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‘The incoming Biden administration will be facing a mounting — not waning — crisis’

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There were 10.7 million unemployed workers, but only 6.5 million job openings in November. (Photo by Chip Somodevilla/Getty Images)


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‘With growing COIVD-19 cases and falling employment, the incoming Biden administration will be facing a mounting — not waning — crisis.’


— Elise Gould, senior economist at the EPI

In November, the number of job openings softened to 6.5 million from 6.6 million the previous month, according to the Bureau of Labor Statistics released this month, while hires were essentially unchanged, increasing to 5.98 million from 5.91 million. Layoffs rose to 2 million from 1.7 million on the month.

This increase was described Tuesday as “troubling” by the Economic Policy Institute, a progressive think tank. “The latest congressional relief bill is an important step toward addressing some of this pain, but it is not at the scale of the problem. I’m hopeful that more relief measures are on the horizon for increasingly desperate workers and their families. Senate Republicans forced the December bill to be far too small,” said Elise Gould, senior economist at the EPI.

“The U.S. economy is seeing a significantly slower hiring pace than we experienced in May or June — roughly where it was before the recession, which is a big problem given that we have only recovered just over half of the job losses from this spring,” the EPI said. “And job openings are now substantially below where they were before the recession began.”

There were 10.7 million unemployed workers, but only 6.5 million job openings in November. “This translates into a job seeker ratio of about 1.6 unemployed workers to every job opening,” Gould said, “or for every 16 workers who were officially counted as unemployed, there were only available jobs for 10 of them. That means, no matter what they did, there were no jobs for 4.2 million unemployed workers.”

The Bureau of Labor Statistics data only covers through November, so is likely rosier than the actual jobs landscape, according to EPI. “It doesn’t even capture December’s job losses, which were substantial. With hiring and job openings at these levels, the economy is facing a long, slow recovery without additional action from Congress,” Gould added. The job losses, thus far, have been concentrated in the services sector, signaling a two-tired economic and jobs recovery.

Also see: The Moneyist — the ethics and etiquette of your financial affairs

The White House pointed to states’ efforts to contain the coronavirus and shuttering of businesses as the reason for the job losses in a statement released Monday. “Leisure and hospitality industry has been generally more susceptible to changes in the prevalence of COVID-19 than other industries, reflecting the regressive nature of government-mandated closures and the reduction in economic activity that occurs when individuals are subject to and make decisions based on these restrictions,” it said.

“As witnessed in the early days of the pandemic, employment in the leisure and hospitality industry fell by almost 50% between February and April, while employment in all other industries fell by a much smaller but still substantial 10%,” the White House added. It added that, with the reopening of businesses and rollout of the COVID-19 vaccine, “Employees in the leisure and hospitality industry are those most likely to see employment gains as a result.”

But people are, of course, suffering economically. At the height of the pandemic in March, more than 30 million Americans were laid off or furloughed when the economy shut down to curb the spread of COVID-19. The unemployment rate at that point was 14.7%; it has since come down to 6.7%. The leisure and hospitality industries have been particularly hit hard by the pandemic.

U.S. bars and restaurants got crushed again in December. Eating and drinking establishments lost 372,000 jobs last month, marking the first decline since April, when they laid off a whopping 5.4 million people, according to separate data released last week. California and New York have limited restaurant hours of operation, restricted the number of customers or bar indoor dining altogether.

The Dow Jones Industrial Average
DJIA,
+0.23%
,
S&P 500
SPX,
+0.07%

 and Nasdaq Composite
COMP,
+0.25%

 had a tumultuous 2020, but they opened higher Tuesday as investors weighed the likelihood of a more generous stimulus under incoming President Joe Biden amid increased risk of more political unrest after the siege on the U.S. Capitol by supporters of President Donald Trump last week.

The Dow ended 2020 up 7%, while the S&P 500 closed out the year up 16%, and the Nasdaq ended 2020 up 43%.



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These money and investing tips can help you stay upright against the market’s headwinds

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can give you greater knowledge about the financial markets’ current condition as you monitor your portfolio and plan ahead. Plus, check out several short videos about whether to include bitcoin and other cryptocurrency in your portfolio and how to go about it if you do.

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Opinion: I took advantage of the 2020 RMD rule but now my 1099-R looks wrong — what should I do?

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Q: I took advantage of the 2020 RMD rule and returned what I had taken from my IRA thinking there would be no taxes. I just got a 1099-R showing the full RMD. That can’t be right. How do I correct it?

—Pauline

A.: Pauline,

If the 1099-R is incorrect, you will need to contact the firm that issued the statement to get it corrected. However, the 1099-R is probably correct.

Read: Are there new RMD rules this year?

Under the law, the firm issuing the 1099-R has no responsibility for reporting how much of a distribution is taxable. That responsibility rests on your shoulders as a taxpayer. The issuing firm need only report what was paid out of the IRA on 1099-R.

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That does not mean you will pay any tax. Any funds returned to the IRA by Aug. 31, 2020 is considered a rollover and is not taxable. Normally, Required Minimum Distributions (RMD) are not eligible for rollover, but IRS guidance after enactment of the CARES Act that waived RMD for 2020 changed that. The guidance stated the normal 60-day time limit for rollovers would not apply and instead instituted a fixed deadline of Aug. 31, 2020 to return such distributions and avoid taxation.

Read: It’s not too late to save on your 2020 tax bill — here’s how

I get similar questions about 1099-Rs every year. The reporting of the gross distribution looks like an error but in most cases, it is correct and the person receiving it simply hasn’t learned how it is accounted for yet.

Here’s how the accounting typically works.

As with any gross amount reported on Form 1099-R, you declare the amount that is not taxable when you file your 2020 tax return. What I hear most tax preparers would do in your situation is put the gross distribution amount from 1099-R on line 4a as per the normal procedure. Then, they would place a zero in 4b of your Form 1040, and put a note on the return near those lines that it was “returned to the IRA under the CARES Act,” “CARES Act rollover,” “CARES Act,” or simply “Rollover.”

Read: These are the best new ideas in retirement

If you did not return all of distribution by the deadline, the portion that was not returned would be taxable. You would put that number on line 4b.

Read: 5 things to do if you inherit a Roth IRA

As I mentioned a moment ago, the discrepancy between the gross distribution reported and what should actually be taxable comes up in other situations. Three of the most common are other rollovers, Qualified Charitable Distributions (QCD), and distributions from accounts that had received after-tax contributions.

In all those cases, the reporting process looks like what I described above. You put the gross distribution on line 4a and the taxable portion on Line 4b. Then note why the numbers are different with “rollover,” “QCD,” or “See Form 8606” on the 1040. Form 8606 is the form used to determine the taxable amount of an IRA distribution when nondeductible contributions have been made to any of one’s IRA accounts.

If you have a question for Dan, please email him with ‘MarketWatch Q&A’ on the subject line.

Dan Moisand’s comments are for informational purposes only and are not a substitute for personalized advice. Consult your adviser about what is best for you. Some questions are edited for brevity.



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Video: Why Mike Novogratz sees bitcoin reaching $500,000 by 2024

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Galaxy Digital’s Mike Novogratz explains the outlook for crypto as Coinbase goes public.





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