Bankruptcies among larger businesses highest since just after Great Recession
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Bankruptcies are up so far this year — to a level we haven’t seen since 2010, in the aftermath of the Great Recession. That’s according to S&P Global Market Intelligence, which tracks big-ish public and private companies across the economy. It’s a 27% increase over the same period in 2019.
There are some household names on the list — J.Crew and Neiman Marcus, for instance. But there’s also Fieldwood Energy and Summit Gas in another hard-hit sector.
When the pandemic hit in March, bankruptcies kept ambling along pretty much like in 2019 — slow and steady, said Chris Hudgins, who crunches the numbers at S&P Global Market Intelligence.
“Even into April and May, we were still pretty much what you would expect during the normal course of the year,” he said.
Companies were still managing to pay the bills in the midst of stay-at-home orders. But then, “in June and July we saw this large spike in bankruptcies, which is about a 30% increase,” Hudgins said.
They were concentrated in retail and energy. Now, this analysis covers pretty big companies with millions in assets and liabilities. Small-to-medium-size businesses appear to be doing worse, according to Dan North, an economist at Euler Hermes North America.
“We think for the whole year, business bankruptcies are going to be up around 47%,” he said.
Euler Hermes is in the business of insuring companies for payments they’re expecting — say, from the customers they ship products to. When those customers are late, or in default, North said, it’s often because they’re heading for bankruptcy.
“If you’re Walmart, a large company, you’ve got a buffer,” North said. “The average small business has a 27-day cash buffer. Business gets shut down —27 days to survive.”
As the economy continues to struggle, a lot of small businesses might just throw in the towel. They won’t show up as bankruptcies. They’ll just turn into zombie companies — no employees or sales, not contributing to the economy anymore.
COVID-19 Economy FAQs
What are the details of President Joe Biden’s coronavirus relief plan?
The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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