Month: November 2022

5 Tax Moves to Consider Before Year-End

Posted on by Sabrina Parys

With the holidays right around the corner, taxes might be the last thing on your mind. But a little bit of preparation now could make a big difference come April.

Here are five things to keep an eye on as the year ends.

1. Increase your 401(k) contributions if you can

Contributing to an employer-sponsored retirement plan, like a 401(k), allows you to save for retirement — and get a tax break for doing so. Contributions are typically made pre-tax, which means that they can reduce your taxable income for the year.

How much you contribute is likely influenced by what you can afford and how far away from retirement you are. In 2022, taxpayers can contribute up to $20,500 into a 401(k), and those age 50 or older get a catch-up that allows them to contribute up to $27,000.

Employers also often match a portion of your contributions. According to a 2022 Vanguard study, the average promised employee match hovered around 4.4% of salary in 2021.

But if you’re contributing only enough to get that match, you could be leaving some money on the table, says Clay Ernst, a Colorado Springs-based certified financial planner and the executive director of financial planning for Edelman Financial Engines. Why? Because the more you contribute by Dec. 31, the more you can shave off your taxable income for the year.

2. If you’re newly self-employed, think about a solo 401(k)

If you’re a freelancer or otherwise self-employed, opening a solo 401(k) — a retirement savings plan for an individual who is a business owner with no employees — may not have been at the top of your list this year. But there are several benefits to establishing a plan, including that contributions you make can lower your taxable income.

A nice bonus? While you only have until Dec. 31 to open the account, you get until the tax-filing deadline — April 18, 2023 — to make contributions to the account that will qualify for a 2022 deduction, says Ernst.

3. Take stock of your investment losses

If you’re an investor who’s been watching the stock market take downward swings through gritted teeth in 2022, this may be an especially good year to take advantage of tax-loss harvesting, a strategy that can help you to squeeze a little lemonade out of the lemons in your portfolio, says Ernst.

How it works: Investors who sell investments at a loss can generally subtract that loss against any investment gains they’ve cashed in. And if their total losses exceed gains, they can even offset up to $3,000 of ordinary income and carry over any leftover losses to deduct in future years.

A few notes: Tax-loss harvesting can only be performed on assets sold in taxable accounts, like brokerages. The strategy can’t be applied to investments in tax-advantaged accounts, like 401(k)s or IRAs. It’s also worth working with a tax or financial advisor, as an expert can ensure this strategy is the right one for you and keep you on the right side of IRS rules, which can be complicated.

4. Consider deferring income

The hope is that you’ve had enough tax withheld throughout the year to avoid a surprise bill. However, a few things — like freelance work or a bonus — could inflate your total earnings.

If you’re a self-employed worker who bills their clients per project, you might consider holding off on invoicing if you think extra income might bump up your 2022 earnings.

“If you bill for your services, say, later in the year, in the third or fourth week of December, it’s highly likely at that point that you won’t receive the income until the next tax year,” says Ernst. This move can allow you to rein in your taxable income for 2022 and plan for 2023.

If you’re expecting a bonus and think your income might be lower next year, you could ask your employer to hold off on paying it out until January. Weigh it carefully, though; this maneuver doesn’t make sense for everyone. After all, you’re merely pushing off the taxes until 2023 — not avoiding them forever.

5. Look into a Roth IRA conversion

Roth IRA conversions allow you to transfer the assets in your traditional IRA into a Roth IRA so that your investments’ growth, and qualified withdrawals, get tax-free treatment in the future. The downside is you’ll likely pay taxes on the amount converted.

A down market can actually help here: If the value of your account has gone down, you’re converting less money, which can translate to lower taxes owed.

Be mindful of a few drawbacks, however. In addition to the conversion taxes, the move can push you into a higher tax bracket. And an inflated income can have a ripple effect on a few other things, like your general tax liability. If you’re retired or about to retire, it can also affect how much of your Social Security is taxable and how much you pay for certain Medicare premiums.

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Sabrina Parys writes for NerdWallet.

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Federal Student Loan Forbearance Extended Yet Again

Posted on by Eliza Haverstock

The White House has once again extended the federal student loan payment pause as it battles lawsuits threatening to derail its sweeping student debt forgiveness plan.

The extension could stretch no later than June 30, 2023, the Department of Education said Tuesday. But if the Supreme Court decides the fate of Biden’s plan to cancel up to $20,000 in student debt per borrower before June 30, forbearance could end sooner.

This marks the eighth time the government has lengthened interest-free forbearance, though the Biden administration had insisted Dec. 31 would mark the final expiration date.

“Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations, and it’s just plain wrong,” Secretary of Education Miguel Cardona said in a statement.

Payments will resume 60 days after the pause ends, the Education Department said. Unless the president orders forbearance to be extended once more, the repayment clock starts again 60 days after the department is allowed to implement the program or the litigation is resolved, or 60 days after June 30, 2023 — whichever comes first.

The extension is a win for activists and borrowers who called on the Biden administration to extend forbearance after several legal challenges put the student debt cancellation plan on hold.

“We applaud President Biden for extending this pause on student loan payments now and for affirming his intent to cancel student debt in the months ahead,” Mike Pierce, executive director of the Student Borrower Protection Center, said in a statement.

During forbearance, first ordered by then-President Donald Trump in March 2020 as the COVID-19 pandemic took hold, federal student loan borrowers are allowed to skip payments. The interest rate on their loans has been set to 0%, and collections activities have been halted on defaulted loans.

Roughly 40 million borrowers who were supposed to start paying their bills again in January now will get additional time without them. After nearly three years without student loan bills and an uncertain future for cancellation, however, not everyone should continue the payment holiday.

When exactly will payments resume?

We don’t know exactly when payments will resume. The Education Department’s announcement Tuesday leaves forbearance’s expiration date up in the air, depending on if and when the Supreme Court weighs in on legal challenges circling Biden’s student debt relief plan.

If the Supreme Court rules on the lawsuit before June 30, 2023

If the Supreme Court rules on Biden’s plan before June 30, borrowers with remaining balances will need to start repaying loans 60 days after the court decision.

If the Supreme court does not rule before June 30, 2023

If the Supreme Court has not made a decision on Biden’s debt cancellation plan by June 30, forbearance will end. Borrowers will need to start repaying loans 60 days after June 30.

Should you make payments during the extension?

The decision to start repaying during forbearance depends on your remaining balance and ability to pay.

If your cancellation amount under the stalled Biden plan would wipe out your student loans, don’t make payments during this extension. Instead, put your student loan bill money aside, if you’re able. This money should be kept in a separate account so it doesn’t get mixed into your normal expenses and is available for you to make a lump-sum payment if cancellation never comes to fruition.

Borrowers enrolled in a forgiveness program — like Public Service Loan Forgiveness — will see their payment count increase each month, whether or not a payment is made. These borrowers should not make payments.

Borrowers who will still have a student loan balance if cancellation is applied should make payments during the pause extension, if they can. Using this time to make payments will get you closer to the finish line sooner and more cheaply.

It comes down to basic math, explains Dave Christensen, a Wisconsin borrower who paid off about $30,000 in student loans during the pandemic pause. “They aren’t charging you interest, so take advantage and your balance goes down a lot quicker that way,” he says.

Whether or not Biden’s broad debt cancellation plan survives, you’ll still have loans to pay back. All money you pay toward your loans until forbearance ends in 2023 will go toward your loan principal. Even partial payments help.

Start planning for repayment now

Regardless of how you handle the remaining forbearance period, start preparing for repayment now. The pause could end sooner than June 30 if the Supreme Court rules on Biden’s debt cancellation plan before then.

“Practice making these payments now,” says Kristen Ahlenius, director of education at The Money Line, a workplace financial wellness company. “Take the equivalent of what you would pay toward your student loans and use these funds to increase your emergency fund or pay off some other liabilities. You’ll be prepared in case student loan forgiveness remains struck down and improve your financial health in the interim.”

Call your loan provider to confirm what your monthly payments will be. This amount could decrease if cancellation happens, but it’s best to plan for the worst. If you won’t be able to cover the full amount, ask about enrolling in an income-driven repayment plan. These plans cap your monthly payments at a certain percentage of your disposable income, lowering them to a more manageable amount while also extending the life of your loan. If your income is low enough, your payments could be $0.

Great, Inflation Is Ruining Thanksgiving Dinner, Too

Posted on by Anna Helhoski

This Thanksgiving, it’s not just the pandemic or post-election political tensions threatening to ruin your family dinner — it’s also inflation. Oh, and the ongoing avian flu that has killed more than 7 million turkeys nationwide this year.

The American Farm Bureau Federation, which tracks food prices, said in a news release that consumers could face record high prices for Thanksgiving meals this year.

Food prices in general have been increasing: The index for groceries — which represents changes in consumer prices — was up 12.4% over a one-year period as of October 2022, according to the latest Consumer Price Index data from the Bureau of Labor Statistics. While the data show price increases for food and other goods are starting to slow down, consumers can still expect high prices this Thanksgiving.

As with all price jumps, some consumers will have a more difficult time handling the higher costs than others. “These are very high price increases, but they’re really impacting low-income families the most,” says David Ortega, associate professor in the department of agricultural, food and resource economics at Michigan State University.

Meanwhile, higher-income consumers who padded their savings during the early days of the pandemic have been increasing their spending on food. The rising demand from those consumers has elevated prices at the supermarket, Ortega says.

In other words, there are lots of reasons why you’ll pay more to get food on the table this year.

Turkeys are available but pricier

The star of the meal is traditionally the humble turkey. You may see turkeys for sale that are smaller than usual, because commercial farms impacted by the highly virulent HPAI, or avian flu, are bringing younger turkeys to market, according to the Farm Bureau. (It’s worth noting in this era of virus awareness that HPAI does not usually affect humans, according to the Centers for Disease Control and Prevention.)

Despite the avian flu, there’s no shortage of turkeys, according to Beth Breeding, vice president of communications and marketing for the National Turkey Federation.

“If a shopper is looking for a turkey, they’re going to be able to find one this Thanksgiving,” Breeding says. “We have no concerns about that whatsoever.”

But those turkeys will be more expensive than usual, partially due to the effects of the avian flu, but primarily because of higher supply costs for feed, fuel, fertilizer and labor. Overall production costs have increased by nearly 18% from 2021 to 2022, according to U.S. Department of Agriculture data.

In September, the highest retail prices for boneless, skinless turkey breast hit a record of $6.70 per pound, which is 112% higher than at the same time in the previous year, according to the Farm Bureau. The price is well above the previous record high of $5.88 per pound in November 2015, during another avian flu outbreak.

Keep in mind that the average price of whole turkeys is lower than those record highs, and cost varies by region and type. The average cost of a whole young fresh turkey ranges from $1.80 to $2.17 per pound, according to the USDA’s weekly turkey report for Nov. 11. Frozen turkeys are typically cheaper than fresh, and hens are less expensive than toms.

“There’s no doubt that things are going to cost more this holiday — that the whole meal will cost more — but there are still really good deals available on turkey and as far as value,” Breeding says.

Ortega recommends that consumers shop around since supermarkets will offer promotions and deals to get customers in the door.

You’ll lay down more green for veggies

As you might expect, you’ll pay more for corn, green beans, potatoes and squashes this year than in the past. The Consumer Price Index shows a 9.2% year-over-year increase in the index for fresh vegetables — representing price changes — as of September 2022.

Many variables are raising prices, including supply-chain snags, high transportation costs and climate events impacting agriculture.

Domestically and abroad, climate changes have affected agriculture, Ortega says. California, for example, is the No. 1 state for agricultural production, according to the USDA. But drought and extreme heat have made it more difficult for crops to survive there, Ortega says.

Weather changes impact production, yields and productivity, he says, and those effects increase the price of food. The industry also has higher energy and transportation costs due to high oil and gas prices.

The wheat supply chain is still strained

Higher costs of wheat will impact the cost of a crucial ingredient for Thanksgiving meal staples like rolls, stuffing and pie crust: flour.

The cost-per-pound of flour has risen 35% year-over-year as of October 2022, according to data from the Federal Reserve Bank of St. Louis.

As with vegetables, compounding factors are increasing price, Ortega says. Wheat costs have also been affected by the war in Ukraine, which is known as the breadbasket of Europe for good reason: It’s a major supplier of grain, wheat and sunflower oil for the world. When combined with Russia, the two countries produce 13% of the world’s grain, according to Our World in Data, a project of the University of Oxford and the Global Change Data Lab.

For most of the year, Russia prevented all exports of grain out of the Black Sea, until the United Nations brokered a grain deal that allowed exports to resume. That deal is set to expire in March 2023.

“Those commodity prices have come down substantially since, but it takes time for these decreased costs to make their way down to the grocery store,” Ortega says.

Don’t forget higher dairy prices, too

Butter, cream, milk and other dairy products that are central to cooking a traditional Thanksgiving meal are also expected to remain more expensive this year, according to BLS data.

Finally, to top off your dessert, the price of canned whipped cream canisters has long been elevated due to a yearslong nitrous oxide shortage. This year it’s been made worse by the conflict in Ukraine. Why? Ammonium nitrate and natural gas are refined to create nitrous oxide, both of which are heavily produced in Russia and Ukraine.

Even with higher-than-usual prices in every aisle, comparison shopping can still help — if you have the fortitude to balance it and make a Thanksgiving dinner. If all else fails, it could be cheaper to call off cooking and eat out instead.

Credit Card Debt Is Making a Comeback

Posted on by Anna Helhoski

Credit card debt took a nosedive in the early days of the pandemic in 2020 as consumers stayed home, lost work and received cash infusions from the government.

Two years later, it’s back.

Credit card debt increased 15% year over year — the largest one-year increase in more than two decades, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit released today. Its total of $930 billion is near pre-pandemic levels.

The report found one group of consumers has surpassed its debt average since December 2019, before the pandemic: those in the lowest income areas. Meanwhile, consumers who live in high-income areas have average balances that are $300 lower than in December 2019.

Credit card debt has been rising all year, according to the New York Fed, and its researchers chalk up the increases to a few possibilities:

  • Consumers are no longer putting off “services” purchases like vacations and travel.
  • Higher prices of goods and services because of inflation.
  • People aren’t slowing consumption of goods and services despite inflation.

New York Fed researchers say they expect to see credit card debt increase as it usually does heading into the holidays.

Debt is up, but delinquencies are down

Debt is higher than pre-pandemic levels, according to the New York Fed’s report. It increased by $351 billion, or 2.2%, in the third quarter of 2022 and now sits $2.36 trillion higher than at the end of 2019.

That’s good news for lenders and less of a celebration for consumers. What consumers can rally around is a lack of a significant uptick in delinquencies, which remain below historical trends, the report found. Researchers at the New York Fed largely chalk that up to excess savings still bolstering some borrowers. The percentage of consumers with debt in collections still remains lower than pre-pandemic levels.

Here’s what’s happening with other types of debt, according to the New York Fed’s findings:

  • Mortgages make up 71% of all outstanding household debt balances compared with 69% in 2019. New York Fed researchers say the refinancing boom in housing is over because of increasing interest rates, and what is left are purchases. New mortgage originations have slowed to pre-pandemic levels. Total mortgage debt is $11.67 trillion.
  • Student loans — the majority of which are federal loans that have been paused since March 2020 — saw slight balance declines likely due to discharges through existing loan forgiveness programs such as Public Service Loan Forgiveness. The pause is expected to lift next year. Total student debt stands at $1.57 trillion.
  • Auto loan balances continued to increase in the third quarter on a consistent 11-year upward trend, but the number of originations (i.e., cars being bought) has decreased since the previous quarter. New York Fed researchers say those who may be struggling likely bought a car recently, and the price would have been inflated compared with that of past years. Younger borrowers, ages 18 to 29, are struggling most with auto loan payments. Total auto loan debt is $1.52 trillion.
  • Home equity line of credit, or HELOC, balances increased for the second consecutive quarter after years of decline. Total HELOC debt is $322 billion.

Anna Helhoski writes for NerdWallet.

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Is $20K Student Debt Forgiveness Still Going to Happen?

Posted on by Cecilia Clark

No one knows for sure when — or if — student loan forgiveness is coming.

As of now, you should plan for payments on your federal student loans to resume in January 2023, especially if you were counting on debt cancellation to erase your balance entirely.

Why? A federal judge in Texas has struck down the Biden administration’s plan to erase up to $20,000 per borrower. The plan is also under an injunction arising from another lawsuit, and several more lawsuits are winding their way through the courts. Any of them could derail debt relief, too.

While the Department of Education is seeking to overturn the court rulings, there’s no guarantee these roadblocks will be cleared before January — or ever.

Unless the president orders forbearance to be extended once more, the clock starts again in January. Loans will resume accruing interest, and missed payments eventually will leave a big dent on your credit history.

Will student loan forbearance be extended?

We don’t know. The White House has not yet committed to pausing payments beyond the Jan. 1, 2023, deadline. It’s possible, though, as forbearance has been extended multiple times since 2020.

Student borrower activists are pressuring the Biden administration to immediately extend forbearance.

“The Biden administration cannot resume payments on Jan. 1,” said Student Borrower Protection Center deputy executive director and managing counsel Persis Yu in a press release. ”It must use all of its tools to fight to ensure that borrowers receive the debt relief they need.”

But Scott Buchanan, executive director of the Student Loan Servicing Alliance, which represents the companies that handle federal student loan accounts, says student loan servicers are moving forward as though payments are restarting in January.

Are the lawsuits likely to succeed?

We don’t know. It’s unclear if any of the lawsuits to stop student loan cancellation will be successful in the end.

However, the two lawsuits that are most challenging have led to a complete halt of the program. In one case, a judge deemed the plan unlawful. The Biden administration quickly appealed the decision, but getting a final answer while the case moves through the courts will likely take months. In another, a court of appeals left an injunction in place, preventing any debt relief while the case moves through the system.

Borrowers should make plans based on the current situation, says Buchanan. That is: Student loan cancellation is blocked, and payments restart in January.

“You have these big programs and big decisions using authority that is untested in courts,” Buchanan says. “That can cause a lot of delays or this could mean it doesn’t happen.”

That stings for those watching from the sidelines.

“It makes me incredibly frustrated,” says Dave Christensen, a Wisconsin borrower who repaid his loans during the pandemic and is awaiting a refund he worries he might have to repay with interest. “We tend to drag things out for so long trying to become victorious for our agenda and our policies, we lose track of how this actually affects people.”

Can I still apply for debt cancellation anyway?

No. For now, the Department of Education has shut down new applications for relief until lawsuits play out. The White House says 26 million borrowers have applied, with 16 million already processed and ready to roll.

Under current guidelines, you must apply by Dec. 31, 2023.

Will I have to return my refunded payments?

Yes, but not all at once. If you sought a refund for payments made during the pandemic, your new payment amount in January will reflect a larger balance, which will include the refund.

If you have not sought a refund, it might be best to wait until the debt cancellation lawsuits play out. If cancellation still happens and you paid your loan balance down below the amount of cancellation you qualify for, your refund will be automatic.

If you still want to put in a manual refund request, you have until the end of 2023 to do so.

What if I cannot afford to make payments?

Take action now, urges Dwayne Kwaysee Wright, a professor of higher education administration at George Washington University.

“It’s going to take a while,” Wright says. “Take a day, take a lunch break, maybe take an extra hour, call your loan provider right now, and have a conversation about January 1st.” He says borrowers should be clear on the amount of their upcoming payments and ask servicers about options that could lower their bills.

An income-driven repayment plan caps your payments at a certain portion of your total income, potentially lowering your monthly bills while extending the loan period. Payments can be as low as $0.

If you’re already enrolled in an IDR plan, you won’t have to recertify your income before July 2023.

If you’ve lost your job, an unemployment deferment can let you skip payments altogether until you start earning again.

What happens to the other parts of debt relief?

The other provisions of debt relief are unchallenged so far, but they could be impacted in the future.

  • Changes to loan forgiveness programs greatly streamlined the process for borrowers in public service, teachers whose schools were closed, and those whose schools defrauded or misled them.
  • An income-driven repayment waiver will broaden which past payments — including partial or late payments, or time spent in certain types of forbearance or deferral — count toward the 240 to 300 needed for forgiveness.
  • “Fresh Start” will allow borrowers with defaulted loans the opportunity to resume repayment in good standing, without penalties and catch-up payments.

Cecilia Clark, Eliza Haverstock and Trea Branch write for NerdWallet.

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5 Ways to Save Money on Holiday Shopping This Season

Posted on by Kimberly Palmer

This holiday shopping season is shaping up to be longer, pricier and in some ways more chaotic than in previous years, which makes it easy to overspend. But there are also opportunities for significant savings if you know where and how to search for them.

“There are supply chain issues, inflation, major retailers reducing inventory — when you put all of that together, it looks like a recipe for disaster,” says Jill Cataldo, a consumer coupon expert based in Chicago. Her solution? “I started shopping now. If you see something and it looks like a good deal, it’s time to pick it up.”

That’s because while prices are higher overall, retailers have already launched the holiday deal season, spreading out discounts and sales over the final three months of the year. Given that complicated background, here are the best ways to save money this Black Friday season:

1. Shop early and often

It might sound counterintuitive, but starting early can ease the impact on your budget and allow you to score the best deals. “I watch prices, see which retailer is offering the best price and always look for coupons before I buy — anything is better than paying full price,” Cataldo says. When she makes an early purchase, she keeps the receipt handy in case the price drops. Some retailers offer price matching, or you can buy the better deal and return the higher-priced purchase.

2. Be relentless about comparing prices

Apps, browser extensions and other tools that will help you track and compare prices abound; you just have to pick the one that you like using most. You can find choices that scour the web in the background while you shop and alert you to lower prices, coupon codes and cash-back opportunities.

For example, the shopping app ShopSavvy will follow price changes on specific items. John Boyd, co-founder and CEO of Monolith Technologies, which owns ShopSavvy, says he uses that feature for things he has his eye on, like a digital single-lens reflex camera. “I want to get an alert the second those things get marked down, because it might only be on sale for a few minutes and then the quantity runs out,” he says.

The Camelizer app performs a similar function for Amazon prices specifically.

Greg Lisiewski, vice president of PayPal Shopping, which includes the shopping browser extension Honey, says when he wants to buy something, he looks up the retailer in the PayPal app to see if any discounts are available (under the “Deals” section).

Those discounts are especially valuable now because PayPal Honey reports that toys and games are 11% more expensive this year compared with last year, coffee machines have increased 7%, and cycling gear and equipment is up 9%. The company also reports that the biggest discounts this holiday season have been in cosmetics, musical instruments and general department stores.

3. Layer on coupon codes and cash back

Getting a good deal isn’t only about price: You can add on other savings with coupon codes and cash-back offers.

Cataldo takes advantage of cash-back offers, which are available through apps like Rakuten, CouponCabin and Ibotta. “It’s just one extra step if you are going to buy online, and then you receive a check,” she says. “I like things that are easy, and that’s very easy.”

Scott Kluth, founder and CEO of CouponCabin, says stores with excess inventory will often have discounts of 10% to 15%, and cash-back offers range from 3% to 20%. “Stack all of those savings on top of each other,” he says, adding that sometimes online retailers accept multiple coupon codes plus provide free shipping.

4. Get to know your local stores

Deborah Weinswig, CEO and founder of Coresight Research, a retail research and advisory firm, says that getting to know your local stores and attending in-person events can be the way to score the biggest deals. “Store managers are being given the ability to negotiate and price match or price beat,” she says, especially when they have excess inventory in stock.

She suggests joining livestreams, following your favorite brands on social media and signing up for brand loyalty programs to be the first to hear about discounts or sales. “Some codes are only good for 24 hours and some prices are only good for four hours,” she says, so if you want the best deals, be ready to move quickly.

5. Talk to friends and family about scaling back

With so many people feeling the strain of rising prices, it’s a good year to talk with family and friends about setting limits. For Sarah Schweisthal, social media manager at the budgeting app You Need a Budget, that means creating a gift exchange with family members so each person purchases just one gift within an agreed-on spending cap. “We used to all buy gifts for each other, but there are a lot of adults in our family. It just took one of us to say, ‘Hey, this doesn’t feel sustainable,’” she says.

Schweisthal estimates that the gift exchange approach has saved her family hundreds of dollars — and this year especially, it’s more important than ever to budget for the holidays.

Kimberly Palmer writes for NerdWallet.

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Job Market Still Strong Despite Slight Rise in Unemployment

Posted on by Anna Helhoski

A slight uptick in unemployment in October is the one blemish on an otherwise strong employment picture for workers, according to data released by the Bureau of Labor Statistics on Friday.

A significant number of jobs were gained in October and wages remain up overall. And hiring was stronger in industries that previously lacked growth, including health care and manufacturing.

Investors reacted positively to the report, with the S&P 500 rising more than 1% immediately after its release.

Here’s what workers need to know about the latest jobs numbers:

  • The economy added 261,000 new jobs in October, a slight decline in gains compared with September (263,000 new jobs).
  • The unemployment rate rose to 3.7% — a 0.2 percentage point increase from September. The total number of unemployed rose by 306,000 from the previous month. The unemployment rate has remained relatively stable, fluctuating between 3.5% and 3.7% since April.
  • The labor force participation rate barely budged since last month: 62.2% in October compared with 62.3% in September. The labor force participation rate shows the percentage of the population that’s working or actively looking for work.

Here are the other key takeaways from the report.

Earnings growth is slowing, but wages remain high. Average hourly earnings increased nearly 0.4% from September to October — a slight increase from the previous month (0.3%). Wages remain about 4% higher than they were a year ago.

Health care gained 53,000 jobs. Throughout 2022, employment in health care increased by 47,000 on average per month, a stark contrast to the 9,000 on average added per month in 2019.

Manufacturing added 32,000 jobs. Manufacturing has seen an increase of 37,000 on average per month in 2022, a notable increase compared with 30,000 per month in 2021.

Leisure and hospitality shows growth but still lags. An additional 35,000 jobs were added to the leisure and hospitality sector.

Is the job market still thriving?

Two key indicators, job openings and quit rate, show that job seekers still have opportunities across fields. Also, there were few changes in layoffs reported among all employment sectors, with the rate changing little from previous months.

Another report released earlier this week from the Bureau of Labor Statistics — the Job Openings and Labor Turnover Summary, or JOLTS — showed job openings remained strong, rising to 10.7 million in September after a one-month blip in August when openings dropped by more than 1 million. The most significant increases in job openings were found in accommodation; food services; health care and social assistance; and transportation, warehousing and utilities. On the other hand, job openings are starting to decrease in wholesale trade as well as finance and insurance.

The JOLTS report also showed the quit rate remained steady at 2.7% for the third straight month, which economists say is a critical factor in the health of employment prospects since quitting shows that workers feel safe making a job switch.

Quit rates increased in state and local government jobs, which shows there may be more movement among workers in this sector. However, the inverse is likely true in three industries where quit rates decreased: construction; transportation, warehousing and utilities; and durable goods manufacturing.

Wages are also firmly in workers’ favor: In another report released on Oct. 28, the Bureau of Labor Statistics found that wages and salaries increased 5.1% over a one-year period ending in September 2022. In the year before that, ending September 2021, wages and salaries increased by 4.2%.

While the overall employment picture looks rosy, multiple forecasts predict job losses in 2023. In September, the Federal Reserve projected unemployment would reach 4.4% next year. Bank of America, meanwhile, projects an even higher unemployment rate of 5.5%.

The Federal Open Market Committee raised its federal funds rate again this week to bring down inflation, which is expected to eventually lead to a higher unemployment rate.

Employment prospects in your field

Workers wondering if it’s time to make a move might want to consider what’s happening with employment in their industry. Here’s what you need to know, based on Bureau of Labor Statistics data over time:

Construction

Employed in October: 7.7 million.

% change since September: +0.01%.

% change since February 2020: +0.98%.

Education services

Employed in October: 3.9 million.

% change since September: +0.22%.

% change since February 2020: +0.55%.

Financial activities

Employed in October: 9 million.

% change since September: +0.03%.

% change since February 2020: +1.37%.

Government

Employed in October: 22.4 million.

% change since September: +0.13%.

% change since February 2020: -1.87%.

Health care and social assistance

Employed in October: 20.9 million.

% change since September: +0.34%.

% change since February 2020: +0.58%.

Information

Employed in October: 3 million.

% change since September: +0.13%.

% change since February 2020: +5%.

Leisure and hospitality

Employed in October: 15.9 million.

% change since September: +0.22%.

% change since February 2020: -5.85%.

Manufacturing

Employed in October: 12.9 million.

% change since September: +0.25%.

% change since February 2020: +0.47%.

Mining and logging

Employed in October: 634,000.

% change since September: No change.

% change since February 2020: -11.58%.

Professional and business services

Employed in October: 22.5 million.

% change since September: +0.17%.

% change since February 2020: +4.28%.

Retail trade

Employed in October: 15.8 million.

% change since September: +0.05%.

% change since February 2020: +1.08%.

Transportation and warehousing

Employed in October: 6.5 million.

% change since September: +0.13%.

% change since February 2020: +14.87%.

Wholesale trade

Employed in October: 5.9 million.

% change since September: +0.25%.

% change since February 2020: -0.22%.

Anna Helhoski writes for NerdWallet.

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Shopping Experts Predict What’s in Store for Black Friday 2022

Posted on by Lauren Schwahn

Black Friday, the day after Thanksgiving, lands on Nov. 25 this year. While that’s still a ways off, holiday sales have already started. But they’ve only begun to scratch the surface. There’s still plenty of season — and chances to save money — left to go. Looking ahead to Black Friday, what can shoppers expect amid rising prices and other concerns?

Here’s how experts predict the shopping event will shape up this year.

Inflation will impact deals

Inflation has driven up the cost of all goods by 8.2% between September 2021 and September 2022, according to data from the Bureau of Labor Statistics. Holiday shoppers are counting on discounts to provide much-needed relief. But inflation has taken a toll on retailers, too.

“Stores are suffering,” says Priya Raghubir, professor of marketing at New York University’s Stern School of Business. “Their fixed costs remain high, and the revenue is shrinking. So they can’t afford to offer deep deals.”

Inflation has hit certain categories harder than others. For example, food prices have increased more than clothing prices. Shoppers may find the quality of deals will depend on what they buy. Many experts say that while retailers will still tout plenty of bargains, the savings may not live up to the hype.

“I think that we will see higher prices this year than we have in the past, and certainly promotions can try to help offset that,” says Heather Dougherty, vice president of success at Lexer, a customer data platform for retailers. “But inflation is definitely pushing higher prices for retailers, and they have to pass that cost on to the end consumer.”

In some cases, the impact will be subtle. Retailers may charge higher delivery fees or shoppers may get less for their money through shrinkflation, in which a product’s price remains the same but its size or quantity is reduced. For example, a lotion bottle may contain an ounce or two less than before.

Supply chain issues could resurface

Shipping backlogs and product shortages made for a challenging holiday shopping season last year. While inflation may be the headline-grabber this year, supply concerns aren’t completely behind us.

“The entire supply chain is currently a huge question mark,” Raghubir says. “A lot of that is due to the war [in Ukraine] and how it has impacted the whole world: shipping, the price of oil and gas, supply lines from China.”

However, retailers may be better prepared to avoid empty shelves this time around. Many have adjusted their ordering strategies and timelines to compensate for possible hiccups, says Katherine Cullen, senior director of industry and consumer insights for the National Retail Federation.

Supply chain snags could also benefit bargain hunters. In recent months, delayed shipment arrivals coupled with declining consumer demand have left some stores with excess inventory.

“Retailers, some of them, are stuck with inventory that the consumers are unwilling to buy. Those will probably be things that go on deepest discounts, but they’re not your ideal Black Friday gift shopping. These are so-last-season kinds of things,” Raghubir says.

Sales will happen early and often

The day after Thanksgiving used to mark the start of the holiday shopping season. But Black Friday sales have crept up earlier and earlier over the last few years, and this year is no exception. Target launched its holiday season savings with the Target Deal Days event on Oct. 6, several days earlier than in 2021. Amazon held a members-only Prime Early Access Sale Oct. 11 and 12. More events like these will pop up later in October and early in November.

“Much of this is in response to when consumers want to shop,” Cullen says. “Retailers have seen that consumers like to take some of the pressure off of having to complete all of their holiday shopping towards the end of the season.”

Sales will continue throughout the next couple of months, giving shoppers plenty of opportunities to find deals. Experts expect that while some retailers will sit on some of their best promotions until closer to Black Friday, there’s no need to wait.

“It really probably is in consumers’ best interest to at least start thinking about shopping early so that when they see something at a price that’s great for them, they can make a move on it and avoid it either selling out or not being as discounted later in the season,” Cullen says.

Early shopping can help strapped customers spread out their spending and spare their holiday budgets. Plus some retailers, like Target, are allowing shoppers to request a price match if an item they buy goes on sale for less later in the season.

Loyalty will pay off

As shoppers deal with concerns over inflation and rising interest rates, retailers are focusing more on retention as a way to bring in dollars.

“Consumers that are members of loyalty programs will probably really benefit from exclusive offers, early access to sales, special discounts, gifts with purchase and all sorts of other types of benefits,” Dougherty says.

Watch for communications from the retailers you plan to shop with. Consider signing up for memberships, or use the ones you already have, to take advantage of special perks. If there’s a fee associated with a loyalty program, make sure to weigh the cost versus potential savings before you commit.

Lauren Schwahn writes for NerdWallet.

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Don’t Let Outdated Preapproval Add to Your Home Search Woes

Posted on by Taylor Getler

As mortgage rates continue their stomach-turning rise and serious shoppers compete for a limited supply of homes, would-be home buyers may be struggling to make a successful offer before their mortgage preapproval letter expires.

According to Zillow, more than half of home buyers this year reported making two or more offers before closing on a home — and that’s only after finding one that meets their needs, which takes an average of eight weeks, according to the National Association of Realtors’ 2022 Home Buyers and Sellers Generational Trends Report. For some, the search lasts longer.

A typical letter is valid for 90 days, though that can vary by lender. This time-sensitive document from your lender tentatively estimates how much it is willing to lend you, and on what terms. It demonstrates to the home seller that your mortgage is likely secure, so the deal can close.

If your home search is outlasting your preapproval window but you’re committed to the hunt, you can relieve some pressure by renewing your preapproval with your lender. These tips will help you protect your mortgage preapproval and stay on top of your homebuying budget.

How to renew your mortgage preapproval

Keep your personal financial documentation on hand and get in touch with your lender before your mortgage preapproval window closes.

Confirm the letter’s expiration date

Your preapproval letter should either spell out the expiration date or list how many days the letter is valid (most likely 90 days or fewer). If there is any doubt, call or email your point of contact at the lender to confirm the date.

Contact your mortgage loan officer

Reach out to the mortgage loan officer listed on your letter and explain that you want to renew your preapproval. Since the lender already has your basic information, the re-application process shouldn’t take as long as when you initially applied for preapproval. According to Bank of America, it can take up to 10 business days to receive a new preapproval letter, so plan ahead. This way, you won’t experience a gap where you’re actively home shopping but haven’t been preapproved. This will also help ensure that the rate and total loan amount estimates you’re working with are timely and realistic.

Update your documentation

You’ll have to provide current versions of your preapproval documentation. This includes your most recent pay stubs and asset statements for your bank accounts, retirement accounts and brokerage accounts. If you’ve experienced a major life event that will impact your borrower profile, like a divorce, you’ll want to update your lender. Your credit score will also take a temporary dip, since this reassessment involves a hard credit pull.

Think of the process as a “refresh” instead of an “extension,” since the amount and terms of your preapproval will likely change with your new letter.

Consider a different kind of mortgage

Applying for a new preapproval letter comes with the opportunity to explore different kinds of loan options with your lender, says Sonu Mittal, head of mortgage at Citizens, based in Dallas. For example, adjustable-rate mortgages are becoming increasingly popular as borrowers bet on long-term rate trends. The rates for ARMs are typically lower during the introductory period and then change with the market.

Some lenders advertise loan programs that come with lower or temporarily suppressed rates. For example, New American Funding offers a “buydown loan” that allows borrowers to pay 1% or 2% less than the 30-year fixed rate for their first few years in the home, or a combination of those discounts.

If you choose to switch lenders, you’ll have to shop around again and start the application process over from scratch.

Reconsider the starter home

“If someone got a preapproval a couple of months ago, the probability of them being able to get it renewed is very high,” Mittal says. Still, Mittal says, even a borrower who has kept their finances in good shape could see their budget constrict with a new preapproval letter months later. Rising interest rates are making home loans more expensive, so borrowers renewing a preapproval may see a lower total mortgage amount for the same monthly payment. If you’re having a hard time finding a home within your preapproved budget, you may need to make some concessions.

“I feel like a lot of millennials are trying to make a move into the dream home from renting,” says Steve Ploetz, a Realtor with Century 21 Award in Carlsbad, California. Some home buyers may find that a smaller house, condo or property outside of a preferred neighborhood makes sense as a stepping stone to their real estate dreams. Limiting the scope of your search to what you can truly afford — instead of what ticks the most boxes on your wish list — may present more opportunities.

Check in with your lender often

It’s a mistake to think of a preapproval letter as a static document, Ploetz says. “We’re recommending that our clients touch base with their lender every other week,” he says, so that the borrower can get an updated perspective on what they qualify for and how rates are responding to recent changes in the market. Otherwise, Ploetz says, you risk working with outdated information and sabotaging your search.

If you want to level-up your home-shopping strategy, maintaining your mortgage preapproval is key. Staying in frequent contact with your lender and accounting for a changing budget can give you the tools to shop like a pro, even in a challenging market.

Taylor Getler writes for NerdWallet.

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