Recession Fears Mount as US Faces Surge in Large Company Bankruptcies 

The US is seeing a significant rise in bankruptcies among large companies, with 275 firms declaring bankruptcy by May 2024, the second-highest since 2010.

This trend indicates economic weakness and heightens recession fears, especially hitting consumer discretionary companies as spending declines.

US bankruptcies are riding rapidly:

275 large companies have declared bankruptcy through May of this year, the 2nd highest since 2010.

Over the last 14 years, only 2023 saw a higher count of bankruptcy registrations, at 277.

In May 2024 alone, 62 firms have gone bankrupt, the… pic.twitter.com/ymNU6fYEcr

— The Kobeissi Letter (@KobeissiLetter) June 22, 2024

In 2023, there were 637 bankruptcies, the highest in 14 years, and May 2024 alone saw 62 firms go under, including Red Lobster. Economic indicators point to trouble, with GDP growth slowing to 1.3% in Q1 2024, 38 months of inflation above 3%, a $2 trillion government deficit, and a national debt of $34.6 trillion. Additionally, non-farm payroll data for 2023 might have been overstated by 730,000 jobs, raising concerns about the labor market.

Achieving a soft landing remains challenging for the Federal Reserve, given the delayed effects of interest rate hikes and balance sheet reductions. The surge in bankruptcies, alongside a record $1 trillion in credit card debt and rising delinquency rates, further complicates the economic outlook. Without additional government intervention, a recession seems increasingly likely, urging businesses and consumers to prepare for tough times ahead.

Kosta Gushterov