Bankruptcy Filings Fall 14 Percent for First Half of 2012, but Unemployment Rate Stays at 8.2 Percent

By Nick Zulovich, Editor
July 06, 2012

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ALEXANDRIA, Va., and DALLAS — As the newest jobs report arrived today, new bankruptcy filings are trending toward levels not seen since before the recession started in 2008, according to the latest analysis from the American Bankruptcy Institute.

In fact, total bankruptcy filings during the first six months of 2012 came in 14 percent lower than the same period a year ago. Data provided by Epiq Systems showed there were 632,130 filings nationwide between Jan. 1 and June 30, down from the first six months of last year when there were 731,500 total filings

Analysts indicated the 601,184 total noncommercial filings for the first half of 2012 represented a 13-percent drop from the noncommercial filing total of 691,902 for the first half of last year.

ABI noted total commercial filings during the first six months of the year were 30,946, representing a 22-percent decrease from the 39,598 filings during the same timeframe a year ago.

Analysts also mentioned Chapter 11 filings also fell during the first half of 2012 as the 5,313 filings represented a 12-percent decrease from the 6,070 Chapter 11 filings during the first six months of 2011.

"We are on pace for perhaps the lowest total new bankruptcies since before the financial crisis in 2008," said ABI executive director Samuel Gerdano.

"With sustained low interest rates and weak consumer spending, we expect bankruptcies to stay at relatively low levels through the end of 2012," Gerdano projected.

In other new data, ABI determined the 99,057 total bankruptcy filings for the month of June represented an 18-percent decrease compared to 120,698 filings during the same month last year.

The 94,437 total noncommercial filings for June represented a 17-percent drop from last June's noncommercial filing total of 114,162.

Total commercial filings for last month settled at 4,620, representing a 29-percent decrease from the 6,536 filings during the same period a year ago.

Analysts added Chapter 11 filings registered a 28-percent drop as the 1,000 Chapter 11 filings in June of last year fell to 718 last month.

ABI calculated the average nationwide per capita bankruptcy-filing rate for the first six calendar months of 2012 decreased to 4.08 (total filings per 1,000 per population) from the 4.13 rate for the first five months of the year, and the average total filings per day in June was 3,302, an 18-percent decrease from the 4,023 total daily filings in June of last year.

Looking at the numbers geographically, states with the highest per capita filing rate (total filings per 1,000 population) through the first six months of 2012 were:

1. Nevada (7.06)
2. Tennessee (6.99)
3. Georgia (6.49)
4. Utah (6.12)
5. Alabama (5.88)

ABI reiterated that it partnered with Epiq Systems in order to provide the most current bankruptcy filing data for analysts, researchers and members of the news media. Epiq Systems is a leading provider of managed technology for the global legal profession.

Employment Report Analysis

As the latest bankruptcy data pointed toward an upbeat trend, Comerica Bank shared a cautionary tone when it reviewed the latest unemployment data.

Comerica said the official Bureau of Labor Statistics count of payroll jobs created in June was a "disappointing" as the U.S. economy added 80,000 jobs and the unemployment rate was unchanged at 8.2 percent.

"Today's jobs data confirms that the slowdown in hiring, first visible in March, has extended into the summer," stated Comerica chief economist Robert Dye, adding that there are several factors to blame for the slowdown.

The factors Dye mentioned are:

—favorable weather early in the year which pulled economic activity forward
—high gasoline prices earlier in the year
—a weaker global macroeconomic environment with Europe in crisis and Asia cooler
—the approaching Fiscal Cliff
—a structural change in labor market dynamics

"It is impossible to say definitively which factor or factors are holding down job growth, but it is fair to say that it looks like a little bit of everything," Dye explained.

"The danger that the U.S. economy now faces is a loss of momentum in the parts of the economy that have been noticeably improving, namely, energy, manufacturing, residential real estate, and automotive," he continued. "While the likelihood of a collapse in demand for these sectors now looks small, the likelihood of ongoing strong growth also looks smaller."

Comerica insisted that new-vehicle sales remain well above their recession lows, but "really have not improved since the end of 2011."

Dye mentioned that June new-model sales increased to a 14.1 million unit annual rate, up from May's 13.7 million unit rate, but remain just below this January's 14.2 million unit rate.

"On the plus side for auto sales is ample pent-up demand, low interest rates, deleveraged households and falling gasoline prices," Dye highlighted.

Dye wrapped up his latest commentary by elaborating on what employment trends could be and what federal officials might do to stimulate growth.

"So far, lack of hiring has not evolved into broad-based firing, but the longer we have weak hiring the more likely we see more firing. Given the headwinds from Europe and Asia, and the approaching Fiscal Cliff, plus the loss of momentum within the U.S. economy, it looks like the rest of this year will feel like more of the same — a sluggish march toward the Fiscal Cliff," Dye cautioned.

"We may yet see more aggressive monetary policy by the Federal Reserve this year, in the form of quantitative easing, but that is by no means a sure thing," he continued. "The Fed is already engaged in extraordinary monetary policy with the pledge to keep the fed funds rate near zero through at least the end of 2014, and with the extension of Operation Twist through the remainder of this year.

"Also, the closer we get to Election Day the more the Fed will be exposed to criticism about political motivations if they engage in new policy actions," Dye went on to say. "An increasing trend in the unemployment rate would certainly catch the Fed's attention, boosting the likelihood of QE3, but we are not there yet."

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