BY SRH
US Bankruptcies Peak Since COVID-19
After promising not to lay off employees, about 1,000 corporate Kroger employees are losing their jobs.
After closing more than 60 unprofitable outlets by 2026, the retailer laid off workers.
Kroger closed stores to minimize costs after its $25 billion merger with Albertsons failed.
‘These decisions are never easy, but we recognize intelligent, albeit painful, choices are necessary to position our company up for continued success,’ said interim CEO Ron Sargent.
As of February, over 409,000 workers were employed by Kroger, with most of them working in stores.
I think that a lot more Americans will lose their jobs in the months ahead.
Robert Lawless, University of Illinois law professor and co-author of Debt’s Grip: Risk and Consumer Bankruptcy, said this benchmark may not facilitate “apples-to-apples.”
“A dollar has lost 19% of its value since December 2020,” he told Newsweek. “Similarly, a $2 million bankruptcy today is the same as approximately a $1.4 million bankruptcy in 2010.”
“Inflation over time will make it seem like there are more ‘big’ bankruptcies if an adjustment is not made,” he warned. Newsweek was informed by S&P Global that the standards are not inflation-adjusted.
Lawless said the report avoids a major issue by tracking bankruptcy filings rather than the number of organizations filing for bankruptcy, as others have done recently.
Epiq AACER stated that business bankruptcy filings rose 78% to 911 in July. Lawless said in a blog post that Genesis Healthcare bankruptcy caused nearly a third of these petitions.
“The narrative focused on the number of entities filing for bankruptcy is not quite right,” UNC Chapel Hill law professor Melissa Jacoby told Newsweek.
“Many of those separate corporate entities are part of a common corporate group—companies partition themselves into separate business associations under state law, but they typically are an integrated whole in terms of thinking about a bankrupt business and are managed together in the bankruptcy process,” said.
S&P Global said in the report: “Companies are contending with elevated interest rates as uncertainty from U.S. tariff policy pressures costs and supply chain resilience.”
“Companies could benefit from the [Federal Reserve] rate cut if such a move impacts U.S. Treasury yields or market sentiment,” it stated. “Treasury yields influence corporate debt interest rates more directly than the Fed rate.”
Early this month, Moody’s top economist Mark Zandi said: “Rising U.S. tariffs and restrictive immigration policy are to blame for the economy’s woes. Tariffs are slashing American company profits and household purchasing power.”
What Next?
Other evidence indicate resiliency among large U.S. firms despite mounting bankruptcies. According to Bloomberg, Goldman Sachs strategists found that S&P 500 businesses’ second-quarter earnings per share are up 11% from last year, exceeding expectations of a 4% increase.
The Fed will set interest rates after the mid-September meeting. According to CME FedWatch, which anticipates central bank decisions based on interest rate trades, this meeting is 81% likely to cut 25 basis points.
