Wednesday, May 26, 2010

High Unemployment Pushes Bankruptcy Filings Up 4% in 1st Quarter

According to the U.S. Bankruptcy Courts, first quarter bankruptcy filings were up 4% from the fourth quarter and 17% from a year earlier. In March, there were roughly 162,000 filings, up 32% from a year earlier. During the last year, there were on average 127,666 bankruptcies per month.

Despite rebounding sales and increasing consumer confidence, high unemployment remains a drag on widespread economic recovery. Naturally, when the economy enters a period with high levels of jobs loss, the volume of bankruptcy filings also rises. Historical data on bankruptcy filings and unemployment rates were used to confirm the relationship. The positive slope in the graph shows the correlation between states that have a high unemployment rate and high per capita bankruptcy filings.

Further analysis was performed to determine if large drops in state home price values were correlated with states that had high levels of bankruptcy filings per capita. The results of the analysis were inconclusive. But based on unemployment data tests, continuing high-single digit rates of unemployment will mean growing bankruptcies.

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sam john said...
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