Bankruptcy Frequency Increases as New Industries Suffer
Commercial and consumer bankruptcies are up all across the U.S. as industries like retail are taking the brunt of the bankruptcy hit.
Total U.S. business bankruptcies in May grew by 4.7% compared to May 2016. With 3,572 filings, according to the American Bankruptcy Institute, that represents a 40% increase in bankruptcies compared to May 2015. (Source: “A ‘great debt unwind’ has begun,” Business Insider, June 6, 2017.)
Another ill omen for American businesses is that May represented a jump in bankruptcies compared to April, which is unusual since most filings spike during tax season and relax afterwards. That May bucked this trend does not bode well for American businesses in financial troubles.
Bankruptcies had been declining since 2013, but experienced a resurgence in 2016 due to the oil bust, where the commodity’s price fell and many companies were forced out of the market due to the high production costs.
While oil has since recovered, alongside natural gas and coal, the new generator of American commercial bankruptcies is now the retail market, where big-box stores are struggling to compete with online offerings like Amazon.com, Inc. (NASDAQ:AMZN) and other e-commerce sites.
U.S. President Donald Trump has promised to fight for American jobs and restore the beleaguered middle-class in a variety of sectors. His most recent pro-oil and natural gas move was to withdraw the U.S from the Paris Climate Agreement, stating that the treaty would have cost millions of jobs to the U.S. over two decades. (Source: “The real story behind Trump’s claim that Paris would kill 2.7 million jobs,” CNN Money, June 1, 2017.)
Experts from both sides of the aisle have debated just how accurate the “millions” of job losses projection is, but one thing is clear: The White House is a friend to oil.
Retail, on the other hand, finds itself in a stiffer position. The online offerings have become simply more attractive to users, who don’t even have to leave the couch to order whatever item it is they were looking at.
The ease of access and purchasing has pushed people away from shopping in traditional stores. Couple this decline with America’s overabundance of malls and shopping centers, and it’s not difficult to see how retail workers and businesses are finding themselves in a precarious position.