Articles by Abheek Dhawan
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.
A global pandemic is a scenario that few big corporations have plans for, let alone small businesses. The emergence of COVID-19 has affected nearly every industry worldwide. All businesses have been forced to pivot, adapt, and at times, completely reinvent their operations to survive. Looking at data from tens of thousands of Home Service professionals, Jobber’s Home Service Economic Report: Spring Edition sheds light into how segments such as Contracting, which includes the HVAC industry, have proven resilient in the face of hardship. Reflecting on trends observed over the past six months, the data reveals that Contracting and the Home Service category as a whole are on a strong path to recovery, and rebounding to pre-pandemic growth levels. To understand where we are heading, let’s explore some key findings in more detail to help HVAC businesses make better informed decisions. Marginal Economic Dip Amid Peak COVID-19 Months With very few exceptions, almost every Home Service industry felt the economic impact of COVID-19; some more severely than others.Data reveals that the Home Service category was far less impacted by the pandemic compared to other categories April was the hardest hit month according to nearly all indicators across all categories. Timed with widespread stay-at-home orders and a significant drop in consumer demand, median revenue for Home Service businesses decreased by 15% year-over-year. Despite these challenges, data reveals that the Home Service category was far less impacted by the pandemic compared to other categories such as Clothing Stores, which saw a year-over-year revenue decline of 87%, and Restaurants, which saw a revenue decline of 53%. While the Contracting segment, which includes industries such as construction, electrical, and plumbing, in addition to HVAC, did see a 15% decline in April revenue; it remained relatively stable compared to others, proving to be resilient to economic downturns even during a historic crisis. New Work Scheduled Reaches a High Point The stable and meaningful nature of Home Service work helped maintain and provide jobs to millions of Americans throughout this time, all while delivering comfort and safety to their communities. New work scheduled for Home Service businesses reached a record high in JuneWhile unemployment shot to a record high of 14.7% in April (largely due to the pandemic), the Home Service category was relatively less impacted, and recovered much quicker than others. Several industries within this category, including HVAC, were designated as essential throughout the country, allowing many of these businesses to continue operating even as others were forced to close. In June, new work scheduled for Home Service businesses reached a record high for the year with an increase of 15% year-over-year. The Contracting segment, which was seeing new work growth of around 2% year-over-year before the pandemic hit, actually hit a record high of 14% growth in June. As new work scheduled continues to look optimistic, Contracting enters Q3 with a positive start. Rebuilding Revenues to Pre-Pandemic Growth Prior to the pandemic, the Contracting segment was seeing industry-average revenue growth. However, the steep decline in new work being scheduled when the stay-at-home There has also been more disposable income available to many that have started working from homeorders came into effect impacted revenues and caused a decline of roughly 25% below expectations. This quickly changed as homeowners spent more time at home than ever, making them more inclined to take money set aside for travel and invest in home projects they’ve been putting off. There has also been more disposable income available to many that have started working from home, and are spending less money than usual due to lesser commuting to work and lesser dining out, if at all. In just two months, the Contracting segment saw a turnaround in revenue, from -15% year-of-year growth in April and May to 10% in June. With the upswing momentum of new work scheduled in this segment, Contacting is well-positioned to see continued revenue growth entering Q3. It’s impressive to see contracting businesses overall return to pre-COVID levels so quickly. The first half of 2020 has really shown the resilience and resourcefulness of small businesses in the Home Service category. Although many businesses have suffered tragic losses, others have survived this crisis quite well, and have started getting back to their pre-lockdown performance levels. Although we have not yet seen the full impact that the COVID-19 pandemic will have on small businesses, there is hope for HVAC entrepreneurs that industry growth will continue to increase during the third quarter and beyond.