HOME SERVICE ECONOMIC REPORT
2022 REVIEW AND 2023 OUTLOOK
March 2023Download Report
Inflation, rising interest rates, rising commodity prices, and rising wages/low unemployment have had a significant impact on Home Service businesses this past year. Fueled by low interest rates and economic reopenings, inflation and rising commodity prices have driven up material costs, while low unemployment and wage growth has driven up labor costs—essentially the two major costs for all Home Service professionals.
The commodities that had the biggest effect on service providers in 2022 are gasoline, HVAC equipment, and steel products. All of these are major cost drivers for Home Service professionals and all had 100%+ price increases year-over-year at one point, but have rapidly slowed down recently. One thing to note is that these costs have a greater impact on certain industries like construction than others.
A big cause of material cost increase is supply chain disruptions over the past few years, but according to the Global Supply Chain Pressure Index, this dramatically improved in the second half of 2022 and early 2023, and is expected to continue improving throughout FY23.
With their own costs increasing, we’d expect Home Service providers to charge more in order to break even. Looking at Home Service providers who have been with Jobber since 2020, we can see that the average invoice value has risen consistently with about 10% year-over-year growth, offsetting rising costs. The first few months of 2023 look similar with average invoice value continuing to rise.
Average Invoice Value YoY
Despite economic headwinds and being measured against the exceptional performance of 2021, Home Service businesses continued to grow revenue year-over-year in 2022. Aggregated data from Jobber shows median revenue for a service provider continued to increase throughout 2021 and 2022. This has been primarily driven by higher invoice values, as the number of invoices sent per month has only risen slightly or stayed flat. This indicates that service professionals have been able to cover some of their costs by increasing prices, but challenges in the labor market, including cost and availability of labor, do constrain their ability to take on more work. We see similar trends looking at the first couple of months of 2023 with revenues continuing to grow as the number of invoices per month stays flat.
Average Number of Invoices Issued YoY
To complement the aggregated Jobber data, we also assessed external data sources that track the Home Service economy. The Leading Indicator of Remodeling Activity (LIRA) provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. Released quarterly by Harvard University’s Joint Center for Housing Studies (JCHS), it looks at several key economic indicators that typically influence and lead remodeling activity. LIRA has been growing, and accelerating, consistently throughout 2020, 2021, and into 2022. It is expected to continue growing into 2023, but at a slowing rate.
Additionally, popularity of online payments, which surged during lockdowns in 2020, has continued to stay robust throughout 2021 and 2022. Even as the economy reopens, the behavior has stuck as customers are choosing to pay through credit cards more often and service professionals are seeing the value in accepting online payments.
Looking into the future of Home Service, we see continued signs of growth and resilience in the category. Home Service professionals provide essential services that are in demand and will continue to be in demand long into the future, regardless of the state of the economy.
As the United States entered lockdowns in 2020, there was an increased interest in trade careers and trades businesses. As the world reopened, that heightened interest remained. New business formation applications in Home Service industries remain very strong. We saw that Contracting, Green, and Cleaning experienced a big bump in applications in 2020 at the beginning of the pandemic. While the year-over-year growth rate of applications has declined, the volume of applications has sustained the high levels of 2020 over the past two years.
Additionally, technical and trade school enrollments are continuing to grow at very high rates as more and more students opt for trade schools over traditional higher education. New apprenticeships have reached record levels in 2022 and are still growing. These will be the businesses and employees of the future and continue to be long term drivers for our industry.
Technical and Trade School Quarterly Revenue and YoY
Active Apprentices (2013-2022)
The economy has experienced various highs and lows since the start of the COVID-19 pandemic. The unemployment rate reached record highs during the height of the pandemic and record lows as the economy gained steam. Supply chains were tested to their limits, and tens of thousands of businesses across multiple industries were forced to close for good. It is clear that one part of the economy was able to persevere and grow in these uncertain times: Home Service businesses. That being said, there are many parts of the economy that remain uncertain.
Supply chain pressures seem to be easing and the Federal Reserve’s interest rate hikes have led to some positive signs inflation is slowing down, but one must only check their weekly grocery bill to know it’s still well above historical averages. Costs are expected to continue increasing in 2023, although more slowly, meaning many Home Service businesses will have to consider raising their own prices. Additionally, The Conference Board forecasts real GDP growth to slow to 0.3% in 2023 before rebounding to 1.6% in 2024.
Regardless of the macroeconomic climate in 2023, Home Service businesses have proved remarkably resilient and will continue to outperform the broader economy. There is still incredible opportunity and demand for these types of services and the future looks bright.