Economic Sectors Explained: The 4 Sectors of the Economy

An economic sector is an area of the economy made up of businesses with similar characteristics. Dividing the economy into different sectors allows economists to more efficiently analyze economic activity and measure how different types of jobs contribute to the gross domestic product (GDP).

In the US economy, business activities sometimes divide into the public or private sector—the public sector includes businesses under direct governmental control, while the private sector comprises privately owned businesses. However, economists typically divide the economy into three main sectors: primary, secondary, and tertiary—each classified by how they relate to the raw materials for production. Finding that the three-sector model didn’t adequately capture modern jobs, economists added the quaternary sector, which sometimes gets further distilled into the quinary sector.

In financial markets, investors break down economic sectors even further. Common investment sectors include health care, technology, energy, real estate, and telecommunications.

Here’s a closer look at each of the four economic sectors:

1. 1. Primary sector: The primary sector comprises businesses that produce or collect natural resources. This includes agriculture, mining and quarrying, forestry, and the oil and gas industry.
2. 2. Secondary sector: Businesses in the secondary sector process raw materials into finished products. All processing, construction, and manufacturing jobs fall into this sector, including aerospace manufacturing, automobile production, textile production, shipbuilding, chemical, and engineering industries,
3. 3. Tertiary sector: Also known as the service sector, the tertiary sector comprises service providers, including retail sales, transportation, insurance companies, restaurants, tourism, entertainment, legal services, health care, and financial services.
4. 4. Quaternary sector: The quaternary sector includes businesses related to intellectual activities, such as education, government decision-making, information technology, research and development, and entertainment. Some classifications include a fifth sector, called the quinary sector, as either a separate category or a subsector of the quaternary sector. However, economists debate over the exact definition of the quinary service sector. Some say it applies only to high-level decision-makers inside government, education, science, technology, media, and health care. Others say it includes domestic activities, nonprofits and charities, and human care services.

An industry refers to a specific group of businesses, whereas a sector is a much broader categorization of business activities with similar characteristics. For example, agriculture and mining belong to the primary sector but are two different industries. They belong to the same sector because they both produce and harvest natural resources. However, the specific activities performed in agriculture and mining differ significantly and, therefore, make up different industries.

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