The North American Industry Classification System (NAICS), the primary classification system used to measure our evolving economy, was recently updated but this is the first year the U.S. Census Bureau’s economic surveys and programs are releasing data using the latest classifications.
The 2022 Economic Census, Geographic Areas Statistics is set to be released in December, becoming the first major publication to feature detailed industry statistics using the latest 2022 NAICS.
The Retail Trade sector now focuses on the types of products being sold instead of the method of selling them.
The Census Bureau and other federal statistical agencies collect, tabulate, present and analyze data about the economy of the United States. The NAICS was developed as part of an agreement between the federal governments of Canada, Mexico and the United States, creating compatible business statistics across North America.
It provides a standardized framework for classifying industries, allowing for consistent data collection and reporting across agencies throughout the federal government.
Trade and professional associations use data summarized by the NAICS to develop forecasts; media organizations use these estimates for news reports; and businesses use the info to measure market share, analyze business potential and plan investment decisions.
The Census Bureau uses the NAICS to publish data from more than 60 business surveys and programs across dozens of industries and time intervals.
Over 100 six-digit NAICS codes of the total 1,057 in 2017 were impacted in the latest NAICS revision.
Some changes were minor, involving the consolidation of multiple 2017 NAICS codes into new NAICS codes for 2022.
For example, Gold Ore Mining (212221) and Silver Ore Mining (212222) each had their own six-digit NAICS code before and now have one: Gold Ore and Silver Ore Mining (212220).
Wholesale Trade (42) included another consolidation: Men's and Boys' Clothing and Furnishings Merchant Wholesalers (424320) and Women's, Children's, and Infants' Clothing and Accessories Merchant Wholesalers (424330) were combined into Clothing and Clothing Accessories Merchant Wholesalers (424350) in the 2022 NAICS update.
The biggest changes were in the Retail Trade (44-45) and Information (51) sectors.
The Retail Trade sector now focuses on the types of products being sold instead of the method of selling them. There is no longer any distinction between brick-and-mortar stores and online retail.
Across the entire Retail Trade sector, Electronic Shopping and Mail-Order Houses (454110) and Other Direct Selling Establishments (454390) industries in 2017 NAICS are now combined with 2017 storefront industries.
An example that illustrates this change is hardware stores. All hardware sales previously classified as part of Electronic Shopping and Mail-Order Houses (454110) and Other Direct Selling Establishments (454390) are now grouped with activity previously captured under Hardware Stores (444130) to create Hardware Retailers (444140) in 2022.
Similar to the changes in the Retail Trade sector, the internet was eliminated as a method of delivery distinction in the Information sector. Publishing Industries (except Internet) (511) and parts of Other Information Services (519) were merged to form Publishing Industries (513).
Rather than being classified as Newspaper Publishers (511110), newspaper businesses exclusively publishing electronically were classified as part of Internet Publishing and Broadcasting and Web Search Portals (519130) in 2017. In the 2022 NAICS update, all newspaper publishing businesses, regardless of the method used to publish, are classified as Newspaper Publishers (513110).
In addition, Broadcasting (except Internet) (515) and parts of Other Information Services (519) were combined to create Broadcasting and Content Providers (516). These changes were implemented to better categorize the services provided by media companies and the way they’re distributed to customers.
As noted, the Census Bureau began using the updated classification system in the 2022 Economic Census. All remaining Census Bureau economic programs and surveys based on the NAICS are planned to transition to the 2022 NAICS by the end of 2027.
For programs that maintain time series, historical estimates will be restated to align with the updated 2022 NAICS codes whenever possible. Descriptions of the methods used for restatement will be provided as part of the methodology documentation for each program.
This transition will ensure all Census Bureau economic data users will have the most accurate and relevant information for analyzing industry trends, making informed decisions and developing economic policies.
The North American Industry Classification System provides detail by using a coded hierarchical structure to distinguish between different sectors and their various industries.
If you own a business that primarily sells apparel and are trying to identify your NAICS classification, the first question you would ask is “What sector am I in?” The NAICS organizes economic activity across 20 different sectors, each designated by a two-digit code. If you consider your business to be a retailer, Retail Trade (44-45) would be your place to start.
You could then determine that businesses like yours that sell apparel fall into Clothing and Clothing Accessories Retailers (458), which is a part of the Retail Trade sector.
From there, businesses can be classified into more specific levels of detail including the four-digit industry group, five-digit NAICS industry and six-digit national industry codes.
The U.S. economy is dynamic and as new industries and products emerge, others shrink or become obsolete. To account for these types of changes, the NAICS is updated every five years to maintain relevance.
Updates can include changes to the titles and codes of various NAICS industries, including combining or separating NAICS codes across various parts of a sector.
One of the more common changes is the consolidation of multiple NAICS codes into one.
Sometimes the Census Bureau is required to suppress estimates due to poor data quality or confidentiality concerns. In some of these cases, combining NAICS codes may provide users with more data than if estimates from multiple, smaller industries were suppressed.
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