Home Service Category Performance

Employment

Although the U.S. unemployment rate has seen a positive trend for the last five years, this all changed as a result of the pandemic, with the biggest impact coming in April 2020. In April, unemployment shot up to a record high of 14.7% largely as a result of COVID-19 related layoffs. Since then, there has been an improvement in this rate related to the re-opening of the economy. By July, the unemployment rate improved to 10.2%, and further to 7.9% by September. ²

To assess employment in the Home Service category, we look at how it compares to Total Nonfarm employment.³ Although the Home Service category spans a vast amount of industries, two North American Industry Classification System (NAICS) categories make up a large portion of the businesses in this category. Services to Buildings and Dwellings refers to most businesses that make up Cleaning and Green businesses such as pressure washing and landscaping, while Specialty Trade Contractors refers to Contracting businesses such as plumbing and HVAC.

Total Nonfarm employment was growing over 1% year-over-year in Q1, and then fell to -13.4% in April. There has been slow improvements every month since then, but employment remains on a decline year-over-year, with Q3 seeing an average of around -7%.

Home Service began 2020 with positive growth on a year-over-year basis in Q1, outpacing the employment growth in Total Nonfarm. However, when stay-at-home orders came into effect towards the end of March and into April, employment fell in Home Service by -12.9% year-over-year. This was just slightly better than the overall effect on Total Nonfarm. Since then, employment in Home Service has recovered quicker than Total Nonfarm, with Q2 seeing rapid recovery from -12.9% in April to -4.9% year-over-year in June 2020. Q3 has continued to improve, though the recovery has slowed down, with September still seeing a -3.9% year-over-year decline in employment. This employment dynamic is still much better than Total Nonfarm.

As we look deeper into Q3 2020, it’s clear that Home Service businesses continued to recover well as states across the country re-opened their economies this past quarter. Grocery stores had seen unprecedented growth early on during the pandemic, but have since normalized considerably. The Automotive category has been very volatile as it declined drastically in March and April, followed by a quick recovery, and now impressive growth in September. Restaurants and Clothing stores have recovered relatively speaking, but still continue to struggle this past quarter.⁴

Consumer Spending

Data from the U.S. Bureau of Economic Analysis has been used to evaluate consumer spending in these different categories. Although there’s no specific expenditure type that directly aligns with Home Service spending as a whole; Furnishings, household equipment, and routine household maintenance is a category that can be used as a proxy.

As seen below, all expenditure types were seeing positive growth early in the year. Similar to revenue growth, there was significant volatility in consumer demand in March, as we saw spending increase suddenly in Food and Beverage, which is directly correlated with Grocery store sales. This is indicative of behaviors seen during the lockdown as people stockpiled on items early on, but then this type of spending stabilized in April and May. 

On the other hand, there was a sudden decrease in spending on items such as Clothing and footwear and Food services and accommodations, which is directly related to Apparel sales and Restaurants / Hotels. As a lot of these businesses shut down in many states in April, this dynamic is to be expected. Even Healthcare, which is non-discretionary in nature, took a big dip in April as outpatient services such as physicians, dentists, and paramedical services either shut down or saw reduced business. All of these expenditure types saw significant recovery in May and June as the economy started to re-open throughout the country. In July and August, these expenditure types were still improving but at a slower pace. They have started to plateau while still seeing negative growth year-over-year. September data will not be available until the end of October.Furnishings, household equipment and routine household maintenance did see a slowdown in March, followed by a sharper decline in April; but it also recovered quickly in May and June, back towards positive year-over-year growth in consumer spending. This is directly correlated with how the Home Service category has performed over the past two quarters, and is indicative of the non-discretionary nature of work that many home service businesses provide. This positive story has continued this past quarter, with July and August seeing positive growth year-over-year. Consumer spending is now right back to where it was before the pandemic.⁶

Employment

As explained earlier, the NAICS categories of Services to Buildings and Dwellings and Specialty Trade Contractors make up a significant portion of businesses within the Home Service category. 

Similar to revenue growth, employment across all categories, with the exception of Food and Beverage Stores, dropped sharply in April. This directly correlates with Grocery Store sales, which have stayed strong throughout the pandemic. On the other hand, Clothing stores were impacted the most as their retail locations were completely shut down in many states. In the case of Restaurants, many of them continued to operate with fewer employees as they saw an increase in their take out sales while in-person dining was shut down. All of these categories that were hit hard in April saw great recovery in May and June, followed by a relatively flat quarter from July to September.

Home Service has been more resilient in comparison to most other categories as many services provided by these businesses tend to be non-discretionary, such as plumbing or pest control. There’s also a significant amount of work that can be done externally in industries such as lawn care and landscaping. After a moderate decline in employment in April, there has been a significant improvement in May and June as the economy has started to re-open across the country. Similar to other categories, last quarter has been relatively flat for Home Service as well. As the economy slowly recovers and businesses figure out their new normal, employment is likely to see slow recovery as most businesses will try to keep their expenses low in these uncertain times. ³

E-Payment Growth

Based on a report from Bain & Company, the adoption of digital payments has accelerated significantly due to the COVID-19 pandemic. Specifically, the estimated percentage of transaction values done digitally in 2025 is now expected to be 67% rather than the previous estimate of 57%. ⁵ 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.

The data shows a rapid change in the market with a huge increase in payments being collected through e-payments rather than other payment methods such as cheque, cash or ACH. From January to May 2020, the payment share for e-payments grew from 32% to 37%, a lot of which can be attributed to social distancing measures that came into effect earlier this year. The increase has sustained over the following months and service providers are increasingly offering e-payment options to their customers. Based on the results we’ve seen so far, we believe the trend will continue throughout the duration of Q4 and into 2021.

Each business within Home Service has its own unique dynamics related to e-payment usage. Some businesses like the immediate liquidity of cash, and others prefer to take cheques for a large job so they don’t have to pay a large amount in credit card transaction fees. The Cleaning segment has seen great traction with e-payments historically, and continues to grow well through 2020. The Green and Contracting segments have historically been a bit slow to adopt  e-payments as they can often have large invoice sizes, however, they both saw a large increase in e-payment adoption through the pandemic.

Customer Communications

Customer communication is an integral part of any Home Service business’ success as every part of their workflow; quoting, schedule and doing work, invoicing and getting paid; is made up of back-and-forth communication between the business and its customers.

As the economy slowed down during the pandemic, Home Service businesses in the Cleaning and Contracting segments saw no growth in visits to customer sites year-over-year in April and May. However, even during that time, there was over 50% growth year-over-year in visit reminders being sent by those same businesses, as customer communication was more important than ever.

This communication trend has remained strong throughout 2020, and continues to look very positive in Q3. In September, all three segments within Home Service saw around 40% growth year-over-year in customer visits, while seeing over 150% growth year-over-year in visit reminders.

Home Service Segment Breakdown

Since the Home Service category consists of a large range of businesses, it’s helpful to segment the data to better understand trends within different sections of this category. We split the data into three segments: Cleaning, Contracting, and Green businesses.

Future Outlook

2020 has been a tumultuous year for most major categories—Home Service included. Record declines in new work scheduled and revenues, particularly in April, were followed by record high growth in June. Although many indicators suggest that the Home Service category has made nearly a complete recovery, the future is heavily tied to the lingering COVID-19 pandemic. 

As of today, it’s clear that Home Service as a category is incredibly resilient as most businesses managed to survive through unprecedented economic hardship. Analyzing measures such as consumer demand, employment, and revenues illustrates a remarkable recovery across all segments.

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.