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Labor Productivity and Costs
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Conversion to North American Industry Classification System (NAICS)

Beginning with the September 18, 2003 news release, industry labor productivity data
reflect the conversion to the North American Industry Classification System (NAICS),
which replaces the Standard Industrial Classification (SIC) system as the basis for assigning
and tabulating data by industry. Due to differences in NAICS and SIC structures,
NAICS-based industry productivity data are not comparable to the SIC-based data.

The NAICS classification system is the product of a cooperative effort on the part
of the statistical agencies of the United States, Canada, and Mexico. The NAICS differs
from the SIC in that it uses a consistent, production-oriented approach to categorize
economic units, focusing on how products and services are created rather than on what is
produced; the SIC was less unified in its approach. The structure of the NAICS system is
also different from that of the SIC, with a greater emphasis on emerging industries and
service-producing industries. Under NAICS, some detailed industries that existed under the
SIC were collapsed or combined with other industries, while other new industries were added.
Treatment of auxiliaries also changed under NAICS: NAICS classifies auxiliary units involved
in activities such as transportation and warehousing; accounting, bookkeeping, and payroll
services; and general management into specialized industries rather than including them in
the manufacturing, trade, or service industries they support (as in the SIC). As a result of
these changes, many of the NAICS industries are significantly different from those in the
SIC system.

Industry output indexes are prepared from basic data published by various public
and private agencies, using the greatest level of detail available. Data from the Bureau of
the Census, U.S. Department of Commerce, are used extensively in developing output
series for manufacturing, trade, and service-producing industries, as well as in developing
compensation and unit labor cost series for manufacturing industries. Census Bureau
data for years prior to 1997 were classified according to the Standard Industrial
Classification (SIC) system. The 1997 Economic Censuses provided data on a NAICS
basis, and data classified according to NAICS began to be provided in subsequent Annual
Survey reports beginning in 1998 or 1999. Some data for wholesale and retail trade
industries have been made available by the Census Bureau on a NAICS basis back to

The 1997 Economic Census questionnaires were designed to permit the
classification of each establishment according to both NAICS and SIC. As a result, the
Census Bureau tabulated and published 1997 Census data on both a NAICS and SIC
basis. The Bureau of Labor Statistics used these dual-coded data to calculate conversion
ratios relating NAICS values to SIC values, and the ratios were used to convert data on
receipts, value of shipments, inventories and labor compensation for SIC-based industries
to estimates for NAICS-based industries for years prior to 1997.

The labor input series used in the industry productivity measures are based primarily on
employment and average weekly hours data from the Bureau’s Current Employment Statistics (CES)
survey and the Current Population Survey (CPS). Other sources are the Association of American
Railroads, the Department of Transportation, and the U.S. Postal Service. The CES data were
published on a 2002 NAICS basis with the release of May 2003 data in June 2003. CES series
are available back to 1990 for all industries maintained by that program, and for years prior
to 1990 for some industries. CES NAICS industry employment and average weekly hours series not
available before 1990 were extended back to 1987 by the industry productivity staff with data
estimated using conversion ratios derived from dual-coded, first-quarter 2001 data from the
Quarterly Census of Employment and Wages (QCEW). These ratios were also used to convert QCEW
historical annual industry wages from SIC to NAICS for use in the compensation and
unit labor cost measures for some non-manufacturing industries.

Visit the BLS NAICS webpage for more information about implementing NAICS at BLS.


Last Modified Date: May 3, 2004