# Presentation: 323096

## Industry Classif- ication

***Industry Classif- ication***

**Notes:**
In this segment, we talk about how economic census data are organized.

## Economic Census Table

***Economic Census Table***

**Data classified by industry**

**Notes:**
When we present data from the Economic Census, we classify the data by industry or kind-of-business, as illustrated by various types of motor vehicle dealers shown in the sample table.

## Standard Industrial Classification System

** ****Developed in 1930's**** **
** ****Updated every 10-15 years**** **
**Dominated by manufacturing**

**SIC**

**Notes:**
The Government’s official system for classifying industries since the 1930's was the Standard Industrial Classification (or SIC) system.
But the SIC system reflected an economy dominated by manufacturing, not the service economy into which we have evolved.	

## NAICS

***North***
***American***
***Industry***
***Classification***
***System***

**Notes:**
America needed a better classification system, and now it has one.

## NAICS

***NAICS***

**North **
**American**
**Industry **
**Classification **
**System**

**Notes:**
The new North American Industry Classification System replaces the old Standard Industrial Classification (or SIC) system as of 1997.  NAICS (which rhymes with "snakes") was defined as a joint project of the U.S., Canada and Mexico.

## NAICS is New

**New industries**
**New sectors**
**New numbering system**

**Notes:**
The most obvious differences between NAICS and SIC can be seen through
   New Industries
   New sectors
   And a new numbering system

## New Industries in NAICS - 97

***Selected examples***

**Fiber optic cable manufacturing**
**Paging**
**Warehouse clubs**
**Food/health supplement stores**
**Telemarketing bureaus**
**HMO medical centers**
**Diet and weight reducing centers**

**Notes:**
 NAICS had immediate benefits by identifying more than 350 new industries.
   This slide shows a handful of examples, like paging and telemarketing bureaus, that show how our economy has been changing in recent years.

## NAICS Sectors

***11        Agriculture, Forestry,******              Fishing, and Hunting ******21        Mining ******22        Utilities ******23        Construction ******31-33   Manufacturing ******42        Wholesale Trade ******44-45   Retail Trade ******48-49  Transportation and******              Warehousing ******51        Information ******52        Finance and Insurance ******53        Real Estate and Rental******              and Leasing ***

***54       Professional, Scientific and Technical***
***              ******Services ***
***55       Management of Companies and Enterprises ***
***56       Administrative and Support***
***              ******and Waste Management and***
***              ******Remediation Services***
***61       Educational Services ***
***62       Health Care and Social Assistance ***
***    ******Arts, Entertainment and ***
***               ******Recreation ***
***    ******Accommodation and ***
***               ******Food Services ***
***    ******Other Services (except ***
***              ******Public Administration) ***
***92       Public Administration ***

**Notes:**
At the same time, the way that industries are grouped into major economic sectors also changed.
   The SIC had 10 divisions, NAICS has 20.

## New Numbering System

**Notes:**
NAICS also introduces a new numbering system.

The new NAICS codes have 6 digits to replace the 4-digit SIC system.

You can think of there being an extra digit at front of the code and an extra digit at the back of the code.  For example, 3-digit NAICS subsectors represent roughly the same level of detail as did the 2-digit SIC level.  

Five digit codes represent NAICS industries–generally the level at which the three countries have corresponding classifications.  We use the term U.S. Industry or US National Industry to refer to the six digit codes which in many cases go beyond what Canada and Mexico can provide.

## New Numbering System

***Example***

***     ******Description***

***Code***

***Level***

***Information***

**51**

**Sector**

**Broadcasting & Telecommunications**

**513**

**Subsector**

**Telecommunications**

**5133**

**Industry Group**

**Wireless Telecommunications**

**51332**

**Industry**

**Paging**

**513321**

**U.S. Industry**

**Notes:**
Here is an actual example of the NAICS hierarchy.

Within the Information Sector, 51, there is 
a 3-digit subsector for Broadcasting and Telecommunications,
a 4-digit industry group for Telecommunications, and 
a 5-digit industry for Wireless Telecommunications.
Only the U.S. further defines a 6-digit industry for paging, as distinct from the other category not shown–Cellular and other Wireless Telecommunications. (513322)

Many users had hoped that going from a 4-digit SIC to a 6-digit NAICS code would mean orders of magnitude more detail.  In fact, the number of classifications has gone up only about 15 percent.

The greatest significance is that the NAICS identifies important new industries and important new groupings.

## New Sectors

***SIC Division***

***NAICS Sector***

***Transportation, ***

***Communications, ***

***and Utilities***

***Utilities***

***Transportation and Warehousing***

***Finance, ***

***Insurance, ***

***Real Estate***

***Finance and Insurance***

***Real Estate and Rental and Leasing***

***Retail Trade***

***Retail Trade***

***Accommodations and Food Services ***

***Service ***

***Industries***

***Professional, Scientific, and Technical Svc***

***Administrative & Support and***

***   ******Waste Management & Remediation Svcs***

***Educational Services***

***Health Care and Social Assistance***

***Arts, Entertainment, and Recreation ***

***Information***

**Notes:**
This slide shows how new sectors were broken out from the familiar divisions of the SIC.
   There are new sectors, like Utilities, and Transportation and Warehousing, that are broken out from old broader categories.
   Most dramatic are the new differentiations within service industries–6 new sectors

## New Sectors

***SIC Division***

***NAICS Sector***

***Transportation, ***

***Communications, ***

***and Utilities***

***Utilities***

***Transportation and Warehousing***

***Finance, ***

***Insurance, ***

***Real Estate***

***Finance and Insurance***

***Real Estate and ******Rental and Leasing***

***Retail Trade***

***Retail Trade***

***Accommodations and ******Food Services****** ***

***Service ***

***Industries***

***Professional, Scientific, and Technical Svc***

***Administrative & Support and***

***   ******Waste Management & Remediation Svcs***

***Educational Services***

***Health Care and Social Assistance***

***Arts, Entertainment, and Recreation ***

***Information***

**Notes:**
Yet that straightforward chart is really an oversimplification
   In fact, major chunks of service industries are also going into the new Accommodation and Food Services sector and the Real Estate and Rental and Leasing sector.
   And the new Information sector shown at the bottom of the screen is really getting its largest component–communications–from the old transportation, communications, and utilities division of the SIC.

## Information Sector

***Created from***

**Manufacturing**
**	****Publishing**
**Transportation, Communication, and Utilities**
**	****Broadcasting and Telecommunications**
**Service Industries**
**	****Motion Picture and Sound Recording**
**	****Information Services and Data Processing **
**	****-  Libraries**

**Notes:**
 You may have never thought of newspaper publishing as a manufacturing activity.  That is why publishing makes a better anchor for the new information sector in NAICS.
   Broadcasting and telecommunications is actually a fairly large segment of the economy.
   It makes sense that movie production and sound recording fit in the same sector.
   Information services round out the new information sector, including both computerized information services and libraries.

## Accommodation and Food Services 

***Created from***

**Service Industries**
**	****Hotels and other lodging**
**Retail Trade**
**	****Eating and drinking places**

**Notes:**
 The new accommodation and food services sector was created by marrying the hotel and lodging industries, from the old services sector, with eating and drinking places from retail trade.
   Retail trade is, of course, a very familiar concept.  In 1992, Eating and drinking places made up about 10 percent of retail trade.  Now that large chunk is removed from retail trade.

## Retail vs Wholesale

**Wholesale Trade**
**Sells to business**
**Office or warehouse**
**Advertise to trade**
**Display little or no  **
**  ****merchandise**

**Retail Trade**
**In SIC**
**Sells to consumers**
**In NAICS**
**Location attracts public**
**Advertise to public**
**Display merchandise**

**Notes:**
 But there is more.
   The distinction between retail and wholesale trade used to be in terms of who the customer was.  Under SIC retailers were those who sold to consumers, and wholesalers sold to businesses and institutions.  Then along came a variety of computer stores and office supply stores and building material stores that sold to both businesses and individuals.
   In NAICS, a retailer is characterized more by the way it does business–with a storefront, advertising to the public, and display of merchandise–than who its customer is.
   The net effect of these changes is to subtract some activity from wholesale trade and add it to retail trade.

## Two Views of 1997 Retail Trade

**Notes:**
Looking at 1997 retail sales as classified by SIC and NAICS, they don’t look all that much different.
The inflow of wholesalers into retail trade appears to have offset much of the loss of restaurants to the new accommodations and foodservices sector.
At least that is the way it looks in terms of sales.

## Two Views of 1997 Retail Trade

**Notes:**
But the picture is much different in employment.  
Restaurants tend to have lots of employees relative to their sales.
The formerly wholesale establishments that came in to retail have much fewer.
In terms of employment, retail trade under SIC and NAICS look quite different.

## Establishment

**A store, warehouse, factory, etc. at a single physical location**

**Notes:**
 Before we go further, lets make sure we understand just what it is that is being classified by industry. 

A business establishment is a store, warehouse or factory operating at a specific physical location.

## Company

**One or more establishments under ****common ownership or control**

**Notes:**
That is not the same thing as a company.
   A company consists of one or more establishments under common ownership or control.  We require each company to give us separate data for each of their establishments, because frequently the different establishments do different things, and typically the different establishments are located in different geographic areas.  
   So it is each establishment that gets a NAICS code, not the company as a whole.
   And it is the number of establishments, not the number of companies, that is featured in most census statistics.

## NAICS Manual

**Definition for each industry**** **
**Alphabetic index**** **
**Correspondence tables**** **

**2002 Edition**
**NAICS02 to NAICS97**
**NAICS97 to NAICS02**

**1997 Edition**
**NAICS97 to SIC**
**SIC to NAICS97**

**In print**
**On CD**
**At www.census.gov**

**Notes:**
There are many resources to help you make the shift from SIC to NAICS.
The definitive resource is the NAICS Manual, available in print, on CD, and at our web site.
   The manual includes definitions for each industry, an alphabetic index, and, in the 1997 edition, detailed tables illustrating the correspondence between NAICS and SIC, and vice versa.

## NAICS to SIC correspondence

**Notes:**
Here you can see the new publishing industries within NAICS
   Newspaper publishing (NAICS 51111) is, one-for-one, the same as SIC 2711, and the table includes an E code to tell you that this is simply an existing industry.
   Periodical and book publishers have a code R to tell you these industries have been revised from their SIC counterparts
   Database and Directory publishers (NAICS 51114) have a code N for a new industry, without a real counterpart in SIC.
  Let’s hone in on Greeting Card Publishers (NAICS 511191) shown at the bottom.  That corresponds to only part of  SIC 2771.  What else was in 2771 that is left out of NAICS 511191?

## NAICS to SIC  -  SIC to NAICS

**Notes:**
The web site allows you to look at correspondence from both the NAICS and SIC perspective.
   In this consolidated presentation, one can click on the SIC code, and that brings up the SIC to NAICS correspondence table at the bottom.  There we can see what happened to the other part of SIC 2771.  The SIC was broken into 5 industries representing different printing technologies, and a sixth for publishing, that is, content development and marketing.

## NAICS definition

**Notes:**
By clicking on the NAICS code instead of the SIC code, you can get to narrative definitions of each NAICS category, as well as to listings of the index entries that might bring you to this category.

   The correspondence tables are very useful, but when an industry is split, they don’t tell you how important each component is.  They leave you with the question of how important are technical manuals—coming from SIC 2741--relative to other parts of the book publishing industry—coming from  SIC 2731.

## Bridge between NAICS and SIC

**Notes:**
That is why there is a very important publication issued as part of the 1997 Economic Census entitled Bridge between NAICS and SIC.  This gives national statistics defining for us just how much of each SIC category has gone to each NAICS–and vice versa–thereby defining comparability issues much more thoroughly than any other source.
The answer to our question about Book Publishers is that the 1997 Economic Census didn’t even find any establishments primarily engaged in publishing technical manuals to the exclusion of all else, so movement of that category had no practical effect.
The symbols here are a take-off on the bridge analogy.  Those categories completely comparable between SIC and NAICS are shown with a full bridge with superstructure.  Those not comparable are shown by a drawbridge wide open.  Those almost comparable, like book publishers, are shown with a drawbridge nearly closed.  We used that symbol if SIC-based data could get us within 3% of the NAICS sales or revenue.

## Assembling Time Series

- SIC      1987  1992   (1997)
- NAICS                      1997  2002  2007

**Notes:**
Data prior to 1997 were published based on SIC.  All data for 2002 and future years will be based on NAICS.  Only for 1997 do we have some overlap between the two systems.  Most 1997 data were published by NAICS, but selected national and state data were also published by SIC to facilitate the transition.

NAICS gives us a better foundation for analysis of trends in the future.  But in many respects there is a disconnect.  Some series simply will not be able to bridge the gap between the two systems.

## Changes for NAICS 2002

**Construction**
**Wholesale Trade**
**Retail Trade (E-tailing)**
**Information (Internet publishing)**

**Implemented in 2002 Economic Census (published 2004-6)**

**Notes:**
The old SIC system was updated every 10 to 15 years.  That proved to be too infrequent.  NAICS will be reviewed every 5 years.

There are already changes implemented for 2002.  
Industries have been largely redefined within Construction and Wholesale Trade.  Still, none of the boundaries between sectors were affected, so we have nothing like the upheaval users dealt with for 1997.  
Changes in retail trade and information are comparatively minor, with little or no impact on historical comparability

## New Industries in NAICS - 02

***Selected examples***

**Residential remodelers**
**Siding contractors**
**Business-to-business electronic markets**
**Discount department stores**
**Electronic shopping**
**Electronic auctions**
**Internet publishing and broadcasting**

**Notes:**
These are just selected examples of the new industries identified for 2002, but you see the main thrust.
Wholesale trade now separates out business-to-business electronic auctions. 
Retail trade now breaks out electronic shopping and electronic auctions from mail-order houses.  
And some of the industries in the information sector were regrouped so as to allow the identification of internet publishing.

## www.census.gov/naics

**Notes:**
The place where you find all of the answers is the NAICS website.
In the upper left corner of the page is the link to the NAICS to SIC and SIC to NAICS tables we illustrated earlier.  Just below that is a NAICS search box where you can type in a word and get a list of all of the related industries.
Let’s imagine that we have typed “software” in and clicked NAICS Search.

## “Software” index entries

- “Software” index entries

**Notes:**
Here is a list of related industries, including Software Publishers, NAICS 511210.  Let’s click on that code 511210.

## NAICS definition (Software Publishers)

**Notes:**
This brings us to the formal paragraph-style definition of software publishers, coupled with cross-references to related industries and a list of all of the index entries that could have brought us to this industry—sort of an operational definition.

This page also lets us link directly to correspondence tables, to the 1997 bridge tables, and to a sampler of economic census data for this industry from the 1997 Economic Census.

## Search results showing 2002 and 1997 codes

**Notes:**
Backing up to the list of entries we saw a moment ago, note that there are actually two code columns, one for 2002 and one for 1997.  The code for software wholesaling changed so you see two separate codes in the next to the last entry.  You can click on the two codes to see how the definition changed.

## www.census.gov/naics

**Notes:**
The NAICS web page is frequently updated.  Concordances for 2002, and between NAICS and some international classification systems, have been added.  There is even information about changes contemplated for 2007.

## Transition to next segment

***American***
***Industry***
***Classification***
***System***