Dan Gross on the Failure of Failure

“The virtuous cycle continues. The decline of corporate failure leads to a decline in consumer failure, which, in turn, leads to a decline in financial-institution failure.”

Dan Gross at the Daily Beast explains that the secret ingredient of the economic recovery, beneath all the layers of QE, is actually the fact that there is less failure in the economy now, failure being a pro-cyclical agent that works both for and against the economy as it ebbs and flows.

Here’s Dan:

Fewer companies failed this year than in previous years. Corporate bankruptcies in the third quarter of 2013 (PDF), at 8,119, were down 12.2 percent from the third quarter of 2012. In fiscal year 2013, which ended in September, corporate filings were down 17 percent from the year before—and down 42 percent from fiscal 2009. Yes, companies continue to restructure, revamp, and rightsize, often in very public ways. Through the first 11 months, large companies publicly announced 478,428 job cuts, according to Challenger, Gray & Christmas. But that’s down 2.5 percent from the first 11 months of 2012. Overall, there was generally a lot less firing in 2013 than in 2012. As a result, the weekly pace of first-time unemployment claims declined over the course of the year. In the second half of 2013, on a seasonally adjusted basis, about 330,000 Americans experienced the trauma and psychological blow of filing for unemployment benefits each week. In the second half of 2012, about 380,000 Americans did so.

In other words, the failure in the rate of failures is having an ameliorative effect on down through the chain.

Many more important stats where these came from, click over and read the whole piece, it’s an important concept to understand.

Source:

The Economy’s Secret Success in 2013 (Daily Beast)

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