North American Industry Classification System | Research & Encyclopedia Articles

The North American Industry Classification System (NAICS) groups establishments into industries according to their primary economic activities. It facilitates the collection, calculation, presentation, and analysis of statistical data by industry. The United States, Canada, and Mexico developed the system to provide comparable statistics among North American Free Trade Agreement countries. 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 is founded on 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.

The NAICS replaced the Standard Industrial Classification (SIC) in the United States. Developed in the 1930s, the SIC was periodically revised to reflect economic changes through 1987. The SIC was increasingly criticized as rapid changes affected both the U.S. and world economies. NAICS addresses such changes by developing production-oriented classifications for new industries, high-technology industries, and service industries in general.

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 (INEGI) and Statistics Canada to develop the NAICS. The three countries will rejoin to update the NAICS codes on a regular five-year cycle, in contrast to the sporadic revisions of the SIC codes.

All federal agencies have adopted NAICS United States for statistical use. NAICS commences implementation for reference year 1997 in the United States and Canada, and for 1998 in Mexico. The U.S. Bureau of the Census used NAICS to prepare the 1997 Economic Census, available in 1999. Government-wide implementation of NAICS will continue at least through 2004 in the United States. Updated information about implementation is available from the Census Bureau's NAICS Internet site at http://www.census.gov/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 third, fourth, fifth, and sixth digits indicate the subsector, industry group, NAICS industry, and national industry respectively. There are codes for 1170 U.S. industries in NAICS—United States, 1997.

NAICS classifies sectors first. The NAICS— United States, 1997 manual presents the twenty sectors, their two-digit codes, and the distinguishing activities of each, as follows:

11

Agricultural, Forestry, Fishing and Hunting—Activities of this sector are growing crops, raising animals, harvesting timber, and harvesting fish and other animals from farms, ranches, or the animals' natural habitat.

21

Mining—Activities of this sector are 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 mining activity.

22

Utilities—Activities of this sector are generating, transmitting, and/or distributing electricity, gas, steam, and water and removing sewage through a permanent infrastructure of lines, mains, and pipe.

23

Construction—Activities of this sector are erecting buildings and other structures (including additions); heavy construction other than buildings; and alterations, reconstruction, installation, and maintenance and repairs.

31-33

Manufacturing—Activities of this sector are the mechanical, physical, or chemi cal transformation of material, sub stances, or components.

41-43

Wholesale Trade—Activities of this sector are selling or arranging for the purchase or sale of goods for resale, capital or durable nonconsumer goods, and raw and intermediate materials and supplies used in production, and pro viding services incidental to the sale of the merchandise.

44-46

Retail Trade—Activities of this sector are retailing merchandise generally in small quantities to the general public and providing services incidental to the sale of the merchandise.

48-49

Transportation and Warehousing— Activities of this sector are providing transportation of passengers and cargo, warehousing and storing goods, scenic and sightseeing transportation, and sup porting these activities.

51

Information—Activities of this sector are distributing information and cultural products, providing the means to transmit or distribute these products as data or communications, and processing data.

52

Finance and Insurance— Activities of this sector involve the creation, liquidation, or change in ownership of financial assets (financial transactions) and/or facilitating financial transactions.

53

Real Estate and Rental and Leasing— Activities of this sector are renting, leasing, or otherwise allowing the use of tangible or intangible assets (except copyrighted works), and providing related services.

54

Professional, Scientific, and Technical Services—Activities of this sector are performing professional, scientific, and technical services for the operations of other organizations.

55

Management of Companies and Enterprises— Activities of this sector are the holding of securities of companies and enterprises, for the purpose of owning controlling interest or influencing their management decision, or administering, overseeing, and managing other establishments of the same company or enterprise and normally undertaking the strategic or organizational planning and decision making of the company or enterprise.

56

Administrative and Support and Waste Management and Remediation Ser vices— Activities of this sector are per forming routine support activities for the day-to-day operations of other organizations.

61

Educational Services— Activities of this sector are providing instruction and training in a wide variety of subjects.

62

Health Care and Social Assistance— Activities of this sector are providing health care and social assistance for individuals.

71

Arts, Entertainment, and Recreation— Activities of this sector are operating or providing services to meet varied cultural, entertainment, and recreational interests of their patrons.

72

Accommodation and Food Services— Activities of this sector are providing customers with lodging and/or preparing meals, snacks, and beverages for immediate consumption.

81

Other Services (Except Public Administration) — Activities of this sector are providing services not elsewhere specified, including repairs, religious activities, grantmaking, advocacy, laundry, personal care, death care, and other personal services.

91-93

Public Administration—Activities of this sector are administration, management, and oversight of public programs by federal, state, and local governments.

NAICS code 711211 identifies the Sports Teams and Clubs industry in the United States and Canada. It belongs to:

Sector 71—Arts, Entertainment and Recreation

Subsector 711—Performing Arts, Spectator Sports, and Related Industries

Industry Group 7112—Spectator Sports

NAICS Industry 71121—Spectator Sports

National Industry 711211—Sports Teams and Clubs

The NAICS—United States, 1997 manual gives a detailed description of the Sports Teams and Clubs industry. It consists of professional or semiprofessional sports teams or clubs engaged in live sporting events (e.g., football, baseball, and soccer games) for a paying audience. These establishments may or may not run their own stadium, arena, or other facility to present sporting events. The United States, Canada, and Mexico collect similar data for NAICS industry 71121, Spectator Sports. The United States and Canada collect more detailed data at the six-digit national industry level for Sports Teams and Clubs. The United States collects data for two additional national industries within the NAICS industry: Spectator Sports: Racetracks (code711212) and Other Spectator Sports (code 711219).

NAICS is a classification system for establishments. NAICS—United States, 1997 defines an establishment as "the smallest operating entity for which records provide information on the cost of resources—materials, labor, and capital—employed to produce the units of output" (EOP 1998, p. 16). In the United States the establishment is generally a single physical location using a distinct process to produce goods or services. An enterprise (company) may consist of more than one establishment. Each establishment within the enterprise is assigned a NAICS code. Statistical agencies such as the Census Bureau and the Bureau of Labor Statistics assign NAICS codes based on information reported to them.

Comparable data for the United States, Canada, and Mexico are generally available at the five-digit NAICS industry level. The sixth digit of the NAICS code is used to define national industries, which differ among the three countries due to differences in economic and organizational structures.

Many other countries collect data using the International Standard Industrial Classification (ISIC) system established by the United Nations (UN) in 1948. The UN's Statistical Commission revised the ISIC structure and codes in 1958, 1968, and 1989. Similar to NAICS, ISIC primarily classifies establishments (rather than enterprises and firms). The criteria used to classify ISIC division and groups are: (1) the type of goods and services produced; (2) the uses of goods and services produced; and (3) the inputs, process, and technology of production. The third classification criterion of the ISIC is the conceptual foundation of NAICS. Hence, NAICS is aligned more closely with ISIC than the 1987 SIC system. Statistics compiled on NAICS are comparable with statistics compiled according to ISIC, Revision 3, for some sixty high level groupings.

Executive Office of the President (EOP), Office of Management and Budget. (1998). North American Industry Classification System—United States, 1997. Springfield, VA: National Technical Information Service.

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