A sharp increase in business bankruptcy filings is not only a tangible sign of business distress, but bodes ill for employment. Although the Bloomberg report does not break out Chapter 11 filings by size of entity, it’s a no-brainer than they would be concentrated in smaller companies, and it is those smaller entities that have been the source of job growth in this cycle (large businesses had been shedding jobs even in a nominally strong economy)l. Small businesses also rely far more than large companies on real estate and credit cards for financing, and lenders have been tightening up on both types of loans.
Business bankruptcy filings in the U.S. increased 49 percent in April from a year earlier, the biggest gain so far in 2008, as the slowing economy prompted more companies to shut down.
Business petitions rose to 5,173 during the month, according to statistics compiled from court records by Jupiter eSources LLC in Oklahoma City…..
“When you go into a downturn, the cyclical industries tend to get hit,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. “Any sudden downshift in growth will generate rises in these numbers.”