Applied at Blue for W2 role

I'm navigating a surprising turn in my job search after being laid off from a company I'll refer to as "Red" about a year ago. Recently, I interviewed for a W2 role at a company called "Blue" through a contracting firm. My recruiter believes feedback and possibly an offer are on the horizon. The pay is lower than what I earned at Red, but it's still a decent rate, albeit without benefits. Interestingly, I've received outreach from recruiters at Red regarding a W2 role that offers significantly less than my previous salary. Given my feelings about the layoff, I initially declined. However, I did mention that I would consider returning for a rate about 40% higher than my last salary. To my surprise, they countered with an offer that was around 33% more, with the possibility of remote or hybrid work, which I didn't expect. I've been weighing my options between Blue and Red: **Blue:** - Good hourly rate, with potential for negotiation after a year. - No benefits. - Fully in-office, which means a longer commute, but the office looks appealing. - Reportedly stable for a contract role. - Would enhance my resume significantly. **Red:** - Substantial pay increase. - Basic benefits available. - Likely remote or hybrid work. - Less stability, as Red often cuts contractors when budgets tighten. - The emotional baggage from my previous experience there is heavy, but the pay is tempting. I'm feeling overwhelmed and unsure about how to proceed. I want to be transparent with my recruiter at Blue about the new offer from Red, but I'm worried about jeopardizing my chances with Blue. Should I reach out to my recruiter now, wait until I receive an offer from Blue, or just accept Blue's offer at the current rate and only mention Red's offer if it comes through later? If anyone has experience in contractor roles, I would appreciate your insights on how to handle this situation.