NAICS

1. NAICS Understanding NAICS: The North American Industry Classification System November 2002 Research and Analysis Bureau Nevada Dept. of Employment, Training, and Rehabilitation TM

2. NAICS Agenda • What is NAICS and Why? • Identify NAICS Sectors • Compare to SIC Industries • Define NAICS Sectors and Industries • New Auxiliary Treatment • Implementation Schedule • Historical Data Reconstruction: Covered Employment and Wages (ES-202) vs. CES • CES Industry Detail for Publication

3. Whatis NAICS? • New Industry Classification System to replace SIC codes • Concept: Group establishments bysimilar production processes • Established in 1997 • Developed 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 industries • Revisions made little change to the original structure • Last revised in 1987

5. What is the NAICS Structure? 20 sectors (21 counting Unclassified) 1,179 industries (US) 175 more than under SIC system 6-digit numbering system

6. How Does NAICS Differ from SIC? • Emphasizes new and emerging industries, high-technology industries, and service industries • Provides greater industry detail (6-digit vs. 4-digit), especially in the services sectors • Provides for comparability with Canada and Mexico • Will be regularly maintained. Current plans are for revisions every 5 years: 2002, 2007, etc.

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 products or • Use of similar production processes • i.e., based on How, not What (produced, sold, serviced)….… usually

8. How Does NAICS Differ from SIC? Examples of applying the “Production Function” concept include: • SIC 49 included Combined Generation, Transmission, and Distribution of Gas • NAICS separates Generation & Distribution of Gas (still in Utilities) from Transmission (to Transportation) • because Transmission of Gas utilizes different processes than generation and distribution

9. How Does NAICS Differ from SIC? Other Examples of “Production Function”: • Wholesale Trade now distinguishes Agents and Brokers separately from Merchant Wholesalers • Agents 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)

10. How Does NAICS Differ from SIC? • Pawn Shops were included in SIC 5932, Used Merchandise Stores • NAICS 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. Other Examples of “Production Function”:

11. NAICS vs. SIC Structure NAICS 12 Super Sectors combinations 2-digit Sector 3-digit Subsector 4-digit Industry Group 5-digit NAICS Industry 6-digit U.S. Industry SIC 1-digit Division 2-digit Major Group 3-digit Industry Group 4-digit Industry

12. NAICS SUPERSECTORS & SECTORS "Total" 2 clusters 12 groups (Super Sectors) 21 sectors North American Goods-Producing Natural Resources and Mining 11 - Agriculture, Forestry, Fishing & Hunting Economy 21 - Mining Construction 23 - Construction Manufacturing 31/33 - Manufacturing Service-Producing Trade, Transportation & Utilities 42 - Wholesale Trade 44/45 - Retail Trade 48/49 - Transportation and Warehousing 22 - Utilities Information 51 - Information Financial Activities 52 - Finance and Insurance 53 - Real Estate and Rental and Leasing Professional & Business Services 54 - Professional, Scientific & Technical Services 55 - Management of Companies & Enterprises 56 - Administrative & Support & Waste Mgmt & Remediation Services Education and Health Services 61 - Educational Services 62 - Health Care and Social Assistance Leisure and Hospitality 71 - Arts, Entertainment, and Recreation 72 - Accommodation and Food Services Other Services 81 - Other Services (except Public Admin) Public Administration 92 - Public Administration Unclassified 99 - Unclassified

13. Agriculture, Forestry, Fishing, & Hunting Mining Construction Manufacturing Wholesale Trade Retail Trade Transportation & Warehousing Utilities Information Logging moves in from Mfg, Vets, Landscaping move out Geophysical surveying out Mgt & Land Developers in Printing and Publishing out How they sell, not what Restaurants out Warehousing growth due to Auxiliaries Excludes Waste Disposal New Industry from Publishing, Communications NAICS vs. SIC Codes

14. Finance & Insurance Real Estate and Rental & Leasing Professional, Scientific & Technical Services Management of Companies & Enterprises Administrative & Support and Waste Management Pawn Shops in Any type of rental in New industry from SIC Services New industry New industry from Business Svcs, plus Waste/Garbage NAICS vs. SIC Codes

15. Educational Services Health Care & Social Assistance Arts, Entertainment & Recreation Accommodation & Food Services Other Services Government Expanded definitions More specialized industries Includes Casinos Only New sector of Casino-Hotels Restaurants now here Fewer industries here now Tribal governments added in 2001 NAICS vs. SIC Codes

16. NAICS Sectors 11Agriculture, Forestry, Fishing and Hunting: Landscaping Services moved 21Mining 22Utilities: Waste Management moved 23Construction 31-33Manufacturing 42Wholesale Trade 44-45Retail Trade: Restaurants moved 48-49Transportation and Warehousing 51Information: Combines SIC 48, Communications, with Publishers 52Finance and Insurance

17. NAICS Sectors (cont’d) 53Real Estate and Rental & Leasing: Rental/Leasing added 54Professional, Scientific & Technical Services: From SIC 73, Business Services 55Management of Companies and Enterprises: New industry 56Administrative & Support and WasteManagement & Remediation Services: From SIC 73, Business Services and SIC 49, Refuse Systems 61Educational Services: From SIC 82, Education and SIC 73, Business Services 62Health Care & Social Assistance

18. NAICS Sectors (cont’d) 71Arts, Entertainment, & Recreation: From SIC 79, Amusement & Recreation 72Accommodation & Food Services: From SIC 70, Hotels-Motels, and SIC 58, Eating & Drinking Places 81Other Services (except public administration) 92Public Administration 99Unclassified

19. NAICS Structure As with SIC, more digits = more detail Code 72 721 7211 721110 721120 Title Accommodation & Food Service Accommodation Traveler Accommodation Hotels (except Casino Hotels) & Motels Casino Hotels

20. NAICS Structure Major Improvements for Nevada: • Casino Hotels now separate from Hotels/Motels • Separate definitions for Full Service and Fast Food Restaurants • Corporate Headquarters / Regional Offices / Management a new industry

21. NAICS Structure Major Improvements for Nevada: • • Warehousing industry better defined due to • change in treatment of Auxiliaries • • Pawn shops move from Used Merchandise • Stores to Finance (522298-All Other • Nondepository Credit Intermeditation) • Nine new Service Sectors created from SIC • 70-89, Services

22. NAICS Structure Improved ‘Business Service’ Definitions: • Employee Leasing and Temporary Help Services now identified separately • Telephone Call Centers (Telemarketing) • Travel Arrangement and Reservation Services • Convention and Trade Show Organizers

23. Classify Auxiliaries by Activity • Under SIC, were classified according to the establishment they served • Greatest impact in SIC-to-NAICS conversion: Manufacturing & Wholesale Trade Example of an auxiliary:Warehouse (separate location) for amanufacturing establishment Under NAICS, the warehouse will be classifiedin Warehousing and Storage, notManufacturing or Wholesale Trade • Auxiliaries will be classified by primary activity

24. Agriculture, Forestry, Fishing & Hunting Changes to sector: Moved in • Logging Moved out • Veterinarians (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 Construction • New Housing Operative Builders • Residential Remodelers • Heavy and Civil Engineering Construction • Specialty Trade

26. Construction (cont’d) Moved in • Construction 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. nonresidential • Example: • Residential Glass and Glazing Contractors • Nonresidential Glass and Glazing Contractors • This will be done by the BLS only and will not be in the manual

28. Manufacturing • Reorganized and restructured to achieve comparability with Canada and Mexico • 474 industries, 173 revised industries, 79 new industries • New Computer and Electronic Products Manufacturing Subsector

29. Manufacturing • Moving In: • Retail Bakeries • Custom wood cabinets, furniture • Dental Laboratories • Tire Retreading • Moving Out: • Logging • Publishing • Other impact of conversion from SIC: • Change in Auxiliary treatment

30. Redefinition of Wholesale/Retail • SIC based on class of customer • NAICS based on method of selling • Restaurants no longer included in retail

31. Wholesale Trade • Three types of wholesalers: Merchant Wholesalers • Operate a warehouse/take possession of goods • Also known as Drop Shippers, Import/Export Merchants, Distributors, Jobbers • Sell goods on their own account

32. Wholesale Trade • Three types of wholesalers: Merchant Wholesalers • Operate a warehouse/take possession of goods • Also known as Drop Shippers, Import/Export Merchants, Distributors, Jobbers Business-to-Business Electronic Markets -Sell ONLY via internet, no brick & mortar location OR -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 goods • Also known as Drop Shippers, Import/Export Merchants, Distributors, Jobbers Business-to-Business Electronic Markets (internet) Agents and Brokers • Do not take possession of goods • Also known as Manufacturers’ Representatives

34. Wholesale Trade • Three types of wholesalers: Merchant Wholesalers • Operate a warehouse/take possession of goods • Also known as Drop Shippers, Import/Export Merchants, Distributors, Jobbers Business-to-Business Electronic Markets (internet) Agents and Brokers • Do not take possession of goods • Also known as Manufacturers’ Representatives • Merchant 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 warehouse • Provide little or no display of merchandise

36. Wholesale Trade NAICS based on method of selling: • Typically operate from a warehouse • Provide little or no display of merchandise • Do not normally advertise to general public

37. Wholesale Trade NAICS based on method of selling: • Typically operate from a warehouse • Provide little or no display of merchandise • Do not normally advertise to general public • Normally denotes sales in large volumes, exceptions include durable nonconsumer goods (machinery)

38. Wholesale Trade NAICS based on method of selling: • Typically operate from a warehouse • Provide little or no display of merchandise • Do not normally advertise to general public • Normally 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 Superstores • Gasoline Stations with Convenience Stores • Electronic Shopping

40. Retail Trade • New Industries • Discount Department Stores • Warehouse Clubs and Superstores • Gasoline Stations with Convenience Stores • Electronic Shopping • Moving Out: • Eating and Drinking Places (EMP= -70,000) • Retail Bakeries

41. Transportation & Warehousing • Trucking no longer distinguished by whether or not storage is provided • General Freight Trucking, Long Distance, Truckload • General Freight Trucking, Long-Distance, Less Than Truckload • No distinction between land and air couriers • Waste collection and travel agencies move to Admin/Support and Waste Management & Remediation Services

42. Utilities • Combination utilities no longer exist (provide gas and electric or other services) • Examples of new electric power industries • Fossil Fuel Electric Power • Nuclear Electric Power Moved out • Refuse systems (garbage collection) moves to: Administrative & Support, Waste Management, & Remediation Services

43. Information Sector • New Industries:- Cellular and other Wireless Telecommunications- Telecommunications Resellers- Internet Publishing and Broadcasting - Internet Service Providers- Web Search Portals • Rest created from:Manufacturing: Publishing TCPU: Broadcasting & Communications (Television, Radio, Satellite) Services: Motion Picture & Sound Recording Information Services & Data Processing Libraries

44. Restructuring of Finance Industries • Recognizes rapid change and deregulation • Recognizes differences in countries’ financial industries structures • Agreement with Mexico at 3- and 4-digit level • Agreement with Canada at 5-digit level • New industries include: • Credit Card Issuing • Financial transactions Processing, Reserveand Clearinghouse Activities • Investment Banking and Securities Dealing

45. 1987 SIC-Services NAICS Real Estate and Rental and Leasing Professional, Scientific, & Technical Services Administrative and Support; Waste Management and Remediation Services Educational Services Health Care and Social Assistance Arts, Entertainment and Recreation Accommodation and Food Services Other Services (except Public Admin) Reorganization of Old “Services” Division

46. Professional, Scientific, & Technical Services Grouped by expertise and training of service provider 28 new industries • Offices of CPAs • Interior Design Services • Environmental Consulting • Marketing Research & Opinion Polling

47. Administrative & Support and Waste Management & Remediation Industries that support businesses 29 new industries • Professional Employer Organizations • Convention & Visitors Bureaus • Repossession Services • Hazardous Waste Collection

48. Health Care and Social Assistance 27 new industries not found under the SIC • HMO Medical Centers • Diagnostic Imaging Centers • Blood and Organ Banks • Residential Mental Health and Substance Abuse Facilities • Continuing Care Retirement Facilities

49. Arts, Entertainment, and Recreation Comparable to SIC 79, Recreation • Includes Casinos only (not Casino-Hotels) and Slot Route Operators Also includes: • Independent Writers, Musicians • Golf Courses • Amusement Parks • Museums • Gymansiums

50. Accommodation and Food Services New lodging industries • Casino Hotels • Bed-and-Breakfast Inns New eating place industries • Full-Service Restaurants • Limited-Service Restaurants • Cafeterias • Food Service Contractors