North American Industry Classification System (NAICS) at BLS

Background

For over sixty years, the Standard Industrial Classification (SIC) system has served as the structure for the collection, aggregation, presentation, and analysis of the US economy. An industry consists of a group of establishments primarily engaged in producing or handling the same product or group of products or in rendering the same services. Industry definitions used in BLS programs come from the 1987 Standard Industrial Classification (SIC) Manual. Because the SIC is used by many other federal government statistical programs, it is possible for users to assemble a comprehensive statistical picture of an industry.

The SIC system was developed in the 1930s at a time when manufacturing dominated the US economic scene. Over the last 60 years, there have been numerous revisions to the SIC system, reflecting the economy's changing industrial composition. However, despite these revisions, the system has received increasing criticism about its ability to handle rapid changes in the US economy. Recent developments in information services, new forms of health care provision, expansion of services, and high tech manufacturing are examples of industrial changes that cannot be studied under the current SIC system.

Introducing NAICS

Developed in cooperation with Canada and Mexico, the North American Industry Classification System (NAICS) represents one of the most profound changes for statistical programs focusing on emerging economic activities. NAICS, developed using a production-oriented conceptual framework, groups establishments into industries based on the activity in which they are primarily engaged. Establishments using similar raw material inputs, similar capital equipment, and similar labor are classified in the same industry. In other words, establishments that do similar things in similar ways are classified together.

NAICS provides a new tool that ensures that economic statistics reflect our Nation’s changing economy. However, improved statistics will result in time series breaks. Every sector of the economy has been restructured and redefined: A new Information sector combines communications, publishing, motion picture and sound recording, and online services, recognizing our information-based economy. Manufacturing is restructured to recognize new high-tech industries. A new sub-sector is devoted to computers and electronics, including reproduction of software. Retail Trade is redefined. In addition, eating and drinking places are transferred to a new Accommodation and Food Services sector. The difference between Retail and Wholesale is now based on how each store conducts business. For example, many computer stores are reclassified from wholesale to retail. Nine new service sectors and 250 new service industries are recognized.

NAICS Coding Structure

NAICS uses a six-digit hierarchical coding system to classify all economic activity into twenty industry sectors. Five sectors are mainly goods-producing sectors and fifteen are entirely services-producing sectors. This six-digit hierarchical structure allows greater coding flexibility than the four-digit structure of the SIC. NAICS allows for the identification of 1,170 industries compared to the 1,004 found in the SIC system. See also: Report on the American Workforce, Chapter 3.

NAICS 2007

NAICS 2007 includes revisions to NAICS 2002 across several sectors. The most significant revisions are in the Information Sector, particularly within the Telecommunications area.

 

Last Modified Date: February 25, 2014