The U.S. economy is on the precipice of a corporate bankruptcy wave, potentially leading to a significant increase in job losses, warns Danielle DiMartino Booth, a Wall Street forecaster.
What Happened: Booth, the CEO of QI Research, noted that this is the highest number of bankruptcies recorded over the past year. She expects this trend to continue, leading to more job losses.
Nine companies, each valued at $50 million or more, have already filed for bankruptcy this year, marking the quickest pace since the pandemic. Booth forecasted that the number of large bankruptcies will hit 25 by the end of June, exceeding the peak of large corporate bankruptcy filings during the pandemic which stood at 23.
“I think that the bankruptcy cycle kicking into high gear is going to be enough to tame inflation,” Booth stated during a recent interview with David Lin.
She also highlighted that the economy has shed 1.5 million full-time jobs in the past six months, replacing them with merely 962,000 part-time positions.
“Americans Are Falling Behind,” she added.
As per Booth, small businesses, which make up 40% of American jobs, are going through a “very precarious time” with increasing uncertainty. She noted that financing has become a major hurdle for these businesses due to current policies, and the uncertainty index has shot up. Small businesses are also anxious about inflation, interest rates, and the political “overhang” due to the upcoming November elections.
Why It Matters: Booth’s foreshadowing comes on the heels of the U.S. labor market exceeding expectations with the addition of 272,000 nonfarm payrolls in May. However, this boom in the job market could be threatened by the impending wave of corporate bankruptcies.
The robust increase in nonfarm payrolls occurred despite the unemployment rate rising from 3.9% in April to 4% in May. This resilience of the U.S. labor market could be tested in the face of the predicted bankruptcy surge.
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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