HOME SERVICE ECONOMIC REPORT
Q3 2022 EDITION
November 2022Download Report
New work being scheduled is an early indicator of the health of Home Service businesses, and a proxy for consumer demand. Although year-over-year growth in 2022 is generally lower than 2021 levels, it’s important to note that performance in 2021 is being compared with 2020, when the start of the pandemic saw a sharp decline in new work being scheduled. Once social distancing directives were minimized across the U.S. in the summer of 2020, demand returned, which explains the normalizing of year-over-year growth in 2021 from June onwards.
Most of the months in 2022 had negative growth compared to last year, which could be related to a number of factors such as continued supply chain issues as well as a softening of demand.3 The economy has slowed down across many categories, and Home Service is being impacted as well, although not as significantly as others.
Historically, median revenue grows in line with new work scheduled. However in 2022, we’ve seen revenue growth continue at very healthy levels even with a slight decline in new work being scheduled. The same trend played out in 2021—with revenue growth seeing an outsized increase compared to new work scheduled due to increased invoice values. This is a double edged sword because high inflation also softens consumer demand.
Although 2022 isn’t seeing the same ultra-high growth rates as last year, most of this year has still been seeing healthy growth rates of around 10% year-over-year.4
Most major categories saw a spike in year-over-year growth in Q1 2022 compared to the same period last year, though growth has since normalized. Grocery Stores have been very stable throughout the year, while Automotive businesses and Clothing Stores have seen considerable volatility.
All selected categories show positive year-over-year growth in Q3 2022 and one of the biggest contributors is inflation.5 The Home Service category has been strong throughout the year, and was second only to Restaurants last quarter, which have seen sky-high growth all year long.
Since the Home Service category consists of a large range of industries, it’s useful to segment the data to better understand trends within different segments of this category. To do so, we split the data into Cleaning, Green, and Contracting businesses. The Cleaning segment consists of residential cleaning, pressure washing, and other such businesses. The Green segment includes lawn care, landscaping, and other related outdoor services. Finally, the businesses in Contracting are made up of construction contractors, plumbers, electricians, and others.
In Q3 2021, roughly 10% of all scheduled work was contract/recurring jobs.4 While contract jobs grew a healthy 15% at the start of 2022, by last quarter, there was a significant year-over-year decline. For one-off jobs, growth has essentially been flat throughout the year.
Similar to the overall Home Service category trend, demand for Cleaning businesses did not see positive growth in Q3 this year. Generally, new work scheduled has experienced flat growth through 2022 compared to last year.
However, on the revenue side, Cleaning businesses did experience positive growth through the first three quarters of 2022. Year-over-year growth for Q3 was around 5–7%, which is quite positive, but looks low in comparison to last year’s growth only because 2021 was so inflated due to the COVD-impacted 2020 performance.
Businesses in the Green segment experienced volatility in new work scheduled throughout the first three quarters of 2022. Contract jobs can represent as high as 20% of all jobs in peak seasons, but then reduce significantly in the off season. Last quarter, contract jobs experienced a significant year-over-year decline.
The Green segment saw a spike in new work scheduled early in the year, which quickly declined, then flattened out. Last quarter, the new work scheduled performance was quite similar to the back half of 2021.
The decline in new work scheduled in Green, however, did not impact revenue growth for this segment. Year-over-year revenue growth for Q3 2022 was around 5–10%, which is higher than businesses in the Cleaning industries, and seems to be stabilizing at these levels.
Contracting continues to be impacted by unstable supply, material costs, and labor shortages.6 Beginning in the second half of 2021, it experienced stagnant growth with the trend continuing in 2022. Most months in 2022 show a slight decline in new work being scheduled, although this is compared to an incredibly strong string of previous years for this segment. With increasing costs in both labor and materials, there appears to be a slowdown in consumer demand for larger projects.
Even though Contracting businesses were negatively impacted by factors discussed above, median revenue benefited from rising prices. While the Contracting segment experienced the lowest growth rate in new work being scheduled compared to the other two segments in Q3, year-over-year growth in revenue is still around 6–8%. At the start of 2022, businesses achieved a 15–20% year-over-year increase in revenue growth, dropping in Q3 as a result of a slowing economy.
Increases in production costs such as raw materials and wages, and customers who are willing to pay more due to a surge in demand for products and services, are contributing to the rise of inflation across the U.S. In 2022, year-over-year growth in the Consumer Price Index (CPI) for “All Items” was 8.2%. 7 Both food and energy have experienced higher than overall inflation rate, which impacts labor and transportation costs for Home Service businesses.
The rise in invoice sizes in home services is a direct result of inflation experienced in the market. In 2022, inflation on all items was always above 7%. Overall inflation less food and energy is around 6% since the beginning of the year and continued to increase in the last quarter. We also measured year-over-year growth in average invoice size using our data, and it experienced a higher price increase than average inflation of over 10%. Both invoice size and CPI (all items less food and energy) show an upward trend in year-over-year growth in Q3.
Although Home Service has been slower to adopt the digital payment trend compared to other categories, the COVID-19 pandemic and social distancing rules that came with it have provided some tailwinds. Our 2020 data indicates a rapid increase in the amount of digital payments received as a percentage of total payments collected. 8 Digital payments as a percentage of total payments collected grew from 33% at the beginning of 2020 to 36% by the end of the year. Since then, we have seen steady performance, and currently sit at 40% of payments collected digitally.
Of all the three segments we measure for, Cleaning businesses experienced the highest adoption of e-payments. Green businesses collected more payments digitally during their peak season. Contracting businesses used to be the segment with lowest adoption rate in digital payments 9 but now shows a similar trend as Green businesses and the percentage continues to increase compared to 2021 levels.
Over the last three years, Home Service businesses have successfully navigated through considerable challenges; from the uncertainty and economic turmoil created by the COVID-19 pandemic, to ongoing supply chain issues, labor shortages, and rising material costs. While these issues impacted every sector, Home Service has proven its resilience—recovering faster, and showing stability and strong revenue growth compared to other categories.
Supply chain challenges and labor shortages impacting every sector are not going away next quarter or next year, while inflation and changes to interest rates will continue to have unpredictable effects on the economy, but Home Service businesses are expected to continue to show stability. Businesses will be able to draw on the experience gained over the last three years to withstand these challenges, and the essential nature of Home Service will allow this category to persevere.
There is still an incredible opportunity for entrepreneurs in Home Service as the category has shown signs of being recession proof. Not only did these businesses take great advantage of the home improvement trends that presented themselves in 2020 and 2021, but they are now showing great resilience as the overall macroeconomic environment slows down in 2022. Even in these tougher economic times, the category continues to show positive revenue growth, currently outpacing inflation, and the future looks positive.
– Sam Pillar, CEO & Co-founder, Jobber