U.S. businesses are filing for bankruptcy at an alarming rate, with new data from S&P Global Market Intelligence revealing a 13-year high in corporate failures.
June alone saw 75 new bankruptcy filings, pushing the first-half 2024 total to 346 – a figure not seen since the aftermath of the 2008 financial crisis.
This surge in business collapses raises serious questions about the effectiveness of the current administration’s economic policies, commonly referred to as “Bidenomics.”
According to S&P’s report, “High interest rates, supply chain issues and slowing consumer spending continue to weigh on struggling companies.”
These challenges appear to be direct consequences of the inflationary pressures and market uncertainties created by recent fiscal and monetary policies.
The consumer discretionary sector has been hit hardest, with 55 bankruptcies reported so far this year.
June was particularly brutal, seeing 16 companies in this sector throw in the towel.
US corporate bankruptcies in June reach highest monthly level since early 2020 pic.twitter.com/yxnZpBD6Wy
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) July 8, 2024
This trend suggests that American consumers, despite White House claims of a strengthening economy, are tightening their belts.
Healthcare and industrial sectors aren’t faring much better, each reporting 40 bankruptcy filings in 2024 to date.
June saw nine industrial companies and seven healthcare providers seek bankruptcy protection, indicating that the economic strain is widespread.
The pace of these bankruptcies is especially concerning.
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S&P notes that the current rate “is rivalled by only the busiest months in 2020, when the shock from Covid-19 pushed a relatively higher number of companies into bankruptcy.”
The comparison to the pandemic’s economic impact is telling – today’s crisis stems not from an unexpected global event, but from policy decisions.
The Federal Reserve’s aggressive interest rate hikes, aimed at curbing inflation, have made it harder for companies to manage debt or secure new funding.
At the same time, ongoing supply chain issues – exacerbated by complex trade policies – continue to create headaches for businesses across multiple sectors.
As we enter the second half of 2024, this wave of bankruptcies serves as a clear warning sign.
"The trend right now is towards more [corporate] bankruptcies," RapidRatings CEO James Gellert says. "In Q1 of 2024, we had 43% more Chapter 11 filings than we had in Q1 of 2023." pic.twitter.com/ncWD2qGbsS
— Yahoo Finance (@YahooFinance) May 21, 2024
The administration’s promise to ‘build back better’ seems at odds with the reality facing many American businesses.
Critics argue that the path forward requires a shift away from government-driven solutions towards policies that reduce red tape and foster a more business-friendly environment.
They contend that without such changes, we may see even more companies struggle in the coming months.
Supporters of the administration’s approach, however, might argue that these short-term pains are necessary for long-term economic restructuring.
They could point to job market resilience and wage growth as counterpoints to the bankruptcy data.
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Regardless of one’s political stance, the numbers paint a clear picture: American businesses are struggling at a rate not seen in over a decade.
