Via Peter Schiff

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Job cuts due to companies going bankrupt hit the highest level since 2005 last year.

According to data released by Challenger, Gray & Christmas, 62,136 announced job cuts by US-based employers in 2019 were due to bankruptcy. That represents 10.5% of the 592,556 announced job cuts last year.

The total number of announced job cuts in 2019 was 10% higher than in 2018 and hit the highest level since 2015. It was the fourth-largest number of job cuts since the 2008 financial crisis.

Year Annual Total
2009 1,288,030
2011 606,082
2015 598,510
2019 592,556
2018 538,659
2010 529,973
2016 526,915
2012 523,362
2013 509,051
2014 483,171
2017 418,770
Source: Challenger, Gray & Christmas, Inc. ©

According to the report, the leading causes of job losses in 2019 were “trade concerns, emerging technologies, and shifts in consumer behavior.”

The surge in bankruptcy-related job cuts was primarily driven by retailers. The last time we saw job cuts due to bankruptcies at this level was in 2005 when 74,238 cuts were due to bankruptcies. That year, bankruptcy accounted for just 6.9% of job losses.

This is another sign of rot in the underbelly of the US economy.

The job market has been one of the crown jewels of the Trump economy. But as Peter Schiff  said after the December jobs report came in better than expected, the employment news has been largely “trumped-up.

Pundits keep saying the unemployment rate is at a 50-year low. Peter explained that this is not true. Fifty years ago, the methodology for calculating unemployment was much different than it is today.

If we had to calculate unemployment using the same statistical measure that they were using 50 years ago, the unemployment rate would certainly be well north of 10%.”

And the job creation we’ve seen since the Great Recession has largely been in low-paying sectors with high levels of part-time work. Job-growth has primarily been in government, healthcare, retail and other services – not manufacturing.

We’re simply continuing in the dark ages we had under Barack Obama with these low-paying, part-time jobs. And we continue to lose higher-paying, productive jobs, full-time jobs.”

The number of job cuts due to firms going bankrupt is another red-flag. It signals underlying weakness in the economy. And with the number of companies leveraged to the hilt, we could see a rising number of corporate bankruptcies in the next several years. Corporate debt has surged to record levels over the last 10 years. Bond issuance by US companies topped $1 trillion every year of the decade that began Jan. 1, 2010. Debt rated just above junk status now accounts for more than half of the investment-grade market. That’s up from about a third at the beginning of the 2010s.

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The Federal Reserve has even sounded the alarm on the ever-increasing levels of corporate debt. In its most recent Financial Stability Report, the central bank expressed concern about the high level of leveraged loans and what it describes as “weak underwriting standards.” There are more than$1.1 trillion in leveraged loans outstanding. These are loans made to firms already deeply in debt. Think subprime loans for corporations. The Fed warned “excessive borrowing” leaves businesses “vulnerable to distress.”

We’re already seeing an undercurrent of distress with the ballooning number of job losses due to bankruptcy. The question is when will the bubble pop?

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