Good morning and happy Friday, Money readers. Jayme Deerwester, here with you again.
🗞 News you should know 🗞
The U.S. economy is still climbing out of the COVID-induced downturn as a robust job market powers it to cruising speed. In fact, employers added 678,000 jobs in February. So why is talk of recession in the air?
Some top economists are raising the odds of a slump within the next year or so amid Russia’s invasion of Ukraine, rising energy prices, historic inflation, the stock market sell-off and the prospect of aggressive Fed rate hikes.
“The risk is uncomfortably high,” says Mark Zandi, chief economist of Moody’s Analytics, who has believes the chances of a recession in the next 12 to 18 months have risen by 30% since Russia invaded Ukraine.
Fears of a slide may seem incongruous with an economy that’s still benefiting from strong consumer spending as vaccinations rise and COVID ebbs.
Yes, gas prices are on the rise – some areas are already seeing $5 or more per gallon – but the more likely trigger for a downturn is the Federal Reserve hiking its key interest rate, now near zero, too rapidly in an effort to curtail inflation, temper an overheated economy and discourage borrowing. That’s what led to two recessions in the 1980s.
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💡 Daily insight 💡
As the COVID-19 pandemic enters its third year and remote work becomes more firmly rooted, Americans are rethinking where they want to live. For the most part, they’re thinking smaller – but not too small.
After taking refuge in the suburbs of the largest cities during the early days of the health crisis in 2020, a growing share of U.S. residents is moving to less populated metro areas or small, semirural towns further out from urban cores, according to a Moody’s Analytics study of credit agency Equifax records.
The shift is being driven by employers’ adoption of more permanent work-from-home setups, or hybrid arrangements that have workers coming to the office just a couple of days a week, says Moody’s economist Adam Kamins.
“People are adjusting to what they see as a new normal,” he says. “We see less movement to suburbs and more movement into second-tier cities,” such as Jacksonville, Florida; Raleigh, North Carolina; Louisville, Kentucky; and Salt Lake City.
💵 All taxes, all the time 💵
In 2021, nearly 13% of jobs posted on ZipRecruiter offered signing bonuses, compared with 2% of jobs in 2019, according to data the site provided USA TODAY.
But what workers often don’t realize is how big a bite the government will take away from their signing bonuses. Perhaps even less apparent is that they could be eligible for big tax refunds on the bonuses.
In general, workers who received any kind of bonus under $1 million last year were subject to a 22% withholding tax. So, for someone who got a $1,000 bonus, they’d initially have $220 withheld in federal taxes. But if their income tax rate is 10%, then they should only owe $100 in taxes. Once they file their taxes, they should get a refund equal to $120, Karen Connelly, an IRS spokesperson confirmed.
To get the refund, you don’t have to fill out any special form besides all the ones that you need to file your regular state and federal tax return.
Speaking of refunds, there’s no better feeling during tax time than getting that check or direct deposit representing your refund. Now comes the fun part: How should you use it? We’ll tackle that topic in Sunday’s tax-centric edition of the Daily Money. (As a subscriber to this newsletter, you’ll automatically receive it.)
🎶 Mood music 🎶
Today’s lyric is a ’90s rap throwback from the Notorious B.I.G., Diddy and Ma$e that came up on the classic hip-hop station on my Ergatta the other night: “I don’t know what they want from me. It’s like the more money we come across, the more problems we see.”
LISTEN WHILE YOU WORK: Remember, you can listen to this song and every track I’ve quoted in the newsletter in the Daily Money Mood Music playlist on Spotify.