NAICS Bulletin

Table of Contents
Introduction
New Industries Reflected in NAICS
Comparison of NAICS and SIC major industry groups
Impact on Labor Market Information Products
Additional Resources

Introduction

A Bulletin from the Texas Workforce Commission, Labor Market Information Department

An Explanation of the North American Industry Classification System (NAICS)

How it may affect Labor Market Information customers

The Office of Management and Budget (OMB) in cooperation with agencies from Mexico and Canada has developed an industry classification system called the North American Industry Classification System (NAICS, pronounced "nakes") that replaced the Standard Industrial Classification (SIC) system. While work has been underway since 1993, OMB formally adopted NAICS on January 16, 2001.

History of Process

The Office of Management and Budget established the Economic Classification Policy Committee in 1992 to pursue a fresh slate – the examination of economic classifications for statistical purposes.1 Since 1939 the U.S. has used the Standard Industrial Classification (SIC) system for classifying industries. While SIC has undergone periodic revisions (the last in 1987), rapid changes in the U.S. and world economies has brought the system under increased scrutiny. In response to the need for a classification system that better reflected the dynamic nature of economies, OMB established the Economic Classification Policy Committee.2 Government agencies from the United States, Mexico and Canada were tasked with the development of a system that accounted for rapid changes in the U.S and world economies.3

Industrial Classification vs.Occupational Classification

NAICS is a system concerned with classifying organizations into different industries; as opposed to classification at the occupational level. The newly revised Standard Occupational Classification (SOC) system classifies occupations by job duties. Occupations specific to certain industries may be found in a different industry category because of the shift to NAICS, yet the Standard Occupational Classification Code remains the same. Systems like O*NET and other classification systems based on SOC are not subject to changes because of the shift to NAICS. Professionals who use information at the occupational level will not notice changes in job categories as a result of the shift to NAICS, unless they are looking at occupations by industry.

Benefits

Comparable - NAICS is organized in such a way so as to allow direct comparison of economic data with our NAFTA trading partners Canada and Mexico.

Relevant -NAICS recognizes hundreds of new businesses in the economy with 20 broad industry sectors, up from SIC's 10. Some new industry categories include an Information Sector and a Health Care and Social Assistance Sector formerly lumped into Services under SIC.

Consistent - NAICS classifies an organization based on how it produces something, not simply what it produces. Businesses that use identical or similar technologies and processes to produce something will be grouped together. For example, software creation falls under the new Information Sector, while software duplication falls under Manufacturing. Under SIC both enterprises were grouped under the same major industry sector, because both were engaged in the production of software.

Adaptable - Regular updates account for emerging industries not currently known.

Things to Consider

The shift to NAICS means a break in historical time series. SIC and NAICS industry groupings are not directly comparable since the code changes for NAICS have split some SIC groups.

1 Executive Office of the President Office of Management and Budget. North American Industry Classification System. White Plains, MD: Bernan and U.S. Department of Commerce, 2002

2 ECPC is chaired by the Bureau of Economic Analysis, U.S. Department of Commerce, with representatives from the Bureau of the Census, U.S. Department of Commerce, and the Bureau of Labor Statistics, U.S. Department of Labor

3 Specifically, Mexico's Instituto Nacional de Estadistica, Geografia e Informafca (INEGI) and Statistics Canada

 

New Industries Reflected in NAICS

u   NAICS heralds the creation of a new information sector that pulls businesses from communications, publishing, motion picture and sound recording and online services to recognize an information-based economy.

u Previously, under SIC, corporate headquarters were not distinguished from the industry category of the product or service they produced. Now, corporate headquarters are recognized in the new Management Sector.

u Manufacturing is restructured to account for high-tech industries.

u An increase in the amount of detail overall accompanies the shift to NAICS including a further breakdown of SIC's services sector into nine new sectors.

u Eating and Drinking Places move from Retail Trade into a new category called Accommodation and Food Services.

u The difference between Retail and Wholesale Trade is now based on how each store conducts business. For example, many computer stores are reclassified from Wholesale to Retail.

Comparison of NAICS and SIC major industry groups

Below is a chart that outlines the major difference between NAICS and SIC industry categories.

SIC

Standard Industrial Classification

NAICS

North American Industrial Classification System

   

Agriculture, Forestry; and Fishing:

Agriculture, Forestry, Fishing, and Hunting

Mining

Mining

Construction

Construction

Manufacturing

Manufacturing

Transportation, Communications and Public Utilities

Utilities Transportation and Warehousing

Wholesale Trade

Wholesale Trade

Retail Trade

Retail Trade
Accommodation and Food Services

Finance, Insurance, and Real Estate

Finance and Insurance
Real Estate and Rental and Leasing
Information

Services

Professional, Scientific, and Technical Services Administrative Support; Waste Management and Remediation Services
Educational Services
Health Care and Social Assistance
Arts, Entertainment, and Recreation
Other Services (except Public Administration)

Public Administration

Public Administration

(parts of all divisions)

Management of Companies and Enterprises

 

The shift to NAICS means a break in historical time series. SIC and NAICS industry groupings are not directly comparable since the code changes for NAICS have split some SIC groups.

U.S. Bureau of the Census, U.S. Department of Commerce

Impact on Labor Market Information Products

While everything produced by the Texas Workforce Commission’s Labor Market Information Department has been impacted by the shift to NAICS, the effect to the end user of LMI products will vary.

Job Vacancy or Benefits Surveys: Employers in the local job vacancy or benefits surveys will be classified under NAICS. Theses surveys will report results by industry using the new system.

ES-202/Covered Employment and Wages: First and Second quarter 2002 have been published using NAICS, and are currently available from the LMI Department. Five quarters worth of data were collected using both NAICS and SIC (first quarter 2001 to first quarter 2002). Fourth quarter 2001 is the last quarter Covered Employment and Wages were published using the SIC. A NAICS series back to 1990 has been reconstructed and is available.

Current Employment Statistics/Non-Agricultural Wage and Salary Employment: January 2003 data for the monthly survey of businesses were collected according to NAICS. January numbers will be available in March 2003. Current Employment Statistics data dating back to 1990 are being reconstructed based on the new NAICS system and are scheduled to be released with revised data in March 2003.

Occupational Employment Outlook/Occupational Projections: Covering the years 2002-2012 will be published using NAICS in 2004. The current 2000-2010 projections are SIC based.

Occupational Employment statistics (OES)/Wage Survey: While employers in the OES sample will be sorted and drawn according to NAICS in 2003, the survey will continue to publish wages by occupation according to the Standard Occupational Classification system. The OES survey has been using the SOC occupations since 1999.

The sample for the current survey was drawn based on the SIC. Wage information that became available in January 2003 was also still based on the SIC.

The survey sample for November 2002 was drawn based on NAICS. Wage data collected for November 2002 will be available around August 2003. Combined results of both November 2002 and May 2003 surveys will be available February 2004.

Occupations by industry for Texas are available upon request, and will reflect NAICS industry classifications beginning with the August 2003 release.

Local Area Unemployment Statistics/Unemployment Rates were not directly impacted by the shift to NAICS.

The shift to NAICS means a break in historical time series. SIC and NAICS industry groupings are not directly comparable since the code changes for NAICS have split some SIC groups.

 

For additional information contact the Labor Market Information Department of the Texas Workforce Commission.

101 East 15th Street, Suite 103A, Austin, TX, 78778.
Telephone 1-866-938-4444
E-mail: lmi@twc.state.tx.us
Fax 1-512-491-4904
Website: www.tracer2.com

We would like to thank the Colorado Department of Labor and Employment for allowing us to use portions of their NAICS information release.

Additional Resources

Bureau of the Census U.S. Department of Commerce
http://www.census.gov/epcd/www.naics.html

Bureau of Labor Statistics U.S. Department of Labor
http://www.bls.gov/bls/naics.htm

Previous articles on the SIC-NAICS conversion from the Texas Workforce Commission, Labor Market Information Department, can be found at: