The health of the Home Service category is naturally connected with the residential housing market, as the rise in housing sales translates into increased demand for home services.

Throughout the pandemic, we have seen a high level of residential sales driven by a desire for lifestyle changes and low mortgage rates. In Q4 2021, residential sales continued to show strong sales month over month._² However, due to continued supply chain issues, the supply of newly built units is consistently unable to satisfy the ever-increasing demand. In fact, the U.S. housing market is nearly four million homes short of buyer demand.³ This gap creates a much bigger demand for resale units, as motivated buyers try to lock in low mortgage rates and find a place to live.

The Leading Indicator of Remodeling Activity (LIRA) report published by the Joint Center for Housing Studies of Harvard University showed strong growth in home improvement and maintenance expenditures in 2021 and projects a double digit growth in 2022. Strong increases in home sales activity, household incomes, and home equity levels are supporting a faster expansion of the home remodeling market over the coming year.⁴

In 2021, we also saw an increase in employee wages, which is another contributing factor in invoice size inflation. Construction, Transportation and Warehousing, and Administrative and Waste Services, which are Home Service related industries, all observed a high rise in employee earnings compared to the overall “Total Private” increase.⁸

In Q4 2021, we continued to see high demand for labor in the US. According to the latest data from the U.S. Bureau of Labor Statistics¹⁰, the job opening rate—a rate for job openings over total jobs out there— increased to 6.6% for Total NonFarm. This metric is currently much higher than pre-pandemic levels, which was 3-4%. All industries within the Home Service category saw a similar pattern.

Within the Cleaning segment, 10% of all jobs were contract jobs in 2021 rather than one-time commitments. This number has grown since 2019, and in Q4 2021, contract jobs saw 16% year-over-year growth when using the 2019 to 2021 compounded methodology explained earlier. One benefit of contract jobs is the ability to better predict what future revenues will look like for the business. Growth in one-off jobs slowed from Q2 onwards, with Q3 and Q4 seeing an annual growth rate of just 2%.

Businesses in the Green segment are often seasonal, and perform a lot of their work in the spring. While some industries within Green have low barriers to entry, similar to residential cleaning, services such as tree care require specialization and have tight regulations.

This segment experienced high growth in work scheduled in 2021, as homeowners continued to invest in outdoor projects, all of which could be completed while physically distancing. The high growth in new work combined with the higher invoice sizes results in some impressive revenue growth throughout 2021, and especially last quarter. The revenue growth in 2021 recorded an average annualized rate of 14%, which was slightly above the growth observed in 2020.

Professionals in the Contracting segment require specialization and licensing in many regions. Although they generally do fewer jobs, revenue from each job is much higher on average compared to Cleaning and Green.

Overall Contracting businesses have also shown slow but positive growth through 2021 in new work scheduled and revenue. The year-over-year comparison for new work scheduled illustrates somewhat flat growth in the second half of 2021, as the segment continued to be impacted the most by supply and labor shortages. However, similar to the other segments, they benefited from increasing prices with an average of 12% positive annualized revenue growth in Q4 2021.

Many major categories started 2020 with similar levels of growth prior to the onset of the pandemic. Restaurants and Clothing Stores were impacted the most in 2020 due to indoor dining and brick-and-mortar retail closures, whereas Grocery Stores and General Merchandise Stores growth remained stable.¹⁷

After experiencing a decline in April 2020, Home Service rebounded to pre-pandemic levels by June 2020 and has seen healthy growth ever since. By Q3, revenue growth in the category outperformed all other categories, including Grocery Stores and General Merchandise Stores, and continued to increase through the end of 2021.

Based on the data, all categories appeared to have stabilized after diverging from the norm throughout 2020.

As stated earlier, Total NonFarm employment includes all employment minus farm workers, private household employees, and non-profit organizations. Services to Buildings and Dwellings covers Cleaning and Green businesses, such as pressure washing and landscaping, and Specialty Trade Contractors covers Contracting businesses such as plumbing and HVAC.¹⁰

Overall, Total NonFarm employment continues to improve from June 2020, but remained negative throughout 2021 in comparison to 2019 levels. This is the case for most categories, with the exception of Food and Beverage Stores, though growth in this category has become stagnant. Restaurants also experienced a decline beginning in Q3 2021, largely due to changing directives around indoor dining.¹⁸

The Home Service category started 2020 on a similar level as Total NonFarm in terms of year-over-year growth, and fell at a similar rate in April 2020 due to the pandemic. However, the recovery rate has been much better throughout 2020 and 2021, though growth is stalled due to factors outlined in the above employment section. 

Each Home Service business has its own unique dynamics related to payment collection. Some businesses like the immediate liquidity of cash, and others prefer to take checks for a large job so they don’t have to pay credit card transaction fees. However, online payments are being adopted by consumers at a rapid pace, and many Home Service businesses are evolving with this trend. Although the Home Service category has been slower to adopt this trend compared to others, the COVID-19 pandemic and the social distancing rules that come with it have provided some tailwinds

In the Q1 2021 Edition of the Home Service Economic Report, we looked at online payment growth in 2020 following the start of the pandemic. We saw a rapid increase since March 2020, with 37% of payments processed without cash or cheque. According to a recent report from Mckinsey & Company¹⁹, around 82% of Americans used online payments in 2021. This ratio was around 78% in 2020 and only 72% five years ago. 

Additionally, a survey of skilled tradespeople shows that in the last year, 21% of skilled tradespeople adopted third-party financing for clients, 36% of pros adopted new tools for meetings, 39% added new tools for quotes, 42% adopted digital tools for planning and 47%, nearly half, added solutions for online payments.¹¹

We also saw another wave of growth in 2021 in our internal data, where online payments grew to 39-40% of all payments processed. This increase occurred across all segments, especially within Green. Green businesses showed the lowest percentage of online payments before the pandemic and in 2021, increased to over 35%, which was even higher than Contracting businesses.

DATA SOURCES & METHODOLOGY

1. The small business data provided is from the U.S. Small Business Administration Office of Advocacy. The specific metrics shared are from a Research Summary published by the organization, as well as an annual FAQ they provide.
2. The data for new residential units built and under construction and new privately owned residential building permits issued is compiled from the U.S. Census Bureau’s Monthly New Residential Construction Report. Total residential sales are calculated by combining new residential sales from the U.S. Census Bureau’s Monthly New Residential Sales Report with the sales of previously owned houses from the Trade Economics report.
3. Reference to an article published by The Wall Street Journal.
4. The home renovation’s actual and projected growth is captured from January’s press release published by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
5. The inflation rates are provided from January’s United States Inflation Rate report by Trading Economics who originally sourced their data from U.S. Bureau of Labor Statistics.
6. The average growth rate is calculated using the ​​data published by the U.S. Energy Information Association.
7. Reference to an article published by Fortune.
8. The data for the Produce Price Index (PPI) of commodities and Hourly Employee Earnings is extracted from FRED Economic Data, who source their data from the U.S. Bureau of Labor Statistics.
9. The consumer price index data is from the U.S. Bureau of Labor Statistics.
10. The employment growth metrics, job opening rates, number of hires, and number of job openings are provided from FRED Economic Data, who sourced their data from the U.S. Bureau of Labor Statistics. We combined employment statistics for ‘Services to Buildings and Dwellings’ under “Professional and Business Services” with Specialty Trade Contractors under “Construction” to create an equivalent for the Home Service category. The ratio of hires to job openings is calculated by dividing the number of hires by the number of job openings in a given month.
11. Reference to the 2021 Skilled Trades in America report published by Angi.
12. Reference to the analysis covered in a report published by The Washington Post.
13. Insights extracted from the United States Economic Forecast published by Deloitte.
14. The year-over-year change in the number of employees, new work scheduled, median revenue, and invoice sizes have been calculated by aggregating data across a cohort of businesses using Jobber since 2019. This doesn’t include any new businesses that started using Jobber during that period.
15. Reference to an article published by Business Insider.
16. The consumer spending data is sourced from the U.S. Bureau of Economic Analysis. The year-over-year change in consumer spending is calculated from personal consumption expenditure (Table 2.3.5U) data published on the website.
17. All category data outside of Home Service comes from the U.S. Census Bureau’s Advance Monthly Retail Trade Report. The year-over-year change in median revenue has been used as a proxy for the Home Service category data point, which is the Home Service equivalent to ‘same-store sales growth.’ As a result, we believe this to be a conservative estimate for the category as a whole because it doesn’t include new business starts, while the U.S. Census Bureau’s trade report includes all sales from new business starts as well as same-store sales.
18. The impact of Omicron on the restaurant industry was covered in a report published by The Washington Post.
19. Reference to a report published by McKinsey.
20. Real GDP forecast published in the 2022 Economic Forecast Report by The Conference Board.
21. Reference to a story published on Axios based on Dr. Anthony Fauci’s statement.

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