Turnover of federal contractors slowed during recession, data show

Turnover in the federal contracting industry fell sharply when the economic recession was in full swing, and stock prices were near record lows, reflecting concerns over job security among the workforce, according to new data from a human resources consulting firm.

In the first quarter of 2009, as the economy continued to struggle and the S&P 500 average hovered around $70 a share, attrition among contractors was 14.3 percent -- one of the lowest rates since 2007. As the economy improved, turnover jumped: In the second-quarter of 2010 as the S&P average climbed to $120 a share, attrition increased to 20.8 percent.

HumanR, a Herndon, Va.-based company, compiled the data from nearly 20 federal contracting organizations, representing more than 125,000 employees nationwide, with 37 percent of those employees in the Washington area. The research covers the first quarter of 2007 through Q2 2010.

From Q1 2007 through Q2 2008, turnover ranged from 15 percent to 19 percent but spiked to 23.8 percent in the third quarter of 2008 just as the recession hit. After Q3 2008, the attrition rate among contractors began to decline. In contrast, it hit a low of 12.7 percent in the first quarter of 2010 as the economy continued to recover, a decrease from 16.1 percent in Q4 2009. Suzanne Logan, HumanR's manager of engagement services, said she thinks employees might have anticipated a double-dip recession at that point.

There could be numerous variables at play in the numbers, Logan said, but she believes the most likely cause for a low attrition rate during the economic downturn was a desire for job security. "When things are slowing down, people are hesitant to leave [a] position that may seem more stable," she said. "Transitioning into a new job with fluctuation in society can be . . . trickier. It's safer in a way to stay put where you know you have a position and ride out the storm for a bit."

Alan Chvotkin, executive vice president and counsel at the Professional Services Council, a trade association, said "it is possible to take any two data points and build a correlation around them." PSC and HumanR co-sponsored a conference on Thursday in Arlington, Va., to discuss the data.

"From the company's approach, the economy is an absolute indicator of employment and turnover because it has little to do with company strategy and everything to do with employee mentality," he added.

The numbers reflect the fact that, as the economy softens, "employees are less likely to leave their current employment and look for others," Chovtkin said. "The grass may not be out there, let alone be greener; there may be no grass on the other side."

Also, the size of the company was likely to affect turnover during the uncertain economy, according to the data. At small companies, those with fewer than 1,000 employees, the turnover rates were always higher than at larger companies, regardless of economic conditions. For example, in the second quarter of 2010, , small-company turnover was 27.3 percent, compared with 18.7 percent for larger companies, while in the first quarter of 2009, the attrition rates at small companies was 15.9 percent, and at large companies 13.4 percent. The numbers were not surprising, Logan said. The figures jibe with what HumanR heard from contractors and market research.

But what will happen if the economy continues its upward trend? Logan said as the economy continues to climb, the turnover rate will increase. "I think we may see a surge at some point," she said. "It will be interesting to see how it plays out with the data." Yet, she does not expect the initial surge to be huge. "It will take some time," she said. "You don't know what's coming next. I think there's still a lot of skepticism [on whether] we're coming out of this recession or not."