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For over 60 years, the Standard Industrial Classification (SIC) system served as the structure for the collection, presentation, and analysis of the U.S. 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. The SIC system was developed in the 1930s at a time when manufacturing dominated the U.S. economic scene. Over the years, there were numerous revisions to the SIC system, reflecting the economy's changing industrial composition. Despite these revisions, the system received increasing criticism about its ability to handle rapid changes in the U.S. economy. Developments in information services, new forms of health care provision, expansion of services, and high-tech manufacturing are examples of industrial changes that could not be studied under the SIC system.
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 uses a production-oriented conceptual framework to group 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 was introduced in 1997 and is periodically revised to reflect changes in the industrial structure of the U.S. and North American economy.
NAICS provides a tool to ensure that economic statistics reflect the changing economy. However, improved statistics will result in time series breaks. Every sector of the economy has been restructured and redefined.
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-providing sectors. This six-digit hierarchical structure allows greater coding flexibility than the four-digit structure of the SIC.
Last Modified Date: February 27, 2020