Aerospace and Defense Economic Impact Analysis a Report for the Aerospace Industries Association

IHS ECONOMICS Aerospace and Defense Economic Impact Analysis A report for the Aerospace Industries Association

April 2016 ihs.com

Economic Impact Analysis IHS Economics | Report

Brendan O’Neil Leslie Levesque Vardan Genanyan Managing Director Senior Consultant Consultant

Shane Norton Charlie Dougherty Director Consultant

IHS Economics | A&D Economic Impact Analysis

TM IHS ECONOMICS COPYRIGHT NOTICE AND DISCLAIMER © 2016 IHS. For internal use of IHS clients only. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable, but its accuracy and completeness are not warranted, nor are the opinions and analyses that are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage, or expense incurred by reliance on information or any statement contained herein. In particular, please note that no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any projections, forecasts, estimates, or assumptions, and, due to various risks and uncertainties, actual events and results may differ materially from forecasts and statements of belief noted herein. This report is not to be construed as legal or financial advice, and use of or reliance on any information in this publication is entirely at client’s own risk. IHS and the IHS logo are trademarks of IHS.

IHS Economics | A&D Economic Impact Analysis

About IHS (www.ihs.com)

IHS (NYSE: IHS) is the leading source of insight, analytics and expertise in critical areas that shape today’s business landscape. Businesses and governments in more than 140 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs about 8,600 people in 32 countries around the world.

For more information, contact: Brendan O’Neil Managing Director, IHS [email protected]

For press information, contact: Katherine Smith Manager Media Relations, IHS [email protected]

IHS Global Insight (USA) Inc. 1150 Connecticut Avenue NW, Suite 401 Washington, DC 20036

IHS Economics | A&D Economic Impact Analysis

Contents

Executive Summary 6 Introduction 10 Approach and Methodology 12 NAICS Data Segmentation 13 Extending the segmentation 15 Measuring the Contribution of the A&D Industry 15 Economic Impact Analysis 18 Employment 20 Sales 21 Contribution to GDP 23 Labor Income 24 Taxes 25 Appendix 26 Additional Tables 27 BMI and IMPLAN 35

IHS Economics | A&D Economic Impact Analysis

Project Directors

 Brendan O’Neil, Managing Director, Consulting, Economics and Country Risk

 Shane Norton, Director, Consulting, Economics and Country Risk

Project Team

 Leslie Levesque, Senior Consultant, Consulting, Economics and Country Risk

 Charlie Dougherty, Consultant, Consulting, Economics and Country Risk

 Vardan Genanyan, Consultant, Consulting, Economics and Country Risk

Acknowledgements

We would like to thank the subject matter experts, technical experts, industry experts, and analysts who contributed either directly to this study or indirectly through the study on which the underlying Aerospace and Defense estimates were based. Specifically, we would like to thank our IHS colleagues Inigo Guevara Moyano, Ben Moores and Mark Bobbi of our Aerospace Defense and Security team.

IHS Economics | A&D Economic Impact Analysis

1.0 Executive Summary

The U.S. Aerospace & Defense industry is a global leader in innovation and significant component of the nation’s advanced manufacturing base of industries. IHS was commissioned to quantify the economic contributions of the U.S. Aerospace and Defense (A&D) industry to the U.S. economy and provide enhanced understanding of the industry’s extensive supply chain, by economic sector at the national and state level. The key findings of this study measure the economic contribution the A&D industry makes in terms of employment, value added (contribution to GDP), sales (output), labor income and taxes within the broader economy.

In 2015, the U.S. economy posted $30.7 trillion in total sales activity; of that total, IHS estimates that $786 billion was supported by the A&D industry’s economic activity. This occurred through approximately $349 billion in direct sales activity, which initiated additional activity as dollars flowed through the A&D supply chain. This “multiplier effect” drove an additional $256 billion in indirect sales. Further, companies and their suppliers hired and paid employees, who, in turn, consumed goods and services in the economy. These induced effects amounted to $181 billion in 2015. The graphic below depicts this flow of economic impacts.

Figure 1: Flow of economic impacts from direct spending through income effect

The sales activity generated by the A&D industry triggers additional economic benefits – workers must be hired and retained in order to deliver goods and services; companies reap additional profits and make larger contributions to GDP; and both companies and their employees must pay taxes. In this realm, IHS estimates that in 2015 the A&D industry fueled the following contributions to the U.S. economy:

 The U.S. A&D industry directly and indirectly employed 1.7 million workers engaged in the design and production of end-user goods and services and within the industry’s supply chain. About two-thirds of those workers were split about evenly between the civilian aviation and the defense/national security sector.  More specifically, within the A&D industry about 531,030 workers were employed in the design, manufacture and supply chain of civil and general aviation aircraft, helicopters and space systems. Since 2013, employment in the sector has decreased by a compound annual growth rate (CAGR) of -0.38%, or by a net of 6,100 jobs.  Another 510,570 jobs were focused on the design, manufacture and supply chain of end-use military aircraft, ground and sea systems, armaments and space systems. Since 2013, the segment’s employment base experienced overall stability, decreasing by a CAGR of -0.03%, or a net loss of less than 1,000 jobs.  Jobs supported by the A&D industry represent approximately two percent of the nation’s total employment base.  Direct A&D industry jobs combined with those supported in the industry’s supply chain represented 13 percent of the nation’s manufacturing employment base.  For every million dollars in direct sales activity, eight employees are supported throughout the supply chain and across economic sectors.  The A&D industry generated $300 billion in economic value, which represented 1.8 percent of total nominal GDP in the U.S.  The output supported by the A&D industry directly and through the supply chain represented about 10 percent of manufacturing output in the U.S.  Labor income supported by the A&D industry represented about 2.3 percent of the nation’s total labor income.  The average labor income per job within the A&D industry (both producers of end-use goods and services as well as the supply chain) amounted to just over $93,000 – or approximately 44 percent above the national average – reflecting the highly skilled nature of the workforce.  The contribution to tax receipts from the A&D industry was $63 billion, or about 1.7 percent of the total tax revenues received by the federal and state and local governments.

The U.S. A&D industry is a broad complex of firms performing a variety of functions including service delivery in support of operations and the manufacturing of goods and of materials, components, systems and platforms for civil aviation, space, and national security applications. For the purposes of this analysis, the A&D industry is defined by a set of associated sectors categorized

© 2016 IHS 8 April 2016 IHS Economics | A&D Economic Impact Analysis under the North American Industry Classification System (NAICS) that include firms that produce goods and services for end use by A&D industry customers, while other sub-sectors are predominately comprised of suppliers that support production.

These two primary groupings are described as having a ‘direct’ or ‘indirect’ impact on the economy; firms that engage in producing goods and services for end use are considered to have a ‘direct’ impact on the economy (for a list of these sectors, see Table 1 in the Approach and Methodology section of this report), while firms in the supply chain are considered to have an ‘indirect’ impact on the economy (for a list of these sectors, see Table 2 in the Approach and Methodology section of this report). Further, firms supplying to ‘direct’ manufacturers are classified as ‘tier I’ and firms supplying to the ‘tier I’ suppliers are classified as ‘tier II’. In addition to this tiered classification, there is a portion of the supplier base that does not fall within the A&D industry. As a point of reference, firms that supply management consulting, transportation services or office equipment to the tier I and II A&D-supplier community do not constitute the A&D supplier base, but are included as part of the industry’s indirect and induced impact (for a list of these sectors, see Table 3 in the Approach and Methodology section of this report).

2.0 Introduction

The A&D industry is a vital component of the US economy, not solely for the role the industry plays in national security, transportation and technological innovation, but also because its influence spans many sectors and every state throughout the country. From commercial airliners to military vehicle manufacturing, the A&D industry calls upon businesses across the nation to supply goods and services for end-use production. From these transactions, the A&D industry supported an average of nearly 2.8 million jobs between 2013 and 2015, representing approximately two percent of total U.S. employment and produced an average of $301 billion in total economic value, or 1.8 percent of nominal U.S. GDP.

For much of the previous five decades, the U.S. manufacturing base has experienced a continuous and sometimes precipitous decline as global market forces drove firms to close, downsize, or relocate abroad. The manufacturing segments associated with A&D have certainly not been immune to this trend; however, over the past several years, strong growth in international markets has driven resurgence in the sector, which has helped accelerate the country’s recent economic recovery. Over the past five years, the U.S. manufacturing industry has enjoyed an average annual growth rate in payrolls of 1.5 percent. Meanwhile, the transportation manufacturing sector, which includes the manufacture of ships, aircraft, and locomotives, posted an average annual growth rate in payrolls of 3.6 percent – outpacing the 1.7 percent growth rate of total non-farm payrolls over that same period.

The economic impact of the A&D industry goes well beyond the companies directly involved in the production of finished goods. The lengthy process of bringing these products to market supports a variety of services that are critical to the success of the industry. The A&D value chain extends throughout the US – from engineering and research and development efforts to the highly capital intensive sectors that provide raw and intermediate materials and components. The result is an extended network of companies that forge and fabricate metal, design and build complex systems, and assemble the finished goods that are ultimately required by the industry. Furthermore, the economic activity associated with end use and supply chain ripple out to a broader set of economic sectors as wages earned are spent across the economy, benefitting sectors ranging from retail trade to the leisure and hospitality sector.

The A&D industry drives economic growth at the local level as well, as many states across the United States depend heavily on the jobs and incomes created by the aerospace and defense industry. From the aerospace manufacturers and suppliers in Washington and Southern California to the defense contractors in Texas and Washington DC/Northern Virginia area, the A&D industry serves as an economic keystone that not only creates jobs and boosts wages, but also provides a reliable stream of tax revenue for state and local governments.

3.0 Approach and Methodology

3.1 NAICS Data Segmentation IHS performed a detailed analysis of relevant NAICS sectors to ensure that all sectors providing components directly to the end users of industry categories were properly captured. A joint review of this list with AIA was necessary to affirm a shared understanding of the ‘market’ and an extensive review of the definitions and limitations of the industry were done to ensure clarity and consistency in the market sizing. Below are tables outlining the NAICS sectors associated with the A&D industry. Some NAICS sectors that were determined to have a direct impact were also considered part of the supply chain in which case only a portion of that sector was used. The final result of the industry segmentation was a comprehensive picture of the size of the U.S. A&D industry at the national and state level, broken out by employment for 2013 to 2015. This data then served as the inputs for the national and state level input-output models that were used to determine the full economic impact of the A&D industry.

Table 1: NAICS sector listing of direct A&D businesses NAICS Description 332994 Small Arms Manufacturing 334511 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing 336111 Automobile Manufacturing 336411 Aircraft Manufacturing 336412 Aircraft Engine and Engine Parts Manufacturing 336413 Other Aircraft Parts and Auxiliary Equipment Manufacturing 336414 Guided Missile and Space Vehicle Manufacturing 336415 Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing 336611 Ship Building and Repairing 336612 Boat Building 336992 Military Armored Vehicle, Tank, and Tank Component Manufacturing 488999 All Other Support Activities for Transportation 541330 Engineering Services

Table 2: NAICS sector listing of indirect A&D businesses NAICS Description 325211 Plastics Material and Resin Manufacturing 325520 Adhesive Manufacturing 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing 326199 All Other Plastics Product Manufacturing 331491 Nonferrous Metal (except Copper and Aluminum) Rolling, Drawing, and Extruding 33151 Ferrous Metal Foundries 331524 Aluminum Foundries (except Die-Casting) 331529 Other Nonferrous Metal Foundries (except Die-Casting) 332710 Machine Shops 332722 Bolt, Nut, Screw, Rivet, and Washer Manufacturing 3329 Other Fabricated Metal Product Manufacturing 332911 Industrial Valve Manufacturing 332919 Other Metal Valve and Pipe Fitting Manufacturing 332992 Small Arms Ammunition Manufacturing 332993 Ammunition (except Small Arms) Manufacturing 332994 Small Arms Manufacturing 332995 Small Arms, Ordnance, and Ordnance Accessories Manufacturing 333415 Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing 333912 Air and Gas Compressor Manufacturing 339991 Gasket, Packing, and Sealing Device Manufacturing 333996 Fluid Power Pump and Motor Manufacturing 334118 Computer Terminal and Other Computer Peripheral Equipment Manufacturing 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

Table 2: NAICS sector listing of indirect A&D businesses (cont’d) NAICS Description 334290 Other Communications Equipment Manufacturing 334413 Semiconductor and Related Device Manufacturing 334417 Electronic Connector Manufacturing 334418 Printed Circuit Assembly (Electronic Assembly) Manufacturing 334419 Other Electronic Component Manufacturing 3345 Navigational, Measuring, Electromedical, and Control Instruments Manufacturing 334511 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing 335314 Relay and Industrial Control Manufacturing 336111 Automobile Manufacturing 336419 Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing 336611 Ship Building and Repairing 336612 Boat Building 488999 All Other Support Activities for Transportation 541330 Engineering Services

Table 3: NAICS sector listing of indirect businesses providing services to A&D supply chain NAICS Description 236 Construction of Buildings 2362 Nonresidential Building Construction 2381 Foundation, Structure, and Building Exterior Contractors 2382 Building Equipment Contractors 2383 Building Finishing Contractors 423430 Computer and Computer Peripheral Equipment and Software Merchant Wholesalers 423830 Industrial Machinery and Equipment Merchant Wholesalers 423860 Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers 423510 Metal Service Centers and Other Metal Merchant Wholesalers 4247 Petroleum and Petroleum Products Merchant Wholesalers 481111 Scheduled Passenger Air Transportation 4812 Nonscheduled Air Transportation 481212 Nonscheduled Chartered Freight Air Transpiration 4881 Support Activities for Air Transportation 488119 Other Airport Operations 488190 Other Support Activities for Air Transportation 4885 Freight Transportation Arrangement 488510 Freight Transportation Arrangement 492210 Local Messengers and Local Delivery 493190 Other Warehousing and Storage 511199 All Other Publishers 511210 Software Publishers 517 Telecommunications 517110 Wired Telecommunications Carriers 517210 Wireless Telecommunications Carriers (except Satellite) 517410 Satellite Telecommunications 517919 All Other Telecommunications 5182 Data Processing, Hosting, and Related Services 518210 Data Processing, Hosting, and Related Services 523910 Miscellaneous Intermediation 524114 Direct Health and Medical Insurance Carriers 541211 Offices of Certified Public Accountants 5413 Architectural, Engineering, and Related Services 541310 Architectural Services 5415 Computer Systems Design and Related Services 541511 Custom Computer Programming Services 541512 Computer Systems Design Services 541513 Computer Facilities Management Services 541519 Other Computer Related Services 5416 Management, Scientific, and Technical Consulting Services 541611 Administrative Management and General Management Consulting Services

Table 3: NAICS sector listing of indirect businesses providing services to A&D supply chain (cont’d) NAICS Description 541614 Process, Physical Distribution, and Logistics Consulting Services 541618 Other Management Consulting Services 541690 Other Scientific and Technical Consulting Services 5417 Scientific Research and Development Services 541712 Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology) 551112 Offices of Other Holding Companies 561320 Temporary Help Services 561491 Repossession Services 561499 All Other Business Support Services 5616 Investigation and Security Services 561612 Security Guards and Patrol Services 561613 Armored Car Services 5629 Remediation and Other Waste Management Services 611699 All Other Miscellaneous Schools and Instruction 811310 Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance

The foundation of this data was the proprietary IHS Business Market Insights (BMI) service. This is a database (based off of the US Census, County Business Patterns data) of employment and output for all six-digit NAICS categories for the U.S. down to the zip-code level that is modeled and maintained by IHS industry experts. This level of sector detail and geographic granularity was necessary to conducting this study. In order to derive an accurate depiction of the A&D industry, it was important to have detailed economic data not only about the affiliate businesses’ classification, but also the location in which they operate. Extending the segmentation Once direct employment at the national level was established, we then used the same methodology to collect the state data. Since the BMI database is based in NAICS codes, the error of attributing employment to a sector that does not exist in a given state was diminished. However, in some cases we have more information than what is provided due to lags in reporting or changes that occur in classifications. Any new information provided by AIA or IHS industry experts was layered into the analysis for a robust understanding of the sector composition in each state.

3.2 Measuring the Contribution of the A&D Industry Business transactions with local suppliers and service providers serve as catalysts that trigger a flurry of economic activity throughout the U.S. For example, when a supplier sells a product or service to a producer of an end-use good or service, that supplier needs to hire employees (e.g., labor) to transform inputs (raw materials, energy, intellectual capital) into the final product or service. The inflation-adjusted ratio of sales to employees, which economists call output per employee, is a measure of productivity.

The models IHS developed to assess the economic footprint of the A&D industry contain productivity statistics for 440 industry sectors that are produced by IMPLAN. These sectors are aggregations of six-digit NAICS codes and are utilized to reduce any inconsistencies present in state- level data. IHS' BMI employment data provided the starting point in assessing the direct impact of the industry. This data enabled an accurate assignment of jobs for each tier-I supplier to the

© 2016 IHS 15 April 2016 IHS Economics | A&D Economic Impact Analysis appropriate industry sector in the models. Industry specific productivity data could then be applied to quantify the level of output supported by the business transactions within each industry sector. These contributions occur as a result of direct spending with a tier-I supplier, and are therefore classified as a direct impact.

Sourcing the inputs a supplier requires to produce the product or service ordered by the producer of an end-use good or service invokes additional rounds of economic impact. Referring to the left side of Figure 2 below, when a tier-I supplier makes a sale, that supplier must then purchase the inputs (supplies and services) needed to produce the final product. Some of these purchases will be imported from outside the U.S. economy and as such, were not included in this analysis. The remaining purchases, which represent sales for local businesses, remain within the U.S. economy. Each supplier must, in turn, hire employees and source additional inputs from its suppliers. This effect occurs as a result of transactions between vendors and their supplier networks (inter-industry), and is considered an indirect economic impact.

Figure 2: Diagram of economic impact analysis

Value Added

Value Added = Labor Income (wages and benefits) GDP Contribution

Profits Sales (Output)

Local Intermediate Sales Employment (Output) (jobs created or Local Purchase Purchases sustained) Stimulate Multi-tiered Industry Local Supplies Productivity Supply Chains (Output/Worker)

Further rounds of Services Economic Impact!

Imported Intermediate Purchases

The difference between the value of a sale and the cost of its required non-labor inputs is known as value added. As its name suggests, this represents how much more valuable a final product or service is relative to its inputs. The sum of all of the value added by all industries within an economy is equivalent to gross domestic product (GDP). Utilizing value added guards against the double- counting that occurs when compiling output or revenue data by industry.

GDP is generally considered the broadest measure of the health of a national economy. The models developed by IHS for this study included value added statistics for each of the 440 industry sectors, allowing IHS to assess the contribution of the A&D industry to national GDP.

Finally, the direct and indirect employees spend a portion of their salaries in the regional economy on consumer goods and services. This stimulates yet another round of economic activity, which results in “induced” impacts on employment, value added, and so on.

The results from the national model yielded employment, value added, labor income and tax revenue generated by the A&D industry. State-level models were primarily driven by the levels of direct employment determined in the data analysis and segment breakdown. However, states also experience significant intermediate activities in support of direct economic activity in other states. These results are captured within the national model but can fall out of a state-specific analysis that is driven solely by in-state direct employment. IHS addressed this issue by allocating those remaining intermediate state through our proprietary regional economic models and BMI data. This process ensures that our state level analysis is in harmony with our national models and allocates all data based on existing industry supply capacity. The resulting levels of direct and intermediate impacts then determine the significance of the spin-off impacts for each state. The graphic below highlights the overall sequence of analysis:

Figure 3: Diagram of modeling process

The results of this analysis provided industry specific income, employment and value added data for each state. IHS maintains broad industry-level data, by state, for employment and Gross State Product through its U.S. Regional Economics group. The results of our findings not only placed the impact of the A&D industry overall and by segment within the proper context of each state’s unique economy, but also highlight the significance of the primary industries within the overall industry of each state – i.e. the A&D industry provides X% of total manufacturing employment in state Y, while also supporting Z% of professional services employment. Federal and state tax generation by state was also determined from the economic impact analysis. IHS placed the state taxes generated into the context of the overall share of state government revenue and also determine the per-household contribution to state taxes that A&D industry provides in each state.

4.0 Economic Impact Analysis

The following tables and charts summarize the economic impact results for the U.S. A&D industry over the 2013 to 2015 period. The analysis starts with the industry’s direct (end-use) employment, which was determined to be 697,330 across 13 primary economic sectors in 2015. Those direct workers supported another 964,590 employees throughout the industry’s supply chain, which resulted in a total A&D employment base of 1.7 million jobs. The A&D industry also generated $349 million in direct sales, which supported an additional $437 million in business activity across the U.S. In sum, the A&D industry supported a total of $586 billion in economic output in 2015. Put another way, for every million dollars in direct sales activity, eight employees are supported throughout the supply chain and across industries.

Table 4: Economic impact of A&D industry 2013 2014 2015

Employment (Number of workers) 2,820,580 2,779,700 2,797,370 A&D Industry Impact 1,673,490 1,650,610 1,661,920 End-Use 700,150 691,630 697,330 Supply Chain 973,340 958,980 964,590 Induced 1,147,090 1,129,090 1,135,440

Contribution to GDP (Million US$) 297,163 298,608 306,572 A&D Industry Impact 196,128 197,093 202,365 End-Use 86,415 86,851 89,226 Supply Chain 109,713 110,242 113,139 Induced 101,035 101,515 104,207

Labor Income (Million US$) 206,475 207,562 213,197 A&D Industry Impact 149,973 150,792 154,921 End-Use 75,439 75,903 78,047 Supply Chain 74,534 74,889 76,875 Induced 56,502 56,770 58,275

Output (Million US$) 762,185 765,741 786,156 A&D Industry Impact 586,417 589,086 604,742 End-Use 337,165 339,258 349,035 Supply Chain 249,252 249,827 255,707 Induced 175,768 176,655 181,414

Government Revenues (Million US$) 60,647 60,877 62,637 Federal Tax 40,355 40,524 41,709 State and Local Tax 20,292 20,353 20,928

4.1 Employment Nationally, the A&D industry supported an average of nearly 2.8 million jobs, between 2013 and 2015. During this period, the greater U.S. economy employed an average of 140 million non-farm jobs, meaning that A&D jobs represented approximately two percent of the nation’s total employment base. Of the jobs supported in 2015, 697,330 were directly within firms producing end- user goods and services, while 964,590 were within supply-chain businesses. A majority of the jobs created were the result of changes to income, or induced jobs, that numbered over 1.1 million on average over the three-year period.

The bulk of direct jobs in the A&D industry are contained within the broad manufacturing industry. On average, over 625,000 direct jobs supported by A&D spending are classified within NAICS as manufacturing. For example, aircraft engine and engine parts, and military armored vehicle, tank, and tank component manufacturing are employment subsectors that are directly impacted by the A&D industry. The information and professional services sector also realizes direct impacts, supporting 70,660 employees on average over the 2013-15 time period.

Chart 1: Employment Impact (2013-15 average)

1,000,000

800,000

Induced 600,000 Indirect Direct

400,000

Number of of workers Number 200,000

Source: IHS

As noted in the figure above, the indirect impacts are far-reaching and span across a more diverse set of industries. However, there is still a similar concentration of these jobs within the information and professional services and manufacturing industries, with an estimated average of 393,490 and 293,130 respectively, between 2013 and 2015. The supply-chain impacts are also present in the

© 2016 IHS 20 April 2016 IHS Economics | A&D Economic Impact Analysis financial activities (68,000 jobs supported), leisure & other services (64,360 jobs supported), transportation & utilities (57,750 jobs supported) and wholesale & retail trade sectors (57,460 jobs supported).

The direct and indirect jobs supported by the A&D industry provide a further round of economic stimulus as wages flow through unrelated sectors of the economy. These induced impacts supported employment in the information and professional services, leisure, and wholesale and retail trade sectors the most. Many of these induced jobs are in the service sectors of the economy, which benefit from higher levels of employment, and therefore higher incomes. Similarly, retail stores and wholesale trade businesses are greatly impacted by the changes in disposable income that result from fluctuations in employment due to hiring in the A&D industry.

The impact on employment at the state level was pronounced in Washington, California, Texas, Michigan, Missouri and Florida, which, combined, accounted for 60 percent of total A&D-supported employment over the 2013-15 time period. As expected, much of this is a result of the presence of the industry’s major players in those states. And the knock-on effect from those businesses’ production is equally important. From a supply-chain stand point, these six states represented 22 percent of total employment supported during this time period – ten percent more than the direct employment’s share.

Chart 2: Employment Impact Percentage by Top Six States (2013-15 average)

23%

40% Washington California Texas Michigan 16% Missouri Florida Rest

4% 8% 4% 5%

Source: IHS

Breakdown by A&D Subcategories In 2015, the commercial aerospace sector supported 531,030 jobs, which included 375,030 jobs directly employed by the sector’s end-use producers. Commercial aircraft manufacturing represented 78% of the sector’s employment followed by general aviation and space systems manufacturing. At

© 2016 IHS 21 April 2016 IHS Economics | A&D Economic Impact Analysis the same time, the defense and national security segment supported a total of 510,570, which included 322,310 jobs directly employed the sector’s end-use producers and service providers.

4.2 Sales The broadest measure of economic activity generated by the A&D industry can be measured in terms of final sales, also known as output. This metric includes value added as well as the purchase of intermediate goods and services, both local and imported. Just as value added can be described as final sales minus the cost of intermediate purchases (hence the additional value created after those purchases), total output is value-added plus intermediate purchases.

The A&D industry created an average of $771 billion in total output between 2013 and 2015, expanding at an annualized rate of 1.6%. Industries that are directly associated with A&D averaged $342 billion and accounted for 44% of total sales. The indirect effects, which represent sales between the industries with a direct impact and their suppliers, amounted to an average of $252 billion each year, while the re-spending of wages earned in the direct and indirect industries created the induced impacts of $178 billion in total output.

As expected, the majority of the direct and indirect sales activity occurred in the manufacturing sector over the 2013-15 time period. The $333 million in average direct manufacturing sales supported another $140 million through the supply chain. Wages earned by employees working to fulfill these sales were spent mostly in financial services, information and professional services and manufacturing.

Chart 3: Sales Impact (2013-15 average)

500,000

450,000

400,000 Induced

350,000 Indirect 300,000 Direct

250,000

200,000

Millions of dollars of Millions 150,000 100,000

50,000

Source: IHS

4.3 Contribution to GDP Between 2013 and 2015, the A&D industry produced an average of $301 billion in total economic value, which amounted to 1.8 percent of total nominal GDP in the U.S. Over that same period, the total contribution to GDP from the A&D industry grew an average of 1.6% annually, from over $297 billion in 2013 to nearly $307 billion in 2015. The direct component of this contribution, the lion share of which can be attributed to the manufacturing sector, averaged $87.5 billion between 2013 and 2015 Industries that benefit directly, such as aircraft manufacturing, also require supplies and services, creating value added in both upstream and downstream supplier industries. Suppliers to the direct component of the A&D industry had an indirect economic impact of over $111 billion, on average, between 2013 and 2015. The induced impact of A&D similarly reached $102 billion, as wages generated in the direct and indirect A&D industry were spent throughout the broader economy.

While the largest economic impacts are attributed to core A&D businesses like aircraft manufacturing and ship building, many sectors that are not typically associated with this industry have realized significant economic benefits as a result of it’s indirect link to the A&D industry. One such example is the financial services sector, which produced an average of $11 billion in value added between 2013 and 2015 as an indirect supplier of services to the aerospace industry. After manufacturing and information and professional services, the financial services industry contributed the most to GDP between 2013 and 2015, followed by wholesale and retail trade ($8 billion) and transportation and utilities ($6.6 billion).

Chart 4: Value Added Impact (2013-15 average)

140,000

120,000

100,000 Induced

Indirect 80,000 Direct

60,000

Millions of dollars of Millions 40,000

20,000

Source: IHS

4.4 Labor Income A large portion of each industry’s value added is contained in the wages and proprietor's income paid out to individuals. Proprietor's income and wages and benefits generated by companies in the A&D industry averaged over $209 billion annually between 2013 and 2015. Over this period, directly paid labor income is estimated at $76 billion annually; indirect production generated nearly $75 billion per year in compensation; and induced labor income tallied an average of over $57 billion.

Overall, compensation paid to employees and owners supported by the A&D industry grew by 1.6 percent annually between 2013 and 2015. While the manufacturing industry creates the largest direct economic impact, the information and professional services sector creates the largest indirect and induced impact on local wages and other compensation. While wages and proprietor income from A&D added $209 billion on average in income to employees and owners of businesses nationally, the regional distribution is similar to the total employment effects of the industry. Washington ($47.7 billion), California ($37.9 billion), and Texas ($17.3 billion) top the list, with these three states receiving almost 50% of the total labor income generated by firms in the A&D industry.

Chart 5: Labor Income Impact (2013-15 average)

100,000

90,000

80,000 Induced

70,000 Indirect

60,000 Direct

50,000

40,000

Millions of dollars of Millions 30,000 20,000

10,000

Source: IHS

4.5 Taxes Firms that operate within the A&D industry contribute taxes at both the federal and state level. In 2015 these firms paid a total of $62.6 billion in federal and state taxes, up 2.9% from nearly $60.9 billion in 2014 and $60.6 billion in 2013. Taxes paid at the federal level amounted to $41.7 billion, a contribution that represents approximately 1.6% of the total U.S. federal budget of $3.8 trillion in the 2015 fiscal year. State and local governments also received an estimated $20.9 billion in 2015, which is roughly on par with the total 2015 state budget of Georgia ($20.8 billion), and greater than the combined state budgets of Vermont ($3.6 billion), South Dakota ($4.3 billion), Delaware ($4.7 billion) New Hampshire ($5.4 billion).

Table 5: Tax Impact Millions of dollars 2013 2014 2015 Total 60,647 60,877 62,637 Federal Tax 40,355 40,524 41,709 State and Local Tax 20,292 20,353 20,928

5.0 Appendix

5.1 Additional Tables Economic Impact by Industry and Metric

Employment Impact of A&D Industry Number of workers 2013 2014 2015 Total 2,820,582 2,779,695 2,797,366 Construction 27,289 26,888 27,038 A&D Industry Impact 16,827 16,589 16,681 End-Use - - - Supply Chain 16,827 16,589 16,681 Induced 10,463 10,299 10,357 Financial Services 205,895 202,819 204,007 A&D Industry Impact 68,467 67,548 67,976 End-Use - - - Supply Chain 68,467 67,548 67,976 Induced 137,428 135,271 136,032 Information & Professional Services 862,006 851,088 857,351 A&D Industry Impact 465,922 461,219 465,288 End-Use 68,629 70,610 72,733 Supply Chain 397,293 390,609 392,556 Induced 396,085 389,870 392,062 Leisure & Other Services 324,042 319,170 321,054 A&D Industry Impact 64,749 63,945 64,392 End-Use - - - Supply Chain 64,749 63,945 64,392 Induced 259,293 255,225 256,661 Manufacturing 978,522 963,164 969,032 A&D Industry Impact 926,400 911,860 917,440 End-Use 631,246 620,739 624,318 Supply Chain 295,154 291,120 293,122 Induced 52,122 51,304 51,593 Natural Resources 38,273 37,709 37,926 A&D Industry Impact 11,088 10,952 11,018 End-Use - - - Supply Chain 11,088 10,952 11,018 Induced 27,184 26,758 26,908 Transportation & Utilities 99,237 97,756 98,303 A&D Industry Impact 58,485 57,643 57,964 End-Use 272 278 282 Supply Chain 58,212 57,365 57,681 Induced 40,753 40,113 40,339 Wholesale & Retail Trade 271,553 267,544 269,020 A&D Industry Impact 57,799 57,143 57,436 End-Use - - - Supply Chain 57,799 57,143 57,436 Induced 213,754 210,400 211,584 Government 13,763 13,558 13,636 A&D Industry Impact 3,754 3,706 3,729 End-Use - - - Supply Chain 3,754 3,706 3,729 Induced 10,009 9,852 9,907

Sales Impact of A&D Industry Million US$ 2013 2014 2015 Total 762,185 765,741 786,156 Construction 4,122 4,113 4,190 A&D Industry Impact 2,436 2,432 2,477 End-Use - - - Supply Chain 2,436 2,432 2,477 Induced 1,686 1,681 1,712 Financial Services 60,575 60,961 62,658 A&D Industry Impact 16,588 16,654 17,058 End-Use - - - Supply Chain 16,588 16,654 17,058 Induced 43,987 44,308 45,601 Information & Professional Services 112,343 113,809 117,667 A&D Industry Impact 67,102 68,073 70,427 End-Use 8,506 8,992 9,517 Supply Chain 58,596 59,081 60,911 Induced 45,241 45,736 47,240 Leisure & Other Services 21,493 21,696 22,366 A&D Industry Impact 4,860 4,921 5,080 End-Use - - - Supply Chain 4,860 4,921 5,080 Induced 16,633 16,775 17,286 Manufacturing 499,991 501,452 514,221 A&D Industry Impact 468,061 469,579 481,706 End-Use 328,629 330,235 339,485 Supply Chain 139,433 139,345 142,221 Induced 31,930 31,873 32,515 Natural Resources 8,195 8,240 8,456 A&D Industry Impact 3,098 3,137 3,235 End-Use - - - Supply Chain 3,098 3,137 3,235 Induced 5,096 5,103 5,221 Transportation & Utilities 20,450 20,539 21,056 A&D Industry Impact 11,656 11,715 12,010 End-Use 30 31 33 Supply Chain 11,626 11,684 11,977 Induced 8,794 8,824 9,046 Wholesale & Retail Trade 32,657 32,544 33,079 A&D Industry Impact 11,908 11,859 12,011 End-Use - - - Supply Chain 11,908 11,859 12,011 Induced 20,749 20,685 21,068 Government 2,359 2,385 2,463 A&D Industry Impact 707 715 737 End-Use - - - Supply Chain 707 715 737 Induced 1,652 1,670 1,725

Value Added Impact of A&D Industry Million US$ 2013 2014 2015 Total 297,163 298,608 306,572 Construction 1,965 1,976 2,028 A&D Industry Impact 1,118 1,125 1,155 End-Use - - - Supply Chain 1,118 1,125 1,155 Induced 847 851 873 Financial Services 40,891 41,103 42,195 A&D Industry Impact 10,892 10,962 11,254 End-Use - - - Supply Chain 10,892 10,962 11,254 Induced 29,999 30,142 30,941 Information & Professional Services 73,503 74,019 76,072 A&D Industry Impact 44,306 44,683 45,959 End-Use 5,338 5,606 5,894 Supply Chain 38,969 39,078 40,064 Induced 29,197 29,335 30,113 Leisure & Other Services 12,915 12,985 13,333 A&D Industry Impact 3,000 3,023 3,107 End-Use - - - Supply Chain 3,000 3,023 3,107 Induced 9,915 9,962 10,226 Manufacturing 128,522 128,925 132,301 A&D Industry Impact 120,237 120,600 123,756 End-Use 81,059 81,227 83,313 Supply Chain 39,178 39,373 40,442 Induced 8,285 8,324 8,545 Natural Resources 4,077 4,102 4,212 A&D Industry Impact 1,753 1,767 1,815 End-Use - - - Supply Chain 1,753 1,767 1,815 Induced 2,324 2,335 2,397 Transportation & Utilities 11,607 11,671 11,979 A&D Industry Impact 6,550 6,590 6,764 End-Use 17 18 19 Supply Chain 6,532 6,572 6,745 Induced 5,057 5,081 5,216 Wholesale & Retail Trade 22,667 22,805 23,403 A&D Industry Impact 7,940 8,008 8,214 End-Use - - - Supply Chain 7,940 8,008 8,214 Induced 14,727 14,797 15,190 Government 1,017 1,022 1,049 A&D Industry Impact 332 334 343 End-Use - - - Supply Chain 332 334 343 Induced 685 688 706

Labor Income Impact of A&D Industry Million US$ 2013 2014 2015 Total 206,475 207,562 213,197 Construction 1,668 1,678 1,722 A&D Industry Impact 1,028 1,034 1,061 End-Use - - - Supply Chain 1,028 1,034 1,061 Induced 640 643 660 Financial Services 12,292 12,361 12,693 A&D Industry Impact 4,488 4,520 4,644 End-Use - - - Supply Chain 4,488 4,520 4,644 Induced 7,804 7,841 8,049 Information & Professional Services 58,061 58,514 60,166 A&D Industry Impact 35,190 35,535 36,578 End-Use 5,248 5,512 5,796 Supply Chain 29,942 30,024 30,782 Induced 22,870 22,979 23,588 Leisure & Other Services 9,816 9,869 10,134 A&D Industry Impact 2,328 2,345 2,410 End-Use - - - Supply Chain 2,328 2,345 2,410 Induced 7,488 7,524 7,723 Manufacturing 101,354 101,719 104,445 A&D Industry Impact 97,490 97,836 100,459 End-Use 70,174 70,374 72,233 Supply Chain 27,315 27,462 28,225 Induced 3,865 3,883 3,986 Natural Resources 2,068 2,080 2,135 A&D Industry Impact 772 778 799 End-Use - - - Supply Chain 772 778 799 Induced 1,296 1,302 1,336 Transportation & Utilities 6,614 6,652 6,828 A&D Industry Impact 3,803 3,827 3,929 End-Use 16 17 18 Supply Chain 3,787 3,810 3,911 Induced 2,811 2,824 2,899 Wholesale & Retail Trade 13,577 13,660 14,018 A&D Industry Impact 4,582 4,621 4,740 End-Use - - - Supply Chain 4,582 4,621 4,740 Induced 8,995 9,038 9,278 Government 1,024 1,030 1,057 A&D Industry Impact 292 294 302 End-Use - - - Supply Chain 292 294 302 Induced 732 736 755

Economic Impact by State and Metric

Total Economic Impact of A&D Industry (Average 2013-2015) Employment Output Value Added Labor Income (# of workers) (Million US$) (Million US$) (Million US$) United States 2,799,210 771,361 300,781 209,078 Alabama 39,420 10,503 3,435 2,460 Alaska 1,300 281 128 83 Arizona 94,790 26,466 9,861 7,369 Arkansas 8,160 2,145 682 466 California 436,180 123,945 51,665 36,871 Colorado 31,320 7,511 3,065 2,405 Connecticut 92,930 32,159 12,378 9,298 Delaware 2,110 535 215 150 District of Columbia 570 97 70 60 Florida 114,750 26,585 10,730 7,422 Georgia 87,400 22,349 8,123 5,716 Hawaii 2,100 408 207 156 Idaho 2,260 495 204 124 Illinois 35,090 9,957 4,095 2,704 Indiana 23,520 8,000 2,557 1,864 Iowa 26,020 5,691 2,464 1,702 Kansas 82,680 22,026 7,299 5,314 Kentucky 8,660 2,908 796 544 Louisiana 12,280 2,650 1,126 722 Maine 7,640 2,039 669 494 Maryland 41,710 9,629 4,546 3,364 Massachusetts 41,910 11,835 5,178 3,997 Michigan 143,520 46,016 14,163 9,746 Minnesota 15,110 3,386 1,619 1,027 Mississippi 10,670 2,492 926 571 Missouri 116,400 27,054 10,098 7,822 Montana 2,390 494 144 111 Nebraska 2,010 486 159 125 Nevada 1,790 411 149 106 New Hampshire 16,910 3,802 1,803 1,250 New Jersey 23,110 5,349 2,628 1,925 New Mexico 4,810 1,082 516 282 New York 36,300 9,377 4,484 3,150 North Carolina 14,410 4,384 1,893 1,068 North Dakota 810 129 62 47 Ohio 60,770 20,420 7,139 4,847 Oklahoma 22,390 5,785 1,797 1,390 Oregon 23,950 6,726 2,882 1,568 Pennsylvania 62,150 16,011 6,128 4,436 Rhode Island 2,670 490 228 180 South Carolina 59,350 15,040 4,810 3,537 South Dakota 530 101 38 26 Tennessee 17,220 4,992 1,546 1,165 Texas 234,690 66,829 25,899 17,300 Utah 26,170 6,531 2,452 1,655 Vermont 2,870 889 131 217 Virginia 53,940 11,448 5,524 3,881 Washington 640,820 180,812 73,178 47,692 West Virginia 3,300 1,041 304 243 Wisconsin 7,150 1,530 573 419 Wyoming 260 37 13 11

Direct Economic Impact of A&D Industry (Average 2013-2015) Employment Output Value Added Labor Income (# of workers) (Million US$) (Million US$) (Million US$) United States 696,370 341,819 87,497 76,463 Alabama 13,070 5,931 1,335 1,207 Alaska 580 156 49 43 Arizona 27,100 13,582 3,462 3,396 Arkansas 2,860 1,243 241 207 California 84,290 36,972 10,381 10,374 Colorado 9,590 3,838 989 1,059 Connecticut 28,150 15,320 4,141 3,716 Delaware 560 293 66 62 District of Columbia 330 57 41 40 Florida 29,720 11,706 2,953 2,664 Georgia 17,140 9,438 1,824 1,747 Hawaii 560 181 79 83 Idaho 950 314 106 68 Illinois 10,900 5,031 1,475 1,083 Indiana 9,900 5,313 1,345 1,135 Iowa 7,560 2,976 981 823 Kansas 28,200 12,519 2,720 2,432 Kentucky 3,090 1,851 347 272 Louisiana 3,860 1,064 347 307 Maine 3,250 1,442 343 295 Maryland 12,130 4,833 1,683 1,538 Massachusetts 13,880 6,646 2,074 1,945 Michigan 54,890 28,277 6,193 4,678 Minnesota 3,760 1,329 482 340 Mississippi 3,520 1,338 375 270 Missouri 20,910 12,035 2,124 2,631 Montana 1,050 318 54 55 Nebraska 940 332 75 73 Nevada 750 226 54 49 New Hampshire 4,500 1,919 679 543 New Jersey 6,870 2,284 780 762 New Mexico 1,530 590 237 133 New York 12,910 4,703 1,597 1,336 North Carolina 5,980 2,885 1,088 624 North Dakota 410 76 30 29 Ohio 21,190 11,976 3,361 2,458 Oklahoma 9,360 3,629 713 733 Oregon 6,740 2,992 803 578 Pennsylvania 13,660 6,476 1,390 1,440 Rhode Island 820 215 80 76 South Carolina 13,330 7,193 1,368 1,346 South Dakota 230 59 16 13 Tennessee 5,940 2,780 548 545 Texas 48,200 22,498 5,496 5,364 Utah 6,910 2,690 684 612 Vermont 1,440 672 32 149 Virginia 16,100 5,099 1,751 1,661 Washington 122,280 76,989 20,127 15,111 West Virginia 1,950 817 201 179 Wisconsin 2,380 699 168 172 Wyoming 150 22 5 6

Indirect Economic Impact of A&D Industry (Average 2013-2015) Employment Output Value Added Labor Income (# of workers) (Million US$) (Million US$) (Million US$) United States 965,640 251,596 111,031 75,433 Alabama 12,530 2,724 1,102 717 Alaska 290 58 36 19 Arizona 30,870 7,825 3,321 2,256 Arkansas 2,620 553 244 156 California 179,060 53,934 23,046 16,128 Colorado 9,210 1,852 995 707 Connecticut 33,180 11,896 4,882 3,668 Delaware 560 107 64 42 District of Columbia 110 18 14 11 Florida 40,060 8,514 4,038 2,666 Georgia 29,880 7,124 2,994 2,102 Hawaii 440 71 38 24 Idaho 550 90 47 28 Illinois 10,690 2,637 1,298 876 Indiana 6,520 1,663 638 429 Iowa 7,920 1,280 679 451 Kansas 25,480 5,612 2,389 1,657 Kentucky 2,840 689 249 164 Louisiana 3,670 907 393 219 Maine 1,780 276 137 93 Maryland 11,590 2,221 1,285 908 Massachusetts 11,060 2,603 1,479 1,037 Michigan 43,700 11,186 4,439 3,069 Minnesota 4,920 1,026 561 367 Mississippi 3,280 653 277 160 Missouri 35,050 6,925 3,395 2,476 Montana 640 96 46 30 Nebraska 440 71 37 26 Nevada 550 119 52 34 New Hampshire 5,030 913 514 357 New Jersey 6,710 1,477 888 602 New Mexico 1,400 265 145 77 New York 10,280 2,460 1,449 988 North Carolina 3,690 801 399 237 North Dakota 140 20 12 7 Ohio 19,730 5,552 2,176 1,490 Oklahoma 6,020 1,220 549 356 Oregon 8,920 2,617 1,450 630 Pennsylvania 20,290 5,250 2,265 1,584 Rhode Island 740 125 64 51 South Carolina 19,940 4,740 1,751 1,233 South Dakota 130 21 10 6 Tennessee 5,570 1,388 527 354 Texas 90,040 28,053 11,311 7,017 Utah 9,960 2,531 1,068 656 Vermont 680 128 47 38 Virginia 14,840 3,011 1,699 1,126 Washington 229,200 57,682 26,275 17,934 West Virginia 600 136 51 36 Wisconsin 2,210 465 201 134 Wyoming 50 8 4 3

Induced Economic Impact of A&D Industry (Average 2013-2015) Employment Output Value Added Labor Income (# of workers) (Million US$) (Million US$) (Million US$) United States 1,137,210 177,946 102,252 57,183 Alabama 13,810 1,849 998 536 Alaska 430 67 44 21 Arizona 36,820 5,059 3,078 1,716 Arkansas 2,670 349 196 103 California 172,830 33,040 18,238 10,370 Colorado 12,520 1,821 1,081 640 Connecticut 31,600 4,943 3,356 1,914 Delaware 990 136 85 45 District of Columbia 140 22 15 9 Florida 44,970 6,364 3,739 2,092 Georgia 40,380 5,787 3,304 1,867 Hawaii 1,100 156 89 49 Idaho 760 92 50 28 Illinois 13,500 2,289 1,322 746 Indiana 7,110 1,023 574 300 Iowa 10,540 1,434 804 428 Kansas 29,000 3,895 2,190 1,225 Kentucky 2,730 368 200 108 Louisiana 4,750 680 386 197 Maine 2,610 320 190 106 Maryland 17,990 2,575 1,578 918 Massachusetts 16,970 2,586 1,625 1,015 Michigan 44,930 6,553 3,531 1,999 Minnesota 6,430 1,031 576 321 Mississippi 3,870 501 273 142 Missouri 60,440 8,095 4,580 2,715 Montana 710 80 45 25 Nebraska 620 83 47 27 Nevada 490 67 43 23 New Hampshire 7,390 971 610 350 New Jersey 9,520 1,589 960 561 New Mexico 1,870 227 134 72 New York 13,110 2,214 1,438 827 North Carolina 4,730 698 405 206 North Dakota 260 33 19 10 Ohio 19,850 2,892 1,602 899 Oklahoma 7,010 935 535 301 Oregon 8,290 1,117 630 360 Pennsylvania 28,210 4,285 2,473 1,412 Rhode Island 1,110 150 85 53 South Carolina 26,090 3,107 1,691 958 South Dakota 160 21 12 7 Tennessee 5,710 824 471 266 Texas 96,460 16,278 9,092 4,918 Utah 9,310 1,310 700 387 Vermont 750 89 52 30 Virginia 23,000 3,338 2,074 1,094 Washington 289,330 46,141 26,777 14,646 West Virginia 740 89 52 28 Wisconsin 2,560 367 203 113 Wyoming 60 7 4 2

5.2 BMI and IMPLAN

IHS Business Market Insights Business Market Insights is a robust database that provides market leading forecast views of business employment and output at the state, MSA, and county level. Using advanced modeling techniques and a rich dataset from the US Department of Census, our teams of economists and business specialists leverage the IHS internationally recognized US macroeconomic, industry, and regional forecasts to generate business activity indicators by county and detailed 4-digit NAICS code. Private companies, financial institutions, and government agencies use this one-of-a-kind database to get a deep look at US markets. It enables users to estimate the size and growth potential of a specific industry in a particular geography even when regional data are limited. The database is designed to allow users to easily aggregate our historical data and forecasts by market area or industry. Database Coverage:  Employment  Number of Establishments  Sales (output) in current and constant dollars  4-digit NAICS Code  US States, MSAs, counties and census Regions  25-year forecast, 15+ years history, annual data

IMPLAN model IHS Global Insight sourced an IMPLAN model to serve as the initial foundation from which to quantify the contribution of the A&D industry to the US economy. The IMPLAN model closely follows the accounting conventions such those used in the US Bureau of Economic Analysis's study, Input-Output Study of the US Economy, and is flexible enough to evaluate changes via the value of output or employment from the source industry. Using data from the World Industry Services, World Economic Services and other IHS-proprietary data assets, we customized and refined the modeling environment.

The direct, indirect, and induced job estimates in this report were quantified through input- output modeling and social accounting matrices using the customized IMPLAN model. Input-output accounting describes commodity flows from producers to intermediates and final consumers. The total industry purchases of commodities, services, employment compensation, value added, and imports are equal to the value of the commodities produced.

The notion of a multiplier rests upon the difference between the initial effect of a change in final demand and the total effects of that change. Total effects can be calculated either as direct and indirect effects or as direct, indirect, and induced effects. Direct effects are production changes associated with the immediate effects or final-demand changes. Indirect effects are production changes in backward-linked industries caused by the changing input needs of directly affected industries (for example, additional purchases to produce additional output). Induced effects are the changes in regional household spending patterns caused by changes in household income generated from the direct and indirect effects.

Type I multipliers A Type I multiplier is the direct effect produced by a change in final demand plus the indirect effect, divided by the direct effect. Increased demands are assumed to lead to increased employment and population, with the average income level remaining constant. The Leontief inverse (Type I multipliers matrix) is derived by inverting the direct coefficients matrix. The result is a matrix of total requirement coefficients, the amount each industry must produce for the purchasing industry to deliver one dollar's worth of output to final demand.

Type SAM multipliers Type SAM multipliers incorporate “induced” effects resulting from the household expenditures from new labor income. The linear relationship between labor income and household expenditure can be customized in the IMPLAN software. The default relationship is PCE and total household expenditure. Each dollar of workplace- based income is spent based on the SAM relationship generated by IMPLAN.

IHS Customer Care: Americas: +1 800 IHS CARE (+1 800 447 2273); [email protected] Europe, Middle East, and Africa: +44 (0) 1344 328 300; [email protected] Asia and the Pacific Rim: +604 291 3600; [email protected]