non-employment IMPLAN data to individual zip code regions.

After aggregating the 6-digit NAICs data to the 536 IMPLAN Sectors, we can create ratios for distributing the county(ies) level IMPLAN data to the desired zip-code regions. The ratio is derived by dividing the specified zip code employment by the county’s zip code employment for each IMPLAN Sector.

Employment ratios are used to distribute all industry data (Employment, Output, Employee Compensation, Proprietor Income, Other Property Type Income and Tax on Production and Imports) into their respective zip code regions.

Census of population data is also available at the zip code level. The ratio of a zip codes population compared to the county’s population for the 2000 Census is applied to the county’s current population to provide an estimate of the zip code area’s current population.

Industry Sectors that CBP Does Not Cover

Proxies are used to distribute industry sectors that CBP does not cover to ZIP Code regions. These sectors, and the proxies used to separate the zip code employment from the county(ies) are shown below:

  • Agricultural Sectors: These are estimated from current Census of Agriculture- county level farming is distributed to zip codes based on the Census number of farms by zip code.
  • Railroad: These are estimated based on trucking and warehousing distribution employment as a proxy.
  • Religious organizations: Population is used as the proxy for determining these employment values.
  • Government, except education: Total employment for the zip code is used to distribute county level government employment.
  • State & local education: Population is used.
  • Construction: Employment for NAICS 22 is used for this proxy.

Final Demand Proxies to Distribute Zip Code Regions

Final demands also need to be estimated. Below are listed the proxy values used to distribute the county(ies) final demands to a zip code area.

  • PCE (9 classes): From latest Census American Community Survey by zip code data. This data contains the number of households by income class. E.g. if the zip code area has 10% of highest income households it gets 10% of the highest PCE final demand.
  • Fed Military & Non-military: overall Employment
  • State & Local Education & non-education: overall Employment
  • Federal Sales: overall Employment
  • State & Local Gov Sales: overall Employment
  • Investment: Employment by Industry
  • Foreign Export: Employment by Industry
  • Change in Inventory: Employment by Industry

Productivity Data

Because of the limitations of the data, productivity data for the zip code area is the same as for the county(ies) containing the zip code area. The following examples are included as part of the productivity data:

  • Output per Worker
  • Earnings per Worker
  • Value Added to Output ratio

Understanding the data in your IMPLAN Zip code files

When working with Zip Code level data, there are several factors to consider. This article, while not exhaustive, lists the main items to keep in mind when using Zip Code data for your geographical study region.

MRIO, Aggregation and Leakages

  1. Multi-Regional analysis is not yet possible with zip code files. While you have received trade flow data files with your data purchase, the current version of the IMPLAN Version 3 software can only estimate zip code effects with the Econometric estimation of imports (RPCs).
  2. Zip code files, like other IMPLAN files, can be combined to create a region or used independently. Please keep in mind that while an individual zip code file will create Multipliers and have impacts, these impacts will be minimal. This is because zip codes may have no population and/or little to no employment (see notes 5 and 6). Also, many individual zip codes are not large enough to allow for local sourcing of materials needed for the indirect effect or to provide adequate services to create significant induced effect leading to much of the potential impact being lost in leakages (as in note 3).
  3. Zip code regions may represent very small economic regions and consequently, be extremely open to leakages. These leakages, even to nearby regions (in some instances this could literally be across the street) are lost from the modeled region resulting in very small indirect and induced effects. Please take into consideration where indirect purchases will be located and where employees may be spending their labor income when customizing zip code regions for analysis.
  4. Many of the issues in notes 2 & 3 may be addressed once zip code files/zip code regions are able to be analyzed with the Multi-Regional modeling technique. Multi-Regional analysis will allow for purchases to be made between Study Area regions (the zip code(s) and the linked regions) by tracking trade between these regions, potentially capturing many of the lost impacts. MRIO, however, is not yet available for zip code files.

Zip Codes Not Represented

  1. Not all zip codes listed by the U.S. Postal Service may be represented in the zip code package you receive. The USPS can open/close post offices or reorganize routes on an on-going basis, thereby changing zip-code demographics. Because of this, the County Business Patterns and Census demographic zip code representation may not be current.
  2. Depending on the year, roughly 4% of zip-codes have neither County Business Patterns (CBP) employment nor Census (demographic) data. If your region includes any of these zip codes, they will not be available in the package you purchase, as there is inadequate information to create Multipliers for these regions.
  3. Depending on the year, there will be roughly 8,000 zip-code files for which there is only CBP data with no demographic data. Most of these are P.O. boxes and “unique” point codes. They serve business but do not represent residential population. With no household representation, all employment would be considered in-commuting and have no local induced effect.
  4. Conversely, there are also some zip-code files with only demographic data and no CBP data. While CBP data does not exist for these zip-codes, they may still contain employment in some sectors since CBP data do not cover all IMPLAN sectors. Population is used as a distributor for most of these non-covered sectors. Farm counts by zip-code from the 2012 Census of Agriculture are used to distribute agricultural industry data in these cases.
  5. There will be cases where you may find an industry exists in an actual zip code region but does not show up in the zip code data (or even the county data). This occurs because of unreported sectors in the CBP and inconsistencies in data between CBP and BLS covered wages and employment. When this issue occurs, you will need to Customize your IMPLAN data to add the industry to the Study Area. CBP data are primarily obtained from administrative records supplied by the IRS, Social Security, and other sources. CBP is tabulated on an establishment basis, and each business location is tabulated only once according to the primary business activity. The industry classifications of establishments in the CBP are self-reported in the vast majority of cases. BLS CEW data are obtained from quarterly tax reports submitted to State Employment Security Agencies.