HOME

TOPICS
HOME

ECONOMIC
BASE PAGE

Florida State University 
Department of Urban and Regional Planning
Planning Methods III: Forecasting 

Topic
Summary

Major Industrial
Sectors
SIC Codes

Three and Four
Digit SIC Codes

Limitations of
SIC Codes

Links

STANDARD INDUSTRIAL
CLASSIFICATION (SIC) CODES

Topic Summary

Standard Industrial Classification Codes attempt to classify industries according to similarities in products, services, and production and delivery systems. SIC Codes organize industries in an increasing level of detail ranging from general economic sectors (i.e. manufacturing, services) to specific industry segments (i.e. commercial sports, laundry businesses).

Major Industrial Sectors are the most general industrial classifications. These are identifed using letters. These are the major sectors of the American economy, as identified when SIC Codes were developed in the 1930s, 1940s, and 1950s. The Two-Digit SIC Code levels are subunits of the Major industrial Sectors and are indentified by two numeric digits. Two-Digit codes are composed of many Three-Digit sub-levels, which are, in turn, composed of many Four Digit sub-levels.

Major Industrial Sectors (SIC Codes)

These are the major industrial sectors of the economy as identified by the SIC Code Model:

Three and Four Digit SIC Codes

Three-Digit and Four-Digit codes are more in-depth industrial classifications. They are subsections of the major industries identified at the Two digit-level. Four-Digit SIC Codes are subsets of a single Three-Digit level which is, in turn, part of a subset of a Two-Digit level.

For example, in King County Washington, the 1994 data for a subset of the Construction Sector (which is a Two-Digit Industrial Classification) has employment numbers as follows:

Table 1: Construction Employment in King County, 1994

We see in Table 1 that King County has a total Construction sector (Two-Digit level) employment level of 46,999.

Of those almost 47,000 jobs 14,133 are classified as General Contractors, which is a Three-Digit level. General Contractors are a sub-level of the Construction Major Industrial Classification. Note that every Three Digit Level has a Zero for its fourth digit (i.e. 1510 and 1720 are three digit levels!)

In the bottom section of this table we see a Three Digit Level (Masonry, 1740) broken into its three Four Digit SIC Codes (1741, 1742, 1743). Note that the number of jobs at the four digit level add up to the total for the three digit level (850+2,954+373=4,177).

Limitations of SIC Codes

There are three major limitations to the SIC Codes model:

• There are clearly problems with allocating employees within a given firm to the “correct” designation of basic or non-basic. For example, administrative employees that work within an automobile manufacturing factory should be reported as non-basic because they are support services for the automobile plant. However, these employees usually are included with the manufacturing jobs and they therefore get reported as basic sector employees.

• SIC codes originally were designed for the “traditional” manufacturing-based economy. A glance at the two-digit designations illustrates this as major sectors still include mining and agriculture which are major sectors of an earlier era. In short, SIC codes have been slow to respond to the restructuring American (and International) economy; an economy that is now built as much upon information and services as it is upon the gathering of natural resources and manufacturing of goods. Should there now be a two-digit sector that addresses the most common resource of the American Economy: information?

• Lastly, related to the above, SIC codes have traditionally been slow to recognize new industrial sectors or individual industries. For example, the recent rise in high technology industries and firms (like Microsoft and the "Northwestern Silicon Valley" on the Eastside) have been slowly accommodated by newer SIC Code designations. Where these SIC Codes should fall (within Services (Code=70)) and at what digit level they should be placed are very difficult questions.

Links

Census Bureau SIC Code Page: The Census Bureau's WWW page on the SIC system.

North American Industry Classification System (NAICS): Resulting from NAFTA and a desire to compare the economies of Canada, Mexico, and the United States, the NAICS has been designed to replace the old SIC Code system for classifying industries. More information:

• Official Census Bureau press release on NAICS

• NAICS and SIC comparability tables

• Implementation Schedule for the NAICS system

• Description of How NAICS will affect Data Users

Top of the Page