This new section presents data on various California industries summarized from the 1997 Economic Census. Be aware that a major change has occurred in the way industries are classified for statistical tabulations. Earlier Economic Census reports were based on the Standard Industrial Classification (SIC) system. The 1997 Economic Census is based on the new North American Industry Classification System (NAICS). See table on next page for structure comparison. This change resulted in a significant loss of many of the existing time series formed using the SIC. The official source for these data is the US Department of Commerce, Bureau of the Census.

BACKGROUND

Over the years, the economy of the United States has shifted from an agricultural based economy, to a manufacturing economy, and now to a service based economy. In the 1930s, in order to better understand the industrial composition and the changes taking place in the U.S. economy, an industrial classification system, referred to as the Standard Industrial Classification (SIC) system, was developed. The SIC system provided a consistent framework for the assignment of unique industry codes to each business firm and the subsequent collection, tabulation, and analysis of economic statistics by governments, researchers, and businesses. During the intervening decades, the SIC system has been updated on a periodic basis. While the current SIC system adequately reflects the manufacturing economy, it provides insufficient detail to analyze the services sector of the economy. Recent developments in information services, new forms of healthcare provision, and even high-tech manufacturing can not be studied under the current SIC system. In order to address the data needs of a changing world, the SIC system has been carefully reconceptualized. The new North American Industry Classification System (NAICS) not only represents the first major revision of the industrial classification used in the United States since the 1930s, but also represents a cooperative effort between the United States, Canada, and Mexico to develop a uniform coding structure which could be used by all three countries. The NAICS will allow the collection and analysis of trade and production data directly with our trading partners in NAFTA.

PRINCIPLES OF THE NAICS

The old SIC system was a mixture of concepts. Some industries were based on demand groupings, activities that were similar in the eyes of users, while others were based on supply groupings. The new NAICS is the first industrial classification system in the United States to use a unified economic concept to define industries. The production function or supply based definition of industries classifies establishments using similar raw material inputs, capital equipment, and labor in the same industry. This approach creates homogeneous groupings that are well suited for economic analysis.

There are four primary concepts that were used during the NAICS development. First, the NAICS was developed using a production oriented conceptual framework. As described earlier, establishments that do things in a similar way will be classified together. Second, new industries in the NAICS focused on emerging economic activities, services in general, and industries producing advanced technology. Third, time series were maintained whenever possible. However, because of national differences in the old coding systems of the United States, Canada, and Mexico and changes to make them comparable, there will be significant time series breaks from the SIC to the NAICS. Finally, the NAICS strove for compatibility with the 2-digit level of the International Standard Industrial Classification of All Economic Activities, Revision 3 (ISIC Rev. 3) of the United Nations.

For more information, visit the US Bureau of the Census web site at http://www.census.gov/epcd/www/naics.html or call (301) 457-2547.