American Council of Engineering Companies
Erin McLaughlin, Vice President, Private Market Resources
The architecture/engineering (A/E) industry peaked in 2019 with annual revenues of $350.25 billion (source: U.S. Census Bureau), of which $263.74 billion was engineering services revenue. Due to the recession caused by the COVID-19 pandemic, A/E revenues declined in 2020. The U.S. Census Bureau’s ‘advance estimate’ of total A/E revenues for Q3 2020 is $80.08 billion (B), an 11.8% decline from the same quarter last year. This is less than half a point improvement from Q2 2020 A/E revenues, at $79.77 billion. Overall, this may be good news for our industry—as there was not a decline from Q2 to Q3 in 2020. Whether or not we can hold at this level will largely depend upon the vaccine as well as the necessary stimulus to state and local governments.
FMI forecasts a “U-shaped” trend in the design and construction markets, with construction put-in-place spending not returning to 2019 peak levels for more than five years. Although no recession is the same as past ones, it is notable that U.S. A/E firm revenues took six years to return to 2008 levels coming out of the Great Recession. For the design and construction market the “bottom” is not expected until 2022.
Comparison of year-over-year construction put-in-place numbers for Q3 2020 confirms that private markets declined first, with public markets remaining flat. However, this is expected to change, with public markets declining as states and localities grapple with shortages in tax revenues as a result of the recession.
The two strongest markets for engineering firms currently are single-family housing and the communications market sector.
The U.S. Census Bureau’s ‘advance estimate’ of total A/E revenues for Q3 2020 is $80.08 billion, an 11.8% decline from the same quarter last year.
The single-family housing market is emerging as a star during the economic recovery from the COVID-19 pandemic. This is good news for engineering firms that engage in land development services, as well as firms that design community infrastructure which supports neighborhoods—such as water/wastewater, K-12 schools and roadways. Single-family homebuilding jumped 8.5% to a rate of 1.108 million units in September, according to monthly joint numbers by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. This is the highest rate of single-family starts since June 2007 according to the World Property Journal. Permits to build single-family homes—a leading indicator—increased 7.8% to the strongest level since 2007, according to Bloomberg, which also noted that construction of single-family homes in September reached the highest level in more than 13 years. In the nation’s largest region, the South, new single-family home construction starts rose 17.7% to a 13-year high.
The communication market sector is considered the most resilient during the current pandemic-caused recession, and FMI forecasts it will grow 18% (the fastest of any sector) over the next few years. The need for social distancing during the COVID-19 pandemic has translated into millions of Americans needing to work from home, engage in distance learning, shop via the internet, and even have medical appointments using telemedicine, boosting demand for communications infrastructure.
International Franchise Association
Matt Haller, Senior Vice President, Government Relations & Public Affairs
The franchise business model represents a cross-section of the entire business community, having a presence in over 220 sectors of the US economy. The franchising community is comprised of 773,600 small franchise establishments nationwide and supports more than 8 million direct jobs, and contributes $787.5 billion of economic output into the U.S. economy, representing 3 percent of the total Gross Domestic Product (GDP).
The COVID-19 pandemic has created economic instability across the country, including the franchises. There is wide variation in the different levels of economic impact because of its ubiquitous representation. Most retail, including much of the restaurant sector, hospitality, and personal services sectors have faced the greatest challenges in continuing their operations because of stay-at-home orders under the initial economic lockdown, social distancing practices, as well as declining consumer confidence and spending. Other sectors such as residential and commercial services experienced a surge driven by increases in new home sales and evolving consumer preferences towards home construction/renovation while working from home for the majority of 2020.
Franchise employment started experiencing gains in June of 2020 through the addition of an average of 25,200 jobs per month. As of November 2020, more than 8 million workers were employed in franchising, and the US gained 33,700 franchise jobs in November, with the most growth coming from the restaurant and automotive sectors.
As we enter 2021, franchising in many sectors is still facing major uncertainties. The recovery of franchising activity is expected to be sector-specific and regional, based on the severity of COVID-19 spread and the different state and local regulatory business condition mandates. The second half of 2020 showed its resiliency, however. As in early phases of past recessions, many brands are seeing significant growth in sales, new unit development, and jobs. The franchise business model has proven to be resilient and a leading expansion method coming out of economic downturns.
As the nation’s largest job creation and training program, franchises have helped workers secure jobs in the current economic crisis, prepared them with relevant business skills, and provided them with opportunities for career progression, which in turn generate economic stability. Based on the ADP’s National Franchise Employment Report, as of November 2020, franchise jobs have sustained a six-month consecutive gain since June, with an average of 25,200 additions per month. In the meantime, the high unemployment rate is anticipated to lead to a large percentage of unemployed workers choosing to invest in become franchise owners themselves, or finding new careers at franchises, which will bolster franchise business growth.
The franchise business model is uniquely designed to share best practices and quickly adapt them in the early stages of an economic recovery following a highly uncertain period by giving franchise business owners a shared source of constant communication, aggregated, evaluated and developed into support programs from franchisors within and across franchise systems. This broader level of information flow and resources are especially valuable in helping lift the economy out of recessions.
Security Industry Association
Ronald Hawkins, Director of Industry Relations
The converged security technology industry – which includes video surveillance, access control, intrusion alarms and related technologies and services – tracked the broader economy in 2020, dipping sharply in the second quarter, then recovering during the last half of the year.
After declining by 4.6 percent in 2020, security equipment sales are expected to grow by 5.7 percent in 2021, according to a Security Industry Association report produced by Omdia.
As a vital service, security was less hard hit than many other sectors, but with the country largely shut down for a time, new installations and system upgrades naturally slowed. Existing contracts and maintenance of installed systems were able to continue as states recognized security personnel, including technicians, as essential employees, and companies adopted new safety protocols. In addition, the need to reduce person-to-person and person-to-surface contact at many sites and to implement remote monitoring at others that suddenly had low or no occupancy led to some expanded uses of security technology, as did the repurposing of certain equipment, such as the deployment of thermal cameras to identify elevated body temperatures.
A research report produced for the Security Industry Association by Omdia projected that security equipment sales would decrease by 4.6 percent in 2020 but would more than recover the lost ground by growing by 5.7 percent in 2021. In terms of industry confidence, SIA’s bimonthly Security Market Index plummeted from 50 in March to a record-low of 30 in May, before steadily increasing to reach 54 by the end of the year.
Even as the pandemic is, it is hoped, brought under control in 2021, several trends from 2020 could have a lasting impact on the converged security technology sector, including the increase in working from home and the changing nature of commercial office space, the move toward “touch-free” environments, and the reduction of interpersonal contact and the expansion of remote security and automation through, among other technologies, drones, robotics and artificial intelligence.