Residential HVAC Continues to Show Business Strength Amid COVID-19

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The entire economy has been severely impacted by COVID-19, with small businesses being hit the worst. These businesses make up 47% of the private labor force and contribute 44% to GDP in the United States. Thankfully, not all small businesses are the same. Jobber’s Home Service Economic Report: Summer Edition analyzes the performance of the Home Service category throughout 2020, and shows a positive path towards recovery.

It shows that the Contracting segment, which includes HVAC businesses, had its first full quarter of positive year-over-year growth since the start of the pandemic.

As we look ahead to the future, it’s important to reflect on the past year and understand how residential HVAC, and the Home Service category as a whole, has fared through this pandemic and the economic turbulence that it has caused. Jobber’s report highlights some trends and key findings that can help guide companies through the end of the year and into 2021.

The Residential HVAC Industry Falls within a Strong Home Service Category

Wrapping up the third quarter, it’s clear that the Home Service category—including residential HVAC—continued to recover as the economy opened up and consumer demand rebounded. With the exception of Grocery Stores and General Merchandise Stores, Home Service was the most stable category through the peak of the pandemic. It also recovered very well through June and into Q3, showing 10% year-over-year growth in September, compared to other categories such as Clothing Stores and Restaurants, which registered declines of 12% and 14% respectively.

New Work Scheduled Finds Pre-Pandemic Success

New work being scheduled is an early inductor of the health of Home Service businesses, and a proxy for consumer demand. When the pandemic first hit, the Contracting segment, which consists of industries such as Construction, Plumbing, and HVAC, saw a sharp decline in new work scheduled in March and April. Residential HVAC continued to recover as the economy opened upAt its lowest point, Contracting saw new work decline by 23% year-over-year as states across the country began implementing stay-at-home directives and consumer spending tightened. This impacted revenues in April and May, where growth declined 15% year-over-year, roughly 25% below expectations.

Despite this dip during the initial peak of the pandemic, new work scheduled for the Contracting segment started to show signs of recovery from May onwards, hitting a record high for the year in June with 15% growth year-over-year, and consistent positive growth since then. As a result, the third quarter revenues for this segment have also shown positive results. Although the growth was moderate earlier in the quarter, the Contracting segment finished strong with 12% year-over-year revenue growth in September, matching pre-pandemic levels.

Employment Growth Sees Upward Trajectory

In April, the U.S. unemployment rate shot up to a record high 14.7% largely due to COVID-19 layoffs, but improved to 10.2% in July as the economy began to reopen, and further to 7.9% by September. For Home Service specifically, the category began 2020 with positive employment growth in Q1 that outpaced the employment growth in Total Nonfarm. However, stay-at-home orders in April caused employment growth year-over-year in Home Service to drop drastically by 12.9%, although this was still a bit better than the 13.4% drop for Total Nonfarm employment. Since this drop, Home Service has seen rapid recovery, with September employment only showing a decline of 3.9% year-over-year while Total Nonfarm shows a decline of 6.4%.

Digital Payments on the Rise Despite Historic Resistance

The Contracting segment has historically been a bit slower to adopt digital payments as these businesses often have large invoice sizes, and don’t want to collect payment using methods that can deteriorate their margins. However, according to market reports, the adoption of digital payments has accelerated significantly due to the COVID-19 pandemic. The adoption of digital payments has accelerated significantly due to the COVID-19 pandemicSpecifically, the estimated percentage of transaction values done digitally in 2025 is now expected to be 67% rather than the previous estimate of 57%. In our data, we saw a significant increase from January to May, from 32% to 37%, in the share of payments being collected through digital methods, compared to other methods such as cash or check. While each business has its own unique dynamics related to e-payment usage, it will be interesting to monitor this trend heading into the new year, as social distancing continues, and more companies commit to improving their technology usage.

Although there has been a positive economic turnaround for all categories towards the end of Q2 and through Q3, it’s difficult to predict where we are going with the recent rise in COVID-19 cases throughout the country. While consumer spending and employment have recovered from the massive declines they saw in early Q2, they seem to be stagnating a bit below their pre-COVID growth levels, suggesting that both consumers and businesses are remaining cautious. One thing is clear though, Home Service as a category is incredibly resilient as most businesses managed to survive through unprecedented economic hardship, while finding new and better ways to service their customers.

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Abheek Dhawan VP of Business Operations, Jobber

Abheek Dhawan is currently the VP of Business Operations at Jobber. Previously he started and led the business operations department at Shopify Plus, and held a variety of other analytical roles in industries such as real estate, financial services, and energy. Abheek is an alumnus of the University of Waterloo and Wilfrid Laurier University, where he studied math and business, respectively.

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Supply Shortages, High Prices Plague Summer Outlook For HVAC Contractors

It’s shaping up to be a long, hot summer for HVAC contractors and their customers. Disruptions in the nationwide supply chain that began during the COVID-19 pandemic still have not been resolved. Shutdowns last summer played havoc with the supply of parts, and suppliers are still playing catch up, as raw materials remain scarce. Furthermore, prices are going up among some components and key raw materials. Waiting times for parts can run into weeks or even months. Supply shortages of HVAC equipment Summer weather increases the demand for HVAC equipment, especially in hotter climates. A spike in air conditioner demand is generally welcomed by most contractors, but supply shortages make it difficult to deliver on customer needs. Managing a backlog of impatient customers is a new challenge for many HVAC companies. The shortages impact materials, such as steel, aluminum, copper and plastics, whose costs are expected to rise in coming months. Among metals, the price hikes could be 20 to 30%, while prices of plastics could almost triple. Copper futures recently reached an all-time high, and steel price indexes are also at record levels. Shortages of electrical components Shortages have been reported of copper and electrical components, such as motors and compressors Shortages have been reported of copper and electrical components, such as motors and compressors, which are specific to the units that use them. There is also a shortage of microchips that are components in high-efficiency systems and furnaces, and resins used in the evaporator coil pans are scarce. Some HVAC supply firms have had difficulty obtaining evaporator coils used in air conditioners. Specialty items such as control boards have a wait time of up to two to three weeks, or longer. Shortages projected till end of 2021 The shortages are projected to continue until the end of 2021. Even as small shipments trickle in, they are often sold quickly. The situation is unfamiliar to the HVAC trade, which has traditionally not had issues with equipment availability. Shortages in the HVAC market are a reflection of broader supply and cost challenges of the construction market. Prices for goods used in residential construction have increased almost 10% over the past 12 months, according to the U.S. Bureau of Labor Statistics. Higher transportation costs impact supply chain Higher transportation costs are impacting both the supply chain and HVAC contractors. Personnel shortages continue to plague many HVAC companies, too, and a technician shortage is also contributing to longer wait times in some areas. A scarcity of labor has been a 20-year challenge for the HVAC industry, but it is reaching new levels as days go by. Order in advance and stockpiling equipment Alternatively, HVAC contractors may seek to switch brands to help ease availability issues One approach contractors are taking to the problem is to order equipment in advance and stockpile it for when they need it. One Denver contractor reportedly ordered almost a million dollars of equipment in advance. Alternatively, HVAC contractors may seek to switch brands to help ease availability issues. Identifying a manufacturer that has stock available can ease the inconvenience of customers having to wait for new equipment. need for regular HVAC maintenance Another approach is to educate homeowners about the importance of maintenance, such as changing filters, which can avoid a need for larger repairs involving equipment that is in short supply. Maintenance service is doable because it doesn’t require new equipment, replacements or add-ons that can be hard to come by. Unfortunately, among consumers, maintenance may have been delayed or ignored during the pandemic, which is aggravating the urgency of the current situation.

Emerson’s Sensi Predict Leverages Artificial Intelligence (AI) For Fault Detection And Diagnostics

Artificial Intelligence (AI) is an emerging tool for a long list of applications, including the ability to analyze and ensure optimum performance of an HVAC system. Emerson’s Sensi Predict smart HVAC solution is an example of how AI can boost the capabilities of HVAC. It has been recognized with a Silver Edison Award in the Innovative Services – AI category. Sensi Predict smart HVAC solution Sensi Predict combines inputs from 10 sensors in an HVAC system and analyzes the performance of heating and cooling systems in real time. Intelligent monitoring alerts home owners and their contractors, when HVAC systems are not operating at full efficiency. The alerts, which can be accessed on a smartphone, can predict and prevent problems, ensure corrective maintenance, lower utility costs, and prolong the life of an HVAC system. Fault detection and diagnostics are a new frontier in HVAC technology, delivering a seamless and simple user experience. Sensi Predict HVAC system configuration Here is how the Sensi Predict system is configured: Sensors monitor the temperature of the air flowing from the HVAC system into the home, and also the return air temperature, coming from the home back into the system. Sensors also monitor temperatures in the liquid and vapor lines in the refrigerant loop, and the indoor and outdoor control lines, communicating back and forth from the thermostat to the outdoor unit. Other sensors monitor the current draw and indoor voltage of indoor units, and current and voltage to the outdoor units. Data from the sensors is used to analyze how well the HVAC is operating, including detailed monthly performance checks, with results issued to the home owner and the contractor. If a warning is detected, an alert will be sent in real time. 24/7 monitoring The 24/7 monitoring is summarized in a personalized home owner portal and monthly performance reports The 24/7 monitoring is summarized in a personalized home owner portal and monthly performance reports that include any alerts, loss of performance, runtime and estimated cost and filter status. Actionable alerts tell when a problem is detected, sent via an email with a straightforward explanation and recommended action. “Our heating and cooling systems are critical to the health and comfort of our families and the environment, yet we have little visibility into how they perform on a day-to-day basis,” said Jamie Froedge, Executive President of Emerson’s Commercial and Residential Solutions business. The Sensi Predict systems seek to provide additional visibility. Sharing real-time system insights The Edison Awards highlight top-tier new product innovation, service development and human-centered design. Named after inventor, Thomas Alva Edison, the awards recognize and honor global innovation. The award to Emerson’s Sensi Predict system recognizes it as a 21st-century solution to the maintenance of home heating, ventilation and air conditioning systems, sharing real-time system insights, in order to help home owners monitor performance and prevent unexpected problems. Maximize system lifetime and minimize energy costs “We are honored to be recognized for this innovative technology that provides both awareness and peace of mind, when it comes to an essential component of the home,” said Jamie Froedge. Sensi Predict also provides benefits related to installation, by validating a quality install and eliminating call backs. Over time, it maximizes system lifetime and minimizes energy costs. service and maintenance information In terms of maintenance, the system provides information to ensure that all contractor truck rolls generate revenue and decrease the average time on site. The 24/7 monitoring limits home visits to only when needed and increases transparency to the customer of suggested repairs and upgrades. Home owners can access the Sensi Predict Homeowner Portal on the official website for detailed information, based on real-time data about how their system is functioning and its performance history, energy usages and costs and predicted maintenance needs.

How Robotics And Human Augmentation Benefit The HVAC Trade

The term ‘robotics’ refers to technology or machines that substitute or replicate human actions. ‘Human augmentation’ is another term, referring to the use of technology to reduce strain and fatigue as workers perform strenuous tasks over long periods of time. Hilti Group has introduced robots and semi-automated technologies to the construction trades, including HVAC. The role of these technologies in the HVAC market is to increase efficiency and accuracy, reduce costs, and decrease physical strain/injury of HVAC installers on the jobsite. Two Hilti products, Jaibot and the EXO-O1 exoskeleton, can make workers’ lives better by reducing risk on the jobsite, increasing productivity, and improving the quality and consistency of work. Reducing worker fatigue Jaibot is a semi-autonomous mobile, overhead drilling robot. It executes its tasks based on building information modeling (BIM) data. The robot is a cordless and easy-to-use system that does not require expert skills. It locates itself accurately indoors, drills the holes while controlling dust, and finally marks them according to trade. Jaibot provides faster, safer and more accurate execution of digitally coordinated mechanical, electrical and plumbing (MEP) systems on the jobsite. Jaibot performs the ceiling drilling and marking, thus allowing the workforce to focus on installation Jaibot is designed to work with workers, not replace them, by taking on strenuous and repetitive tasks that have been shown to put workers’ health at risk. Guided by a trained operator, Jaibot performs the ceiling drilling and marking, thus allowing the workforce to focus on installation. This makes jobsite teams faster, more productive, reduces worker fatigue and enables them to deliver a constant plannable output, according to Hilti. Required drilling information “One of the few pitfalls the BIM process encounters is getting the digitally coordinated and designed project from the office and out onto the job site,” says Aidan Maguire, Business Unit Manager for Hilti North America’s Measuring, Layout and Robotics technologies. “While traditional methods will take the BIM model and print out paper or utilize 2D blueprints to use to install anchors, the Jaibot works directly from the coordinated digital design or BIM model using a point cloud of the anchor locations. Jaibot can also read the required drilling information such as drilling diameter, drilling depth, trade or system from the BIM model. This allows the semi-autonomous Jaibot to operate directly from the most up-to-date digital model.” The Hilti EXO-O1 is a wearable human augmentation system designed to reduce fatigue and strain. The exoskeleton is designed for workers performing strenuous overhead tasks for long periods of time. Performing overhead work Long-term, the EXO-O1 contributes to prevention of musculoskeletal disorders This system will allow its user to perform the overhead installation of HVAC systems while reducing the injuries and errors that come with the normal fatigue common from this type of work. Hilti’s research shows that users who perform overhead work for more than 60% of their time benefit from up to 47% reduction of load on their shoulders. With decreasing strain and fatigue, the EXO-O1 allows users to remain productive while working safer for longer periods. Long-term, the EXO-O1 contributes to prevention of musculoskeletal disorders. The upfront costs of these systems are designed to be competitive when compared to traditional methods, says Maguire. “The other benefits of the systems such as rework, injuries, and labor costs, while increasing productivity and accuracy all provide extensive and sometimes immeasurable benefits for the systems’ operators,” Maguire adds. Human augmentation systems Human augmentation systems help overcome labor shortages in the HVAC trade in several ways. They are not designed to replace workers but rather to augment the workforce by taking over strenuous and repetitive tasks that have been shown to put workers’ health at risk. The augmentation systems help to reduce absentee days, fill gaps caused by a diminishing qualified workforce, and allow the workforce to focus on more value-adding tasks, thus contributing to higher and more consistent outputs. These systems help construction companies retain the tenured workforce already in place These systems help construction companies retain the tenured workforce already in place and attract new talent to the industry by offering more attractive working conditions and the opportunity to work with state-of-the-art technologies. The cost of a robotic system like Jaibot can be directly compared to other methods of overhead drilling all the way down to a per-point cost. Quicker project delivery These systems have a direct impact on the time and labor required to complete these tasks and can provide value through supplementing the requirement for skilled labor, reducing labor cost, and providing time savings on the critical path of a project to enable quicker project delivery and potentially meeting targeted schedule bonuses. Additionally, while these technologies are relatively new to the construction industry, as the utilization of these systems increases there will be the opportunity to study and quantify the health and safety savings over time. Both the Hilti Jaibot and EXO-O1 exoskeleton are new innovations currently being rolled out across the United States. “As with all innovations, it is often not the technology that drives adoption, but human beings,” says Maguire. Adopting new technologies The key to overcoming this mindset is to closely support the first adopters of this technology" “While we see a clear advantage of deploying mobile robotic or human augmentation solutions for certain tasks and observe an increase in activity in the market, it is hard to predict how long this will take. We envisage that significant progress will be made over the next five years. As the construction industry continues to move towards digitalization, more and more companies will look for technology that gives them an advantage over their competitors, and Jaibot and EXO-O1 will help them do exactly that.” The biggest obstacle for greater deployment is the construction industries’ resistance to change, says Maguire. The phrase ‘because this is how we’ve always done it’ is prevalent in construction. Many construction companies are risk-adverse and prefer to continue to utilize the tried-and-tested methods of the past. “The key to overcoming this mindset is to closely support the first adopters of this technology in order to quantify and provide proof of the many benefits of adopting these new technologies and methods,” says Maguire.