BSC Labor Trends: Progress Report
The first half of 2021 outdid 2020 as the most extraordinary labor market in modern times. At the beginning of the pandemic, building service contractors were deemed essential frontline workers. Fast forward to 2021 and we’ve seen massive movement in the U.S. labor market that’s having serious implications on BSC labor trends. January began with half the unemployment rate we’ve seen since the beginning of the pandemic. By late Q1, vaccines were beginning to roll out nationally and by the beginning of Q2, we could see light at the end of the tunnel.
BSC hiring rates began to improve, peaking in June. And while quit and total separation rates steadily declined, BSCs retained employees at a higher rate than the general population. When businesses began to reopen in March, cleaning service demand was high. The labor market became highly competitive in April as fewer candidates applied, leading to job board bidding wars, increasing wages and a decrease in service availability.
Although 2021 has so far seen a slight increase in employee retention rates, we’re still over double the national average. BSCs continue to focus hiring efforts on younger generations who tend to turn over more than their older peers. In a big contrast to 2020, Gen Z hiring rates are now equal to Gen X while Millennials continue to be the bulk of new hires.
U.S. Unemployment, Participation Rates and Active Employees
U.S. unemployment rates have continued to drop since the record 14.8% in April 2020. However, this BSC labor trends metric is still nearly double the record low 3% we experienced pre-pandemic.
As unemployment rates have steadily decreased in 2021, BSC employment numbers (represented as the percent change in active employees, month over month) remained remarkably flat during this same time period, with a loss in total employees during April and May. This loss also correlates with a higher quit rate in March, coupled with declining applicants.
U.S. labor participation through the first half of 2021 rebounded while BSCs lost employees during Q2. The employee loss may not be 100% due to employee churn. In discussions with several cleaning company operators, some made decisions to scale back contracts to focus on more profitable business while others became more efficient at cleaning less inhabited spaces.
U.S. Quit Rates vs Industry Quit Rates
BSCs traditionally face a higher quit rate than the broader labor market. Through Q2 2021, quit rates for the U.S. market slightly increased. Meanwhile quit rates for BSCs have been on a rollercoaster, bottoming out at 5.9% in February and peaking at 8% in March. Looking at the 18-month period in aggregate, we still see a positive trend with declining quit rates, but over double the national quit rate average. The second half of 2021 may show a completely different trend.
U.S. Layoff Rates vs Industry Layoff Rates
U.S. layoff rates in 2021 have been on a slight decline, starting at 1.2% and ending at 0.9% through June. The BSC industry has seen an increase in layoff rates, peaking in March at 2.3% and eventually tapering to 1.8% at the end of June. Traditionally, the BSC industry has a higher layoff rate than the U.S. labor market as a whole. The distribution has normalized and we’re now seeing the same gap in layoffs we’ve seen in previous years.
U.S. Hire Rates vs. Industry Hire Rates
The U.S. hire rates remained consistent through the first half of the year, slightly increasing to 4.7% in June. This is a higher rate than 2019 and years prior. The BSC industry’s higher quit rate results in a larger hiring rate than the general U.S; hiring has to keep up for staffing. BSC labor trends show they’ve hired around 10% (annualized) of their employee base the first half of 2021. March and April were surprisingly consistent given the historically low number of candidates and job search activity (discussed below).
Generational Analysis
Millennial and Gen X employees make up nearly 65% of both the U.S. and the BSC workforce, though the BSC industry has more active Gen X employees compared to the U.S. workforce. Gen Z only made up 5% of the U.S. workforce in 2020 but has more than doubled to 12% in 2021. They have nearly an equal share of the BSC workforce. At the other end of the spectrum, Boomers make up 22% of the U.S. workforce which is nearly in line with the BSC labor pool.
Generational Hire Rate vs. Annual Retention
Looking at retention rates over the past five years, older workers stay longer than younger workers. Boomers and the Silent Generation are retained 45% and 57%, respectively, for at least 12 months. These two generations only make up 10% of hires.
Millennial hires have decreased from 42% of hires in 2020 to 40% in 2021. Likewise, we’ve seen a decrease in Boomer and Gen X, while we’ve had a huge increase in hires from Gen Z.
Applicant Volume
Applicant trends for BSCs have followed the national trend through the first part of 2021. Lower job search activity lead to few applicants. Applicant volume increased in Q4 of 2020 but lacked the seasonal increase normally seen in January. Instead, it bottomed out with record low job search activity in April and May. June saw a slight increase.
Conclusions
The BSC industry faced major labor challenges in the first half of 2021. There was an increased demand for services coupled with a waning candidate pool. U.S. unemployment rates slightly decreased while participation rates held steady. But, they’re still significantly less than pre-pandemic levels. BSCs have managed to keep employee levels steady during this time, with slight dips in April due to a high quit rate (8%) and low candidate volume. Layoffs in the U.S. have been steadily and slightly decreasing this year while BSCs have let go of a higher percentage than the national average. Overall, industry staffing is faring well due to a steadily declining quit rate despite increased layoffs and quits.
In an incredibly challenging hiring market, employee retention continues to be critical. We believe there are several areas to investigate that could lead to improvements in hiring and retention. The long-term decreasing quit rate may change going forward with the fluctuating months in early 2021.
With a labor shortage in all markets and industries, employees now have opportunities to try different careers or move up in pay scale. BSCs need to find solutions to make their jobs more attractive than other industries, like quick-service restaurants or warehouse work. Cleaners have multiple reasons they leave jobs, with a prime example being pay. Two other factors often cited are cash flow and transportation. On-demand pay solutions are helping employers bridge cash flow emergencies and are becoming more common for hourly workforces. Smarter hiring practices like local targeted job ads are proving helpful in finding candidates who live close to their place of employment.
Understanding generational employee retention is also key to stopping the revolving door as well. Millennials make up nearly one-third of employee bases, yet only 18% are retained annually. Gen Z make up nearly a quarter of new hires, the same as Gen X, yet their retention numbers are poor. In general, older employees tend to stay longer. If your goal is to reduce turnover, we recommend advertising in channels where these generations frequent.
This BSC labor trends report was created in collaboration with Building Service Contractors Association International (BSCAI).