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Economic sectors are broad categories of businesses that
economists use to track economic growth.
An economic sector is a subset of the economy comprised of
businesses that share similar characteristics. Economists can more efficiently
analyze economic activity and measure how different types of jobs contribute to
the gross domestic product by dividing the economy into sectors.
In the United States, business activities are sometimes
divided into the public and private sectors”the public sector includes
businesses that are directly controlled by the government, while the private
sector includes privately owned businesses. Economists, on the other hand,
typically divide the economy into three major sectors: primary, secondary, and
tertiary”each classified according to how they relate to raw materials for
production. When economists discovered that the three-sector model did not
adequately capture modern jobs, they added the quaternary sector, which is
sometimes further distilled into the quinary sector.
Investors in financial markets further segment economic
sectors. Health care, technology, energy, real estate, and telecommunications
are common investment sectors.
Four Sectors of the Economy
A closer look at each of the four economic sectors follows:
1. Primary sector: The primary sector consists of
businesses that produce or collect natural resources. Agriculture, mining and
quarrying, forestry, and the oil and gas industry are all included.
2. Secondary sector: Companies in the secondary sector
transform raw materials into finished goods. This sector includes all
processing, construction, and manufacturing jobs, including aerospace
manufacturing, automobile production, textile production, shipbuilding,
chemical, and engineering industries.
3. Tertiary sector: The tertiary sector, also known as the
service sector, includes service providers such as retail sales,
transportation, insurance companies, restaurants, tourism, entertainment, legal
services, health care, and financial services.
4. Quaternary sector: Education, government
decision-making, information technology, research and development, and
entertainment are all examples of businesses in the quaternary sector. A fifth
sector, known as the quinary sector, is included in some classifications as
either a separate category or a subsector of the quaternary sector. However,
economists disagree on how to define the quinary service sector. Some argue
that it only applies to top-level decision-makers in government, education,
science, technology, media, and health care. Domestic activities, non-profits
and charities, and human care services, according to some, are included.
Industry vs. Sector
An industry is a specific group of businesses, whereas a
sector is a much broader classification of similar business activities.
Agriculture and mining, for example, are both in the primary sector but are
distinct industries. They are in the same industry because they produce and
harvest natural resources. However, the specific activities performed in
agriculture and mining differ significantly and, as a result, the two industries
are distinct.
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