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U.S. Business Failures Up 20% in ‘90, Study Says : Economy: California’s 13.9% rise is the first in six years. The pattern of weakness hits most areas of the United States.

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TIMES STAFF WRITER

U.S. business failures soared in 1990, reflecting the recession’s icy grip on most of the country and a sweeping pattern of weakness in many industries, Dun & Bradstreet Corp. reported Tuesday.

Last year, 60,432 businesses shut their doors, a 20% jump from 1989. The rise was particularly evident in the Northeast, although California also registered its first increase in six years, according to the New York financial research firm.

“The impact of the recent economic downturn is clear, and virtually no region or industry has been spared,” said Joseph W. Duncan, chief economist at Dun & Bradstreet.

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Hard times took a special toll on companies saddled with excessive debt. The dollar liability of business bankruptcies rose 51.3% to $64 billion, largely due to a “relatively small number” of over-leveraged companies, the analysis found.

The white-collar nature of today’s slump was also documented in the report. Failures in finance, insurance and real estate jumped 32.4%, the biggest gain among various industrial categories.

While decidedly bleak, the rise in failures is viewed more as a description of the recent past than a harbinger of future economic activity. Many economists expect the recession to ease in the coming months. Some cite rising consumer confidence and recent gains on the stock market as signs that the worst may be over soon.

“It’s another piece of information that confirms the economy weakened last year,” said Michael Penzer, a vice president and senior economist at the Bank of America in San Francisco. “It doesn’t give you a forecast.”

The report suggests that hard times were spread out across the map last year:

* New England failures rocketed up 138.5%, with particular trouble in Massachusetts, Connecticut and Rhode Island.

* California failures rose a more modest 13.9% as 8,902 firms went belly up, the state’s first increase since 1984. Failures in manufacturing, retail and a range of services pushed up failure statistics in the West.

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* Middle-Atlantic States fared more poorly, with failures increasing 61.3%, aggravated by economic woes in New York and New Jersey.

* South-Atlantic business failures rose 29%, reflecting broad weakness in finance, insurance and real estate companies in Florida and other Southeastern states.

* A five-state section of the Midwest was the only winner among various U.S. regions. A section made up of Ohio, Indiana, Illinois, Michigan and Wisconsin was the one part of the country in which failures declined, albeit by a modest 5.8%.

“Nearly every region is being hurt,” observed Mark Zandi, an economist with Regional Financial Associates in West Chester, Pa. “It’s somewhat surprising that even heretofore fast-growing parts of the country are experiencing problems.”

Nationally, most major industries suffered a sharp rise in failures last year as the recession sent a chain reaction of trouble from one company to another. Companies that provide business services, for example, were among those injured by the recession’s ripple effects.

“This is a typical recessionary pattern caused by cutbacks in spending by large firms, on which many small service companies depend for their survival,” Duncan explained.

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In addition, manufacturing failures were up 19.7% nationally. Wholesale trade failures increased 18.7%. The number of failures in retail, construction, transportation and agriculture rose, as well.

The failure statistics include bankruptcies and other actions, such as voluntary arrangements with creditors, Dun & Bradstreet said in the report.

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