The US economy is headed for a cycle of corporate bankruptcy that will increase unemployment, says a veteran analyst

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• The US is entering a cycle of bankruptcy that could lead to more job losses, said Danielle DiMartino Booth.

• The veteran analyst pointed to the increase in large bankruptcies so far this year.

• June could see an increase in large bankruptcies, increasing unemployment, she predicted.

A wave of major bankruptcies is about to hit the U.S. economy — and that could trigger job losses for a growing number of Americans, according to Wall Street analyst Danielle DiMartino Booth.

The CEO of QI Research highlighted the rise in corporate bankruptcies over the past year, a sign that companies are struggling with higher interest rates and tighter financial conditions. Corporate bankruptcies increased 88% until April this yearaccording to data from S&P Global.

This marks the highest number of bankruptcies recorded in the last 12 months, and that number is expected to continue to rise, Booth said.

Nine companies worth $50 million or more have gone bankrupt so far this year, the fastest pace of large bankruptcy filings since the pandemic. Booth predicted the number of large bankruptcies would rise to 25 by the end of June, surpassing the peak of large business bankruptcy filings during the pandemic.

“I think the high-speed bankruptcy cycle will be enough to tame inflation,” Booth said in a recent interview on David Lin Report. “When you have these big bankruptcies and liquidations and everything else, you have a loss of income. A total loss of your paycheck,” she said.

The US job market remains on solid footing, but the unemployment rate rose to 4%. Meanwhile, the economy lost around one million full-time workers over the past 12 months, Booth noted.

Small businesses are also feeling the pressure of tighter financial conditions and higher wages. 10% of small business owners said labor costs were their “most important problem,” according to the latest Small Business Optimism Index.

Companies signaled that they are pulling back on hiring and ready to make job cuts. Another 63,000 employers announced plans to lay off workers in May, while hiring fell to the slowest pace since 2014, according to a report from Challenger, Gray and Christmas.

“Very precarious times for the small businesses that produce 40% of the jobs in America,” Booth said.

Booth has previously argued that the economy is already in recession due to a weak job market. According to an unemployment indicator, the job market went into recession in October last year, she said, anticipating more layoffs to hit the economy In the next months.

Read the original article at Business Insider

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