Plumbing, Heating, and Air-Conditioning

SIC 1711

Companies in this industry

Industry report:

This industry classification covers special trade contractors primarily engaged in plumbing, heating, air conditioning, and similar work. Sheet metal work performed by plumbing, heating, and air conditioning contractors in conjunction with the installation of plumbing, heating, and air conditioning equipment is included here, but roofing and sheet metal work contractors are classified in SIC 1761: Roofing, Siding, and Sheet Metal Work. Special trade contractors primarily engaged in electrical work are classified in SIC 1731: Electrical Work.

The U.S. heating, ventilation, and air-conditioning (HVAC) industry employed about 903,950 industry wide in 2009, according the U.S. Bureau of Labor Statistics. Construction and extraction occupations totaled 485,670 workers (54 percent). Of these, plumbers, pipefitters, and steamfitters numbered 279,700. Installation, maintenance, and repair occupations totaled 199,050 (22 percent). Of these, heating, air conditioning, and refrigeration mechanics and installers numbered 159,170. Other segments of the workforce consisted of office staff, management, transportation, and so on. Roughly 54 percent of these individuals worked for heating and cooling contractors, and roughly 15 percent were self-employed. Average hourly earnings for HVAC mechanics and installers were $20.33 in 2009, with a yearly wage of $42,290. Plumbers earned an average of $24.22 per hour, or $50,370 per year, in 2009. Generally, apprentices earned half the wage paid to their more experienced counterparts.

The plumbing, heating, and air-conditioning industry benefited from the growing U.S. housing market in the early years of the first decade of the twenty-first century. Despite a weak economy, housing construction achieved record growth in response to low interest rates during the mid-2000s. There were approximately 1.51 million building permits issued for single family housing in 2003 and 315,000 building permits issued for multi-family units. This was vital for the plumbing, heating, and air-conditioning industry, since more than one-quarter of its construction work was done on detached single-family houses in the early years of the decade. Industrial buildings accounted for another 15 percent of HVAC work, followed by office buildings and other commercial buildings at roughly 10 percent each. While sales of industrial and commercial units waned as construction in those sectors slowed in the early years of the first decade of the 2000s, the booming home construction market pushed shipments of central air conditioning units and heat pumps to 6.7 million in 2002 and slightly higher yet in 2003. However, the industry did not remain immune to the effects of the recession. According to a January 2004 issue of Appliance, "It's been a difficult few years for the HVAC/R industry, despite the welcome new record shipments of central air conditioners and heat pumps. The loss of millions of jobs, especially the cutbacks in manufacturing employment, took its toll as indicated by the slowdown in shipments in many sectors of this industry."

Severe winter weather in some areas of the country in 2004 proved to be a good business opportunity for this industry. Water damage from frozen pipes and frozen water mains required expensive repairs. Also, the nation's aging housing stock meant that many homes built during the building boom that followed World War II needed replacement heating and air conditioning systems, as well as plumbing repairs, which helped to boost industry sales. In the air conditioning sector alone, roughly 65 million air conditioning units were in use as of early 2003, a figure that boded well for future replacement needs.

One trend that affected the plumbing, heating, and air conditioning industry in the early years of the first decade of the 2000s was the continuing shortage of skilled trades people. Jobs in construction continued to suffer an image problem with high school students. The labor shortage was causing firms involved in construction to increase wages, stretch schedules, and, in some cases, reduce the quality of construction. The U.S. Department of Labor named construction as one of the most promising industries for those seeking employment early in the decade. The job market for HVAC workers is projected to grow 37.5 percent between 2002 and 2012; for plumbers it is expected to grow 22.5 percent.

According to industry statistics, there were an estimated 179,325 special trade contractors primarily engaged in plumbing, heating, air-conditioning, and similar work, valued at more than $122 billion in 2007, with industry-wide employment at 1,041,735 workers. An estimated 36.9 percent of the industry's workforce were considered independent contractors, while another 37.6 percent employed between two and four workers. States with the highest concentration were centered in California, Texas, New York, Florida, and Pennsylvania.

There were 25,194 plumbing, heating, and air-conditioning firms responsible for $17,500 million in sales representing 14 percent in market share in 2007. The largest industry sector based on sales was that of the 12,372 mechanical contractors who bolstered nearly $21 billion in revenues employing 134,474 workers. Plumbing contractors dominated the industry with roughly 33 percent in market share valued at $31,919.1 million, employing 300,275 workers. There were 29,788 establishments home to the warm air heating and air conditioning contractors employing 188,767 workers and generating $19,893.4 million in sales.

Between January and July of 2008, heat pump shipments grew 2.5 percent or 1.25 million units compared to the same time period in 2007. In fact, heat pump shipments climbed 17.3 percent, or 198,686 units for the month of July alone.

Residential remodeling activity is one indication as to how the plumbing, heating, and air conditioning industry is performing overall. Activity within the remodeling sector was expected to remain stagnant through 2009, according to the National Association of Home Builders (NAHB). However, In the long-term, "green building" will grow to 60 percent, compared to 30 percent by 2013, which in turn will boost industry demand. Despite the weakened economy, the geothermal market was heating up for the HVAC industry as well, with increased demand, especially following the passage of the Emergency Economic Stabilization Act of 2008 (EESA), extending the current and expired HVAC tax incentives.

Current Conditions

According to industry statistics, in 2009, the HVAC industry had 160,843 firms that generated over $109.6 billion in revenues. An estimated 14.2 percent of the industry's firms were classified generally as plumbing, heating, and air-conditioning establishments. These 22,784 firms (1.9 percent) generated $15.46 billion in revenues. Over 3,000 firms were classified as boiler, heater, and furnace contractors. These firms combined to generate $2.78 billion. Plumbing contractors numbered 57,618 (33.8 percent) and had revenues of $30.13 billion. Heating and air conditioning contractors and related firms numbered nearly 69,100 (43 percent) and generated revenues of $52.57 billion. Smaller sectors included fire system and irrigation system installation.

Despite predictions to the contrary, when the housing bubble burst in 2008, due to a myriad of economic problems including a banking system built on a foundation of poorly made subprime mortgages during the mid-2000s, the HVAC industry suffered the consequences. New housing starts, which hit record highs in 2005, fell to a 50-year low just four years later in 2009. In addition, consumer spending also decreased, including the amount spent on home repair and remodeling. National Association of Home Builders' chief economist David Crowe noted early in 2009: "Remodelers suggest that the huge decline in consumer confidence, volatility of the stock market, and uncertainty about the future of the economy have made homeowners delay remodeling decisions. These anxieties are causing consumers to wait and see if conditions improve before they are willing to commit to home improvement spending."

Toward the end of 2009 and into 2010 conditions for the HVAC industry improved. The Air Conditioning Contractors of America reported in May 2010 that its Contract Comfort Indicator, based on a survey of the association's membership, rose to 65 during the month of April, up from 60 in March and 55 in February. A score of above 50 reflect anticipated economic growth. Nonetheless, recovery was slow to return to the new housing market, which remained relatively flat during the fourth quarter of 2010.

The industry did find some small reprieve from the poor economic demand via the funding that filtered into the industry from the American Recovery and Reinvestment Act of 2009. For example, in December 2010, the Department of Energy (DOE) announced 24 projects valued at a total of $21 million in technical assistance aimed at significantly reducing the energy used in their buildings.

Industry Leaders

While there are thousands of small, independent contractors in this industry, there are also very sizable major companies leading the industry. Comfort Systems USA Inc., which posted sales in 2009 of $1.13 billion, down from $1.32 billion in 2008, was a leader in the industry. Although Comfort Systems' revenues dropped during 2009 due to the recession, the firm managed to post a profit for the year of $34.6 million, which was down from the net income of $49.8 million posted in 2008 but up from the $32.2 million posted in 2007. Other leaders included ACCO Engineered Systems and EMCOR Group.

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