Presentation on theme: "The North American Industry Classification System"— Presentation transcript:
1 The North American Industry Classification System Understanding NAICS:The North American Industry Classification SystemNAICSLONGER VERSION of presentation to UCLA Anderson Forecast (panel on data issues in forecasting). Updated from June version to Sept to November.This version has additional 17 “sector” slides (11-20, 22-28), in case more “what is NAICS” is needed.Focus of short version: NAICS implementation, primarily for BLS employment programs (CES & 202) most commonly used in forecasting.Crowd of forecasters was NOT happy that California CES data were being reconstructed only back to 1991.This .ppt was built upon one done by Teri Morisi, the “sector” slides in particular are essentially hers.November 2002Research and Analysis BureauNevada Dept. of Employment, Training, and RehabilitationTM
2 Agenda NAICS What is NAICS and Why? Identify NAICS Sectors Compare to SIC IndustriesDefine NAICS Sectors and IndustriesNew Auxiliary TreatmentImplementation ScheduleHistorical Data Reconstruction: Covered Employment and Wages (ES-202) vs. CESCES Industry Detail for Publication
3 What is NAICS? New Industry Classification System to replace SIC codes Concept: Group establishments by similar production processesEstablished in 1997Developed in cooperation with our NAFTA partners, Canada and Mexico
4 Why Develop NAICS? The SIC was: Developed in the 1930s Emphasized manufacturing, not growing service and high tech industriesRevisions made little change to the original structureLast revised in 1987First developed 70 years ago.The economy has changed. Growth has been in services and high tech industriesAny revisions to SIC made little change to original structure.
5 What is the NAICS Structure? 20 sectors (21 counting Unclassified)1,179 industries (US) more than under SIC system6-digit numbering system20 sectors, as compared to 10 Divisions in SIC.BLS publication guidelines will use a 21st sector for unclassifiedsRoughly 1200 industries, about a 15% increase over the number of SICs.
6 How Does NAICS Differ from SIC? Emphasizes new and emerging industries, high-technology industries, and service industriesProvides greater industry detail (6-digit vs. 4-digit), especially in the services sectorsProvides for comparability with Canada and MexicoWill be regularly maintained. Current plans are for revisions every 5 years: , 2007, etc.Old SIC: mixture of concepts-some by demand groupings, some by supply groupings (e.g. wood desks and steel desks in completely different SICs).Strive for comparability with the 2-digit level of the International Standard Industrial Classification of All Economic Activities, Revision 3 of the UN
7 How Does NAICS Differ from SIC? Based on the “Production Function” concept -The “Production Function” concept means that businesses should be grouped together based on:Production of similar productsorUse of similar production processesi.e., based on How, not What (produced, sold, serviced)….… usuallyOld SIC: mixture of concepts-some by demand groupings, some by supply groupings (e.g. wood desks and steel desks in completely different SICs).Strive for comparability with the 2-digit level of the International Standard Industrial Classification of All Economic Activities, Revision 3 of the UN
8 How Does NAICS Differ from SIC? Examples of applying the “Production Function” concept include:SIC 49 included Combined Generation, Transmission, and Distribution of GasNAICS separates Generation & Distribution of Gas (still in Utilities) from Transmission (to Transportation)because Transmission of Gas utilizes different processes than generation and distributionOld SIC: mixture of concepts-some by demand groupings, some by supply groupings (e.g. wood desks and steel desks in completely different SICs).Strive for comparability with the 2-digit level of the International Standard Industrial Classification of All Economic Activities, Revision 3 of the UN
9 How Does NAICS Differ from SIC? Other Examples of “Production Function”:Wholesale Trade now distinguishes Agents and Brokers separately from Merchant WholesalersAgents and Brokers are coded based on:HOW they sell (i.e., no inventory of merchandise)No longer based on WHAT they sell (as it did in SIC)Old SIC: mixture of concepts-some by demand groupings, some by supply groupings (e.g. wood desks and steel desks in completely different SICs).Strive for comparability with the 2-digit level of the International Standard Industrial Classification of All Economic Activities, Revision 3 of the UN
10 How Does NAICS Differ from SIC? Other Examples of “Production Function”:Pawn Shops were included in SIC 5932, Used Merchandise StoresNAICS includes Pawn Shops in All Other Nondepository Credit Intermediation, (i.e., now included in consumer cash lending).NAICS identifies the true business activity of Pawn Shops is to provide cash, not the incidental sales of merchandise.Old SIC: mixture of concepts-some by demand groupings, some by supply groupings (e.g. wood desks and steel desks in completely different SICs).Strive for comparability with the 2-digit level of the International Standard Industrial Classification of All Economic Activities, Revision 3 of the UN
11 NAICS vs. SIC Structure SIC 12 Super Sectors combinations 2-digit Sector3-digit Subsector4-digit Industry Group5-digit NAICS Industry6-digit U.S. IndustrySIC1-digit Division2-digit Major Group3-digit Industry Group4-digit IndustrySixth digit is country-specific, this allows some customization by individual nations.
12 NAICS SUPERSECTORS & SECTORS "Total"2 clusters12 groups (Super Sectors)21 sectorsNorth AmericanGoods-ProducingNatural Resources and Mining11 - Agriculture, Forestry, Fishing & HuntingEconomy21 - MiningConstruction23 - ConstructionManufacturing31/33 - ManufacturingService-ProducingTrade, Transportation & Utilities42 - Wholesale Trade44/45 - Retail Trade48/49 - Transportation and Warehousing22 - UtilitiesInformation51 - InformationFinancial Activities52 - Finance and Insurance53 - Real Estate and Rental and LeasingProfessional & Business Services54 - Professional, Scientific & Technical ServicesLatest change: CES will split Trade & TU ss into three for publication: whole, retail, TU.BLS variation 8/01: 1-Goods Production was split in to two Super Sectors: Construction, Manufacturing. (because it sounded too much like “goods producing” cluster name) 2-Added Nonclassified. 10/01 corrected 99 title to Unclassified10 groups sometimes called “super sectors” and can be used if an agency can’t publish all 20+ sectors.Other versions existed in recent past; this was “blessed” by the ECPC on May as the official grouping recommendation (see Clarification memo #2)ECPC = Economic Classification Policy Committee, which was established by OMB in 1992 to work on a new system.55 - Management of Companies & Enterprises56 - Administrative & Support & Waste Mgmt& Remediation ServicesEducation and Health Services61 - Educational Services62 - Health Care and Social AssistanceLeisure and Hospitality71 - Arts, Entertainment, and Recreation72 - Accommodation and Food ServicesOther Services81 - Other Services (except Public Admin)Public Administration92 - Public AdministrationUnclassified99 - Unclassified
13 NAICS vs. SIC Codes Agriculture, Forestry, Fishing, & Hunting MiningConstructionManufacturingWholesale TradeRetail TradeTransportation & WarehousingUtilitiesInformationLogging moves in from Mfg, Vets, Landscaping move outGeophysical surveying outMgt & Land Developers inPrinting and Publishing outHow they sell, not whatRestaurants outWarehousing growth due to AuxiliariesExcludes Waste DisposalNew Industry from Publishing, Communications
14 NAICS vs. SIC Codes Finance & Insurance Pawn Shops in Real Estate and Rental & LeasingProfessional, Scientific & Technical ServicesManagement of Companies & EnterprisesAdministrative & Support and Waste ManagementPawn Shops inAny type of rental inNew industry from SIC ServicesNew industryNew industry from Business Svcs, plus Waste/Garbage
15 NAICS vs. SIC Codes Educational Services Expanded definitions Health Care & Social AssistanceArts, Entertainment & RecreationAccommodation & Food ServicesOther ServicesGovernmentExpanded definitionsMore specialized industriesIncludes Casinos OnlyNew sector of Casino-HotelsRestaurants now hereFewer industries here nowTribal governments added in 2001
16 NAICS Sectors 11 Agriculture, Forestry, Fishing and Hunting: 21 Mining Landscaping Services moved21 Mining22 Utilities: Waste Management moved23 ConstructionManufacturing42 Wholesale TradeRetail Trade: Restaurants movedTransportation and Warehousing51 Information: Combines SIC 48,Communications, with Publishers52 Finance and Insurance
17 NAICS Sectors (cont’d) 53 Real Estate and Rental & Leasing:Rental/Leasing added54 Professional, Scientific & Technical Services:From SIC 73, Business Services55 Management of Companies and Enterprises:New industry56 Administrative & Support and Waste Management & Remediation Services:From SIC 73, Business Services andSIC 49, Refuse Systems61 Educational Services: From SIC 82,Education and SIC 73, Business Services62 Health Care & Social AssistanceNew services sectors:-Professional, Scientific, Technical Services-Management of Companies-Administrative & Support & Waste Management & Remediation-Health Care & Social Assistance-Accommodation & Food Services (combined lodging places with eating/drinking places)
18 NAICS Sectors (cont’d) 71 Arts, Entertainment, & Recreation:From SIC 79, Amusement & Recreation72 Accommodation & Food Services:From SIC 70, Hotels-Motels, andSIC 58, Eating & Drinking Places81 Other Services (except public administration)92 Public Administration99 UnclassifiedNew services sectors:-Professional, Scientific, Technical Services-Management of Companies-Administrative & Support & Waste Management & Remediation-Health Care & Social Assistance-Accommodation & Food Services (combined lodging places with eating/drinking places)
19 As with SIC, more digits = more detail NAICS StructureAs with SIC, more digits = more detailCode727217211721110721120TitleAccommodation & Food ServiceAccommodationTraveler AccommodationHotels (except Casino Hotels) & MotelsCasino Hotels
20 Major Improvements for Nevada: NAICS StructureMajor Improvements for Nevada:• Casino Hotels now separate fromHotels/Motels• Separate definitions for Full Service and FastFood Restaurants• Corporate Headquarters / Regional Offices /Management a new industry
21 Major Improvements for Nevada: NAICS StructureMajor Improvements for Nevada:• Warehousing industry better defined due tochange in treatment of Auxiliaries• Pawn shops move from Used MerchandiseStores to Finance ( All OtherNondepository Credit Intermeditation)Nine new Service Sectors created from SIC70-89, Services
22 Improved ‘Business Service’ Definitions: NAICS StructureImproved ‘Business Service’ Definitions:• Employee Leasing and Temporary HelpServices now identified separately• Telephone Call Centers (Telemarketing)• Travel Arrangement and ReservationServices• Convention and Trade Show Organizers
23 Classify Auxiliaries by Activity Auxiliaries will be classified by primary activityUnder SIC, were classified according to the establishment they servedGreatest impact in SIC-to-NAICS conversion: Manufacturing & Wholesale TradeExample of an auxiliary: Warehouse (separate location) for a manufacturing establishmentUnder NAICS, the warehouse will be classified in Warehousing and Storage, not Manufacturing or Wholesale TradeUnder SIC, a warehouse for Amazon books is coded in book sales, while a warehouse for Clorox bleach company would be coded in chemical manufacturing.Under NAICS, both would be coded as warehouses.
24 Agriculture, Forestry, Fishing & Hunting Changes to sector:Moved inLoggingMoved outVeterinarians (to 54- Other Professional, Scientific, and Technical Services)Horticultural and Landscape Activities (to 56-Services to Buildings and Dwellings)
25 Construction Subsectors basically comparable to SIC major groups: • Construction of Buildings - industry is based on whether construction is new or remodeling:New Single Family Housing ConstructionNew Housing Operative BuildersResidential Remodelers• Heavy and Civil Engineering Construction• Specialty Trade
26 Construction (cont’d) Moved inConstruction management services (from SIC 87, Management Services)Land Subdividers and Developers (from SIC 65, Real Estate)Construction Equipment Rental & Leasing (construction equipment with operator only)
27 Construction - Specialty Trade Contractors We now collect data at the 6-digit level to differentiate residential vs. nonresidentialExample:Residential Glass and Glazing ContractorsNonresidential Glass and Glazing ContractorsThis will be done by the BLS only and will not be in the manualThe manual will show the 6-digit identical to the 5-digit. BLS did this to respond to requests from industry experts such as Harvards’ Joint Center for Housing studiesper FR 4/20/00:22 of 28 comments received in response to 2/25/99 FR were on Construction (and 3 on wholesale, other 3 out of scope).Many of 22 comments contradictory.Limited 3-country comparability. For most, comp. at 5-digit level. For specialty, comparable at 4-digit
28 ManufacturingReorganized and restructured to achieve comparability with Canada and Mexico474 industries, 173 revised industries, 79 new industriesNew Computer and Electronic Products Manufacturing SubsectorComputer and Electronic Products Manufacturing combines several areas that were in different sectors under NAICS.It includes computer and parts manufacturing, software and CD reproduction, communications equipment, electronic components, connectors, semiconductors.
29 Manufacturing Moving Out: Other impact of conversion from SIC: Moving In:Retail BakeriesCustom wood cabinets, furnitureDental LaboratoriesTire RetreadingMoving Out:LoggingPublishingOther impact of conversion from SIC:Change in Auxiliary treatment
30 Redefinition of Wholesale/Retail SIC based on class of customerNAICS based on method of sellingRestaurants no longer included in retail
31 Wholesale Trade Three types of wholesalers: Merchant Wholesalers Operate a warehouse/take possession of goodsAlso known as Drop Shippers, Import/Export Merchants, Distributors, JobbersSell goods on their own account
32 Wholesale Trade Three types of wholesalers: Merchant Wholesalers Operate a warehouse/take possession of goodsAlso known as Drop Shippers, Import/Export Merchants, Distributors, JobbersBusiness-to-Business Electronic Markets-Sell ONLY via internet, no brick & mortar locationOR-Have brick & mortar location separate from internet location, and report data on both locations
33 Wholesale Trade Three types of wholesalers: Merchant Wholesalers Operate a warehouse/take possession of goodsAlso known as Drop Shippers, Import/Export Merchants, Distributors, JobbersBusiness-to-Business Electronic Markets (internet)Agents and BrokersDo not take possession of goodsAlso known as Manufacturers’ Representatives
34 Wholesale Trade Three types of wholesalers: Merchant WholesalersOperate a warehouse/take possession of goodsAlso known as Drop Shippers, Import/Export Merchants, Distributors, JobbersBusiness-to-Business Electronic Markets (internet)Agents and BrokersDo not take possession of goodsAlso known as Manufacturers’ RepresentativesMerchant wholesalers sell goods on their own account, while the other two do not
35 Wholesale Trade NAICS based on method of selling: Typically operate from a warehouseProvide little or no display of merchandise
36 Wholesale Trade NAICS based on method of selling: Typically operate from a warehouseProvide little or no display of merchandiseDo not normally advertise to general public
37 Wholesale Trade NAICS based on method of selling: Typically operate from a warehouseProvide little or no display of merchandiseDo not normally advertise to general publicNormally denotes sales in large volumes, exceptions include durable nonconsumer goods (machinery)
38 Wholesale Trade NAICS based on method of selling: Typically operate from a warehouseProvide little or no display of merchandiseDo not normally advertise to general publicNormally denotes sales in large volumes, exceptions include durable nonconsumer goods (machinery)Some goods always in Wholesale include:Farm machinery, Medium & Heavy duty Trucks, Industrial Machinery
39 Retail Trade New Industries Discount Department Stores Warehouse Clubs and SuperstoresGasoline Stations with Convenience StoresElectronic Shopping
40 Retail Trade New Industries Moving Out: Discount Department Stores Warehouse Clubs and SuperstoresGasoline Stations with Convenience StoresElectronic ShoppingMoving Out:Eating and Drinking Places (EMP= -70,000)Retail Bakeries
41 Transportation & Warehousing Trucking no longer distinguished by whether or not storage is providedGeneral Freight Trucking, Long Distance, TruckloadGeneral Freight Trucking, Long-Distance, Less Than TruckloadNo distinction between land and air couriersWaste collection and travel agencies move to Admin/Support and Waste Management & Remediation Services
42 UtilitiesCombination utilities no longer exist (provide gas and electric or other services)Examples of new electric power industriesFossil Fuel Electric PowerNuclear Electric PowerMoved outRefuse systems (garbage collection) moves to: Administrative & Support, Waste Management, & Remediation Services
43 Information SectorNew Industries: - Cellular and other Wireless Telecommunications - Telecommunications Resellers - Internet Publishing and Broadcasting - Internet Service Providers - Web Search PortalsRest created from: Manufacturing: Publishing TCPU: Broadcasting & Communications (Television, Radio, Satellite)Services: Motion Picture & Sound Recording Information Services & Data Processing LibrariesInformation slide only “sector” detail slide in the short version of this .ppt as example of sector that pulls pieces of industries from all over.Point out that this gives a hint that there will be breaks in time series.
44 Restructuring of Finance Industries Recognizes rapid change and deregulationRecognizes differences in countries’ financial industries structuresAgreement with Mexico at 3- and 4-digit levelAgreement with Canada at 5-digit levelNew industries include:Credit Card IssuingFinancial transactions Processing, Reserve and Clearinghouse ActivitiesInvestment Banking and Securities Dealing
45 Reorganization of Old “Services” Division 1987 SIC - ServicesNAICSReal Estate and Rental and LeasingProfessional, Scientific, & Technical ServicesAdministrative and Support; Waste Management and Remediation ServicesEducational ServicesHealth Care and Social AssistanceArts, Entertainment and RecreationAccommodation and Food ServicesOther Services (except Public Admin)
46 Professional, Scientific, & Technical Services Grouped by expertise and training ofservice provider28 new industriesOffices of CPAsInterior Design ServicesEnvironmental ConsultingMarketing Research & Opinion Polling
47 Administrative & Support and Waste Management & Remediation Industries that support businesses29 new industriesProfessional Employer OrganizationsConvention & Visitors BureausRepossession ServicesHazardous Waste Collection
48 Health Care and Social Assistance 27 new industries not found under the SICHMO Medical CentersDiagnostic Imaging CentersBlood and Organ BanksResidential Mental Health and Substance Abuse FacilitiesContinuing Care Retirement Facilities
49 Arts, Entertainment, and Recreation Comparable to SIC 79, RecreationIncludes Casinos only (not Casino-Hotels) and Slot Route OperatorsAlso includes:Independent Writers, MusiciansGolf CoursesAmusement ParksMuseumsGymansiums
50 Accommodation and Food Services New lodging industriesCasino HotelsBed-and-Breakfast InnsNew eating place industriesFull-Service RestaurantsLimited-Service RestaurantsCafeteriasFood Service Contractors
51 Public Administration Tribal government addedin 2001Note: A governmental and a private unit will have the same NAICS code if they perform the same activity- Air Traffic Control is
52 NAICS 2002 Industries impacted by NAICS 2002: Next revision: 2007 Construction International comparability at fifth digit, and (BLS only) residential/nonresidential distinction at sixth digitWholesale TradeDepartment StoresElectronic shopping and auctionsInformationNext revision: 2007Complete restructuring of “distribution network” industries: Wholesale, Retail, Transportation and Warehousing
53 Implementation Timing Across Agencies Phase in by statistical agenciesCompletion of implementation by 2005
54 NAICS Implementation Schedule U.S. Statistical AgenciesInternal Revenue ServiceCensus BureauBureau of Economic AnalysisBureau of Labor StatisticsTax Year 1998IRS isn’t really a stat agency but included them to show an early adopter.BLS range is a year later than originally planned; once 2002 version specs were out, it made more sense to wait a year and just go with that rather than publish, then break series AGAIN in one year.BLS is “slow” relative to others primarily due to the lengthy process to refile in ES-202, covered in a bit.
55 Covered Employment & Wages (ES-202) ES-202 is cornerstone employment programUniverse for virtually all BLS programsVery detailed coverage: - all employers in NV covered by UI laws - by ownership/county/6-digit SICCodes continually verified on a three-year cycleHistorical firm-level data back to 1990:Sector levels must be computedNot yet validated by NV staff202 covers all establishments covered by state Unemployment Insurance laws, which is about 99% of all establishments, period.Standard contract required response rate for refile in a year is for states to get at least 75%. During the NAICS refiling years, states were given a little extra money and asked to hit at least 90%. It was a lot of work.
56 Covered Employment & Wages (ES-202) Data Availability:First Qtr 2002 data by NAICS and SICSecond Qtr 2002 data by NAICS onlyQuarterly publication of data now required, beginning with Second Qtr 2002 data (via website)Refile load in 2001 was approximately 1/4 of the universe.Dual coding of SIC will continue for a year because a number of BLS programs will still be using it. Last qtr will beReconstruction: Confidentiality is sacred, so take no chances.States can opt to reconstruct but we recommend against it. California plans to follow BLS’ lead in terms of publication (what & when).
57 Current Employment Statistics (CES) Decreased risk of confidentiality disclosure with higher level of aggregation for publicationData for all 20 sectors will not be available for all state & area series Minimum publication will be “Expanded” Super Sector (Wholesale, Retail, Transportation & Utilities pub. separately)CES is designed to be a time series while 202 is not. CES smoothes over the bumps & drops that occur in the administrative 202 program.Publication: will probably use the (expanded) super sector approach for the smallest areas.Expanded super sector=trade & TU split in to three: whole, retail, TU
58 Current Employment Statistics (CES) Maintain continuity at “Total Nonfarm” levelRetain logging, despite reclassification to agriculture Drop animal production support (part of SIC 075)Publication by BLS and states Two-year benchmark from January through December State & Area: March National: June 2003Logging will be kept, but in Natural Resources & Mining sector, not ManufacturingThe part of 075 "animal services except veterinary" that goes to "support activities for animal production" (NAICS ) will be out of scope. Initial tabs indicate that about 69% of SIC 0751 and 33% of SIC 0752 will be out of scope. In 1999, this involved about 22,500 workers nationwideThe reconstructed data will be released at the same time as the regular two year’s worth ( ) of bmk data.
59 Current Employment Statistics (CES) Time series reconstruction:State & Areacurrent for Total Nonfarmfor All Employee seriesValidated and corrected by NV staffNO Hours & Earnings reconstruction, H&E will start as of January 2001National (Employment and H&E)for “Super Sector”minimum for detailAt different times, it was thought that states could opt to go back to only 1991 instead of California will go back to 90 for super sectors.MethodsBy firmUse LDB records back to 1991, firms dead prior to NAICS code would be assigned one, would NOT pick up economic or NECC, AE only.By ratioCould do H&E using weighted averages, distortions grow the further back you go (emerging industries)
60 Breaks in Time Series - CES Expect LOTS of breaks in seriesEffect on series depends upon level of aggregationCES Preliminary Research: 4-digit SIC level 75% will convert directly 3-digit SIC level 50% will convert 2-digit SIC level 25% will convertThe 75% number is actually a Census estimate, not CES.4-digit level CES data aren’t common, so an estimate covering all 4-digits probably won’t be made by CES folks.2/15/02: dropped this last (dated) bullet:Timeline for breaks evaluation for State & Area data 2001 July - preliminary assessment January - finalize breaks ratios
61 More information http://www.census.gov/epcd/www/naics.html Link in left frame for clarification memos is labeled“Issues & concepts”and is just out of sight on this screenprint.Clarification memos at:
62 SUMMARY NAICS NAICS is HERE NAICS offers 20 industry sectors NAICS offers new industries:- Information- Professional/Scientific/Technical Svcs- Management of Companies- Administrative & Support/Waste Mgt- Accommodation & Food Servicesand more detail
63 SUMMARY NAICS New NAICS terminology: - Super Sectors (industry groups) - Sectors (2-digit)- Industries (6-digit)New Auxiliary Treatment affects employment levels (ex: warehousing)Covered Employment and Wage (ES-202) data available now by NAICSMonthly Current Employment Statistics (CES) by NAICS with Jan data
64 NAICSSUMMARYHistorical data available for Current Employment Statistics (CES) by NAICS from Jan. 1990
65 The learning curve for NAICS is slow…… CONCLUSIONNAICSThe learning curve for NAICS is slow……and sometimes painfulBe patientGood Luck