Housing market dynamics, pressures on global supply chains, and the rising costs of materials and labor are a few of the trends that are impacting the HVAC industry. While COVID-19 restrictions may have been largely lifted throughout the U.S., many of these lingering trends can be traced back directly, or indirectly, to the pandemic.
Jobber’s Home Service Economic Report: Record Growth Fuels Labor Shortage explores these trends and their true impact on home service businesses’ ability to get work done. Below are key takeaways for the Contracting segment, which includes HVAC businesses, based on Q3 performance and data from over 100,000 home service companies.
Homeowner Spending Continues to Grow
Let’s start with good news. Consumer spending continues to drive revenue growth in Home Service—including residential HVAC— which has outperformed all other categories, including Grocery Stores and General Merchandise Stores in Q3 2021. Long-term sustainable growth is expected through Q4 2021 and into 2022 due to several factors:
- Demand Maintains Momentum: The number of new homes being constructed and new building permits issued continues to outpace pre-pandemic levels, with no indication of slowing down. Additionally, remodeling activity remains very high and is expected to accelerate towards the end of the year. All these trends mean that demand for home services will remain very high.
- New Work Growth Stays Positive: New work scheduled continues to show positive year-over-year growth, although the supply chain and labor shortage challenges are certainly slowing things down. There is a lot of opportunity for the category as those challenges are overcome.
- Growing Invoice Sizes Across the Board: Due to increased input costs, the cost of services being delivered has increased, which means invoice sizes are increasing for all the main segments across Home Service, including Cleaning, Contracting, and Green.
With October and November typically being some of the busiest months for HVAC companies, it’s safe to assume that the industry will finish the year with strong demand. Now, the ability to take advantage of this spike in demand is a different story.
The inability to hire enough employees will prevent service providers from keeping up with demand
Skilled Workers in High Demand
While the labor shortage has impacted Home Service less than other categories, the need for skilled workers is impacting the rate at which HVAC technicians and other service businesses can book new work.
The ratio of hires to job openings has decreased significantly, suggesting the current demand for talent is not being sufficiently met. This inability to hire enough employees will prevent service providers from keeping up with demand and taking on more work.
Help Wanted, Inquire Within
The Contracting segment showed positive growth in new work scheduled year-over-year in Q3 2021 but was impacted the most by labor shortages among Home Service segments. Our data shows that service providers that we're able to increase their headcount were able to schedule more work and increase their revenue at a much faster rate.
This gap is creating opportunities for both new HVAC entrepreneurs and workers seeking to pursue HVAC careers. It’s also making the battle for talented technicians extremely competitive.
Growing Pains
The increased cost of materials, material scarcity, and labor shortages are starting to cap While the HVAC industry has shown resilience, there continue to be emerging and rapidly-changing economic trends that HVAC business owners and other home service providers have to navigate.
While new work scheduled saw positive growth, this growth was slower year-over-year. The increased cost of materials, material scarcity, and labor shortages are starting to cap the amount of jobs service providers can commit to.
Demand Outpacing Supply
Due to steel mill products seeing a 122% growth over January 2020 prices, the prices of HVAC and commercial refrigeration equipment have increased. Gas and diesel prices reached peak levels last quarter as well, contributing to higher operating costs across the board for HVAC businesses.
Regardless of the obstacles that stand in their way, home service businesses, including those in the HVAC industry, continue to persevere and outperform nearly every other major category. This speaks to the incredible resiliency of Home Services and the essential nature of these companies. One key takeaway from Jobber’s report is that the best time to open a home service business or pursue a career in the trades is now.