North American Industry Classification System

Author:Mary Michel
Pages:544-547
 
INDEX
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Page 544

The North American Industry Classification System (NAICS) groups establishments into industries according to their primary economic activities. NAICS facilitates the collection, calculation, presentation, and analysis of statistical data by industry. The North American Free Trade Agreement countries—United States, Canada, and Mexico—developed the system to provide comparable statistics among themselves. Federal statistical agencies in these countries use NAICS to produce information by industry on inputs and outputs, productivity, industrial performance, unit labor cost, and employment. Both government and business use this information to understand industries and the economy.

NAICS has a production-oriented conceptual framework. It groups establishments according to similarity in the processes used to produce services or goods. This supply-based framework delineates differences in production technologies. In this system, an industry is not solely a grouping of products or services.

BACKGROUND

NAICS replaced the Standard Industrial Classification (SIC) system in the United States. The SIC system, established in the 1930s and revised through 1987, drew increasing criticism as rapid changes affected both the U.S. and world economies in the late 1980s.

In 1992 the Office of Management and Budget (OMB), an executive office of the president, established the Economic Classification Policy Committee (ECPC). The ECPC was chartered to provide a "fresh-slate" examination of economic classifications for statistical purposes. The ECPC ultimately joined with Mexico's Instituto Nacional de Estadistica, Geografia e Informatica and with Statistics Canada to develop the NAICS. The NAICS codes are revised on a regular five-year cycle.

The U.S. Bureau of the Census, the U.S. Bureau of Economic Analysis, and the U.S. Bureau of Labor Statistics (BLS) continue to develop NAICS. NAICS implementation began for reference year 1997 in the United States and Canada, and for 1998 in Mexico. The U.S. Census Bureau used NAICS to prepare the 1997 Economic Census, which became available in 1999.

Other agencies implementing NAICS include the Federal Reserve Board and federal departments (e.g., Labor, Commerce, Defense, and the Treasury).

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STRUCTURE OF NAICS

NAICS uses a six-digit code to identify particular industries, in contrast to the four-digit SIC code. The structure of NAICS is hierarchical. The first two digits of each code indicate the sector. The other digits and what they indicate are:

Third digit—Subsector

Fourth digit—Industry group

Fifth digit—NAICS industry

Sixth digit—National industry

In the manual North American Industry Classification System: United States, 2002 (NAICS: United States, 2002), there are codes for 1,179 U.S. industries.

NAICS classifies by sectors first. The NAICS: United States, 2002 manual presents twenty sectors, their two-digit codes, and the distinguishing activities of each, as follows:

11 Agricultural, Forestry, Fishing and Hunting

This sector includes growing crops, raising animals, harvesting timber, and harvesting fish and other animals from farms, ranches, or the animals' natural habitat.

21 Mining

Extracting naturally occurring mineral solids, such as coal and ore; liquid minerals, such as crude petroleum; and gases, such as natural gas; and beneficiating (e.g., crushing, screening, washing, and flotation) and other preparation at the mine site, or as part of...

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