Americans are opting to file for bankruptcy at a faster pace as they cannot repay their debts. A few major banks came out to say that they lost over $4.1 billion last quarter due to unpaid debts. Bankruptcy filings in the US rose 15% in the first half of 2024, reaching 217,000. Consumers aren’t spending and businesses are unable to turn a profit. Prolonged supply chain issues, inflation, higher rates, and reduced consumer spending have all contributed to more failing businesses, in fact, corporate bankruptcies reached a 13-year high last month.
Commercial Chapter 11 filings have the most notable uptick, with an alarming 43% annual spike from Q1 of 2023 to 2024. Overall, commercial bankruptcies rose 22% in Q1 of 2024, with 7,113 businesses going under compared to 5,820 in Q1 of 2023. The first half of 2024 saw 346 corporate bankruptcy filings, the highest in over a decade.
Around 75 corporations filed for bankruptcy in June 2024 alone, which brings us back to pandemic levels when businesses were closing due to lockdowns. “The pace accelerated from the first months of 2024 and is rivaled by only the busiest months in 2020, when the shock from COVID-19 pushed a relatively higher number of companies into bankruptcy,” S&P Global Market Intelligence proclaimed.
In fact, US corporate bankruptcy filings in 2024 are at a 13-year high. The consumer discretionary sector experienced the highest number of bankruptcies, with 55 filed by July 1, 2024, as consumers are spending less on eating out, clothing, entertainment, travel, and other expenditures that are now considered luxuries.
The healthcare sector saw the second-largest rise in bankruptcies, with 40 companies failing. Unlike the discretionary sector, America desperately needs healthcare services but has seen a drastic decline in available employees since the COVID-19 pandemic. Industrials tied health care for the second most losses, a major loss for America’s dying manufacturing sector.
Job losses will follow this trend of failing businesses and the uptick in public sector jobs is hurting America’s economy. Some believe over 50,000 retail stores will shutter before 2028. Countless businesses are taking their money offshore to places like Mexico, bringing with them tax revenue and jobs. America has become a bit hostile toward business due to rampant taxation. These mid-sized businesses cannot afford to borrow even at a slightly lower rate. The supply chain issues from COVID have never been fully resolved. Inflation began with COVID but has been prolonged primarily thanks to government spending as Biden implemented some of the heftiest packages (see: Inflation Reduction Act) before opting out of office. Looming wars indicate that inflation is far from waning, and the computer sadly suggests that a recession is already underway.
