Industry HHI

Definition

The Herfindahl–Hirschman Index for industries is the sum of the squared shares of each NAICS sector's establishments, multiplied by 10,000 (industry convention). It ranges from 1,429 (perfectly evenly split across 7 sectors) to 10,000 (one sector contains every establishment).

Source data

• Census County Business Patterns (CBP) — Establishment counts by 2-digit NAICS sector and county (2014–2022)

Steps

1. Pull establishment counts from CBP for each of the 7 major NAICS sectors: agriculture (NAICS 11), construction (23), manufacturing (31), retail (44), professional (54), healthcare (62), food/lodging (72), plus an 'other' residual.
2. Compute share_i as sector_i_establishments / total_establishments.
3. Compute HHI as 10,000 × sum of squared shares.
4. Buckets: highly diverse (<1,500), diverse (1,500–2,200), moderately concentrated (2,200–2,800), highly concentrated (>2,800).

Known limitations

• CBP is county-level; we attribute county HHI to all ZCTAs in the primary county.
• Aggregating to 7 broad sectors hides finer-grained concentration; a county dominated by automotive manufacturing has the same HHI as one dominated by aerospace manufacturing.
• Establishment counts treat a 5-person shop and a 5,000-person factory equally; employment-weighted HHI is a separate methodology.
• CBP excludes some sectors entirely (government, railroad, agriculture below threshold); the 'other' residual may be large in rural counties.

Where this metric appears

Every place page (in the percentile ranking + industry donut), the Most economically diverse list, and the Economic Diversification Index.

Related methodology

• Industry mix breakdown
• Economic Diversification Index

Cite this methodology

Commerce Institute. (2026). Industry HHI — Methodology. Retrieved from https://commerceinstitute.org/methodology/industry-hhi/.