Measuring Employment across the Supply and Output Chain

BLS publishes employment data for every industry under the sun. If you are looking for employment in shoe stores, we have it. What about bowling alleys or laundromats? We have those too.

But what is an industry? BLS classifies industry employment according to the North American Industry Classification System (NAICS). Each industry has its own NAICS code number.

NAICS uses a production-oriented framework to group establishments into industries based on the activity in which they are primarily engaged. In other words, establishments that do similar things are classified together. The first two digits of a NAICS code correspond to an economic sector, such as construction or manufacturing. Each subsequent digit provides progressively more detail.

Let’s take the oil and gas industry as an example. If we want to know how many people are employed in that industry, we would look at four 6-digit NAICS codes within sector 21 (mining, quarrying, and oil and gas extraction). Specifically, we’re interested in the NAICS codes in the table below. Since the first two digits all start with 21, we can say they all belong to sector 21.

So now we should be able to get total employment in the oil and gas industry, right? Well, let’s take a look.

The 2019 average annual U.S. employment in these industries combined was about 472,000. But wait! You might think that figure is too low. While it captures people who work in extraction, well drilling, and support for oil and gas operations, what about people who work in industries related to the oil and gas industry? You have now stumbled upon one thing NAICS is not designed to do directly: capture an entire industry’s supply and output chain. But what if you are interested in employment across that industry’s supply and output chain?

Let’s continue with the oil and gas example. If you think about all of the activities in the oil and gas industry, they run the gamut from construction to transportation to retail. For example, workers build oil drilling platforms, refine the oil into gasoline and other products after extraction, operate and maintain the pipelines that carry the oil and gas products closer to the end user, and run the gas stations. With that in mind, you can group industries to capture more of the oil and gas industry’s input and output chain. Such a grouping might look like this:

By adding total employment for the oil and gas industry group and the oil and gas supply and output chain group, you get a 2019 annual average total employment for the oil and gas and related industries of just over 2 million.

As we have seen in this example, you can use BLS data to build measures of employment in sectors like those related to the oil and gas industry. If you experiment on your own, you will realize there is no official guide for creating these groupings of industry sectors. It may even be difficult to identify all the sectors or subsectors you should include.

BLS employment data by industry are very powerful, and you can use them to paint a picture of employment across an entire supply chain. When using these data, be mindful of which NAICS industry sectors are included in the definition of, say, the oil and gas supply and output chain. As we have seen in this example, two perspectives about what makes up that industry can result in a difference of more than 1.5 million workers.