June 5, 2020 by Joshua Wright
When thinking about the labor market, you might envision large corporations and small businesses made up of thousands upon thousands of jobs–plus salaries, hourly pay, taxes, etc. But it’s important to remember that those corporations and businesses are part of a broader grouping: industries. And industry data is at the heart of labor market information.
Organizing data by industries helps economists and other researchers look past the details of individual businesses or corporations and see the bigger picture. At Emsi, we use industry data as a foundation for all economic and labor market analysis.
An industry is a category of economic activity. A single industry is usually composed of multiple establishments, and the occupations within them, that conduct similar types of business.
For example, Joe’s Plumbing might be a particular local business that is classified, along with all other related businesses, in the industry of “Plumbing, heating, and air-conditioning contractors.” Even if Joe’s Plumbing doesn’t offer heating and air-conditioning services, the business is still relevant to this particular industry.
Let’s use a more familiar example. Boeing is a single, global corporation that makes aerospace products. But because it makes a wide variety of those aerospace products, different parts of its business are classified under different industries, such as “Aircraft manufacturing,” “Aircraft engine and engine parts manufacturing,” “Guided missile and space vehicle manufacturing,” and possibly others.
There can be many types of occupations within any single industry. For example, the industry of “Hospitals” includes various types of workers such as surgeons, nurses, receptionists, computer specialists, janitors, and cooks.
The key thing to remember is that establishments, rather than business or corporate entities, collect and report industry data. An establishment is a single, physical location of economic activity. For example, a single company with its corporate office in New York, a paper manufacturing plant in Georgia, and fifteen warehouses in various cities would comprise a total of seventeen establishments, and each establishment would be classified according to its own type of activity.
In this case, three different industries would be used:
These industry names are directly from the North American Industry Classification System (NAICS).
If one corporate site carries out two very different types of activities (e.g., a regional paper company has one building with an office upstairs and a warehouse below), these are typically reported as two separate establishments with separate industry codes “if separate records are kept” (according to the BLS Handbook of Methods). Otherwise, the industry code for the establishment’s primary activity is used. The establishment itself is responsible for classifying its own activity, which can be a source of error in federal or state industry data due to misclassification, especially for very detailed industry categories.
In most cases, data sources show establishments separated by industry and by state, metro, or county-level geography. Sometimes, however, businesses are allowed to report employment and wages for a multi-site “reporting unit” instead of for individual establishments. In these cases, jobs are reported in a state-level “catchall” geographic category instead of any one county or metro area. Within Analyst, one of Emsi’s data analytics tools, this appears as “County Not Reported.”
The North American Industry Classification System (NAICS) assigns business establishments a six-digit code and category title, organizing them primarily by similar production processes. Codes are hierarchical, and by removing digits from the end of a code you get a less detailed category code. For example:
NAICS currently has five versions: 1997, 2002, 2007, 2012, and 2017. There are fairly minor differences (mostly in the Telecommunications and Manufacturing sectors), but Emsi uses the 2017 classification for all data. Thus any 2007 and 2012 codes from data in Emsi’s original sources have been converted/reconstructed using 2017 codes. Click here for more information about NAICS.
Emsi NAICS codes also have a few differences from standard NAICS:
Emsi’s core labor market information data is made up of industry, occupation, education, and demographic data. We combine these datasets to create reports within our analytical tools, such as Analyst and Developer. We even have several industry-oriented reports, like the Industry Overview, Industry Table, and Industry Map. These tools are built to help businesses and organizations of all kinds to better understand their position (and competition) in the labor market.