Business faces a key question in 2019, and it’s about unemployment: How low can it go?

At the time of this writing, unemployment in the North Bay is extraordinarily low — and holding. For the past two months, the majority of the North Bay has experienced around 3 percent unemployment, with some counties dipping into the 2 percent range. California itself has seen around 4.1 percent unemployment for the past two months, down a few tenths of a percent year-over-year but still just above the U.S. national average of 3.7 percent.

All of this is to say, it’s a good time to be a job seeker.

It’s been a while since we’ve seen shifts in the economy such that job seekers have had such an upper hand when it comes to the job market. But now that we’re here, it will be imperative that employers take steps to make their brands impenetrable and their acquisition and retention strategies competitive.

In a recent study of workplace trends among more than 600 California employers and 500 California employees, which was conducted by my company, Nelson, we discovered that the top two challenges facing employers for 2019 are “talent acquisition” and “talent retention,” respectively.

Tied for third are “managing growth” and “competitive pressures.” This tracks with the trends we’ve seen in unemployment, explosive business growth and intense competition for talent here in the Bay Area.

While some are watching the stock market warily, the economy remains hot. So while as businesspeople we must plan with a recession in mind, we must also face the reality that right now if you want to get and keep talent — to manage your growth — you have to make your company and your offers as competitive as possible.

Challenges to hiring and retention

California has a unique landscape — and we’re not just talking geographically. In this state, we face a number of challenges to hiring and retention that other states don’t necessarily face.

For many Californians, the high cost of living in relation to wages means that many of California’s workers have to seek jobs outside of areas in which they can affordably live. And because the “Bay Area” is a sprawling and inclusive definition of a huge geographic region — we see a similar situation in Los Angeles — many “Bay Area” workers are actually commuting for hours at a time and across multiple county lines to get to work each day.

In the Nelson study, we found that 84 percent of companies say that their commute times are getting longer. As a result, nearly three-quarters of surveyed employers say that they have lost candidates and/or employees as a result of the commute.

In 2019, it is unlikely that the need for a long commute will abate. As more workers enter the state — especially, as the tech industry continues to attract workers — the Bay’s commute times may very well come to rival LA’s.

One of the reasons that the commute is so long is that California is facing a housing shortage. There is a dearth of affordable homes, so while the housing market has begun to cool after reaching its apex in June, it is unlikely that California’s housing problems will be solved by 2019. In fact, Governor-elect Gavin Newsom has suggested that the state needs to build 3.5 million more homes by 2025 to keep up with demand.

How this will play out is anyone’s guess, but in the meantime, nearly three-quarters of the companies we surveyed have either lost a candidate or had to pay more due to the diminishing availability of housing in the state.

Wages are not rising fast enough to meet inflation. Because many employers can’t or won’t increase their wages, many workers — especially, low-income workers — are choosing to leave the area or the state entirely.

We did see that 58 percent more companies were offering higher wages for entry-level roles this year, versus 15 percent more offering higher wages for management — and executive-level roles. But if employees can’t find housing, which then makes their commute worse, or can’t afford the cost of living for themselves and their families, they may choose to seek employment with another company offering more.

Staying competitive

In 2019, many employers will need to take a good, hard look at their offerings and their retention strategies if they want to fight against the effects that our state’s economy is having on their talent management.

More than 25 percent of respondents to our survey who had more than one person in their department said they expected no turnover in 2019. That is concerning, because according to our survey of California workers, even employees who said they weren’t looking to leave their jobs named a number that would convince them to go. In other words, 95 percent of employees can be considered potential job seekers, whether active or passive.

Knowing what we know about the unique conditions of California employment then, we need to be ready for turnover — and ready to combat it.

Some employers are already heeding this warning. In 2018, 39 percent offered increased base compensation, and 32 percent increased bonuses or bonus opportunities. But just increasing wages won’t make morale go up when the commute is chipping away at quality of life. (Fewer than 20 percent of companies have offered benefits that actually address the time and cost to commute in the last 10 years.)

So what can your organization do in 2019 to prepare for the staffing challenges it may face?

First and foremost, be prepared for turnover. If 95 percent of employees are at least passive candidates, if not already active, then it should be your No. 1 priority to plan for the inevitable. Get your succession plan in order, and don’t turn a blind eye to the possibility that employees might leave.

Second, take steps to understand what challenges your employees are facing to engagement and retention. Is the commute an issue? If so, can you offer financial offsets, commuter benefits or flexible work arrangements? Is housing driving your employees to consider changing their residency? If so, it might be time to reconsider your compensation and benefits offerings.

Third, get to know the cost of living in this state intimately as you consider your recruiting and hiring. If your wages are not competitive with other companies, you will lose both current employees and future candidates. You can benchmark your offerings by region in Nelson’s 2019 California Advisor and Salary Guide.

Take advantage of the incredible opportunities for growth and business success in this state by taking care of your employees. Even if increasing wages or offering new benefits bring short-term challenges to the bottom line or change the way you do business in the state, you will profit from increased retention, better hiring and more stability in the long term. The No. 1 thing we learned from our survey of California’s workers is that they want to be treated the same way you do. If you give them the opportunity to improve their quality of life, they will, in turn, have the chance to improve the quality of their work — a benefit from which our state will surely profit.