Section 1: 2002 NAICS and Previous Industry Classification Systems

After 60 years of use, the U.S. Standard Industrial Classification (SIC) system has been retired and replaced by the North American Industry Classification System (NAICS). NAICS is the product of a collaborative effort by the United States, Canada, and Mexico. For the first time ever, this common classification system allows direct comparisons of economic data across borders in North America.1 All U.S. federal government agencies adopted the 2002 NAICS beginning with 2003.² Chart 1 provides a comparison of the 2002 NAICS, 1997 NAICS, and 1987 SIC codes for the construction industry.

NAICS uses a six-digit classification code that allows greater flexibility in the coding structure. The first two digits of the six-digit code designate the highest-level groupings among major industry sectors (for example, Mining codes as 21, Utilities as 22, and Construction as 23), with each digit making the code more specialized. NAICS allows each country to recognize its own, possibly unique, industries by going into more detail, using a sixth digit. Thus, six-digit U.S. codes may differ from counterparts in Canada or Mexico, while the five-digit codes remain standardized. The following example shows the 2002 NAICS structure.

NAICS represents a fundamental change in approach to industrial classification. Under the SIC system, some establishments were classified according to their production processes, but others were classified using different criteria, such as class of customer, i.e., public, private, individual. By contrast, NAICS is based solely on production processes; that is, NAICS classifies each establishment into a detailed industry based on the production processes it uses. Thus, reclassification under NAICS substantially changes how many and which businesses are included in certain sectors of construction. For instance, Land Subdivision (SIC 6552), which was not part of construction under the SIC system, is included in Heavy and Civil Engineering Construction (NAICS 23311, 1997 version; NAICS 23721, 2002 version). Other SIC categories added to the construction industry include: Management Services (SIC 8741) for each industry subsector; Radio and Television Repair Shops, i.e., Household Antenna Installation (SIC 7622) to NAICS 23829; Repair Shops and Related Services, i.e., Boiler Cleaning, Chipping, and Scaling (SIC 7699) to NAICS 23822 (2002 version).

Key changes in construction in NAICS also include the new listing of a residential remodeling industry, the reshuffling of many heavy construction industries, and the rearranging (renumbering) of the specialty trades to place them in the appropriate sequence of the construction process.

The construction industry had substantial revisions to classifications within 2002 NAICS, although most NAICS industry classifications remained unchanged between 1997 and 2002. For example, part of Support Activities for Mining under the 1997 (NAICS 21311) has been moved to construction under the 2002 NAICS as Site Preparation Contractors (NAICS 23712), a code which now bundles six different codes from the 1997 NAICS and 10 codes from the 1987 SIC. Some 1997 NAICS categories have been broken into separate 2002 NAICS industries, creating more industry-level detail. One example is Carpentry Work (23551 under NAICS 1997), split into Framing Contractors (NAICS 23813), and Finish Carpentry Contractors (NAICS 23835) under 2002 NAICS. NAICS is to be reviewed and updated every five years to reflect our changing economy. The 2007 NAICS is now available, and the codes are exactly the same as 2002 NAICS for the construction industry, but has a significant revision within part of the Information Sector.³

The NAICS production-oriented system means that government data can be used more easily for measuring and grouping productivity, unit labor costs, the capital intensity of production, and understanding employer-output relationships and other such statistics. However, the transition to the new system poses some difficulties for researchers. To help data users making the transition to the new system, the following pages provide construction statistics showing the historical trends across the three coding systems.

1. 2002 North American Industry Classification System

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