Business Failures Decline 5.5% in 1st Half : California: Findings point to third straight year in which fewer companies failed than in year before and a steadier economy.
The number of business failures in California declined by 5.5% in the first half of this year, a sign that the economy is recovering and leveling out, according to a report released Monday by Dun & Bradstreet Corp.
The findings point to a third straight year in which fewer California businesses failed than in the preceding 12 months.
Although the last half-year decrease is not as steep as the 14.9% decline in business failures in 1994, this actually may mean the state’s economy is steadier than before, analysts said.
“Last year, the declines were very, very dramatic in business failures,” said Jack Kyser, chief economist with the Economic Development Corp. of Los Angeles County.
“Now, they’re sort of moderating, which means that we’re reaching an even keel in our economy,” Kyser said.
Dun & Bradstreet said 8,155 California firms went out of business in the first half of 1995, compared to 8,634 in the same period last year. The statistics are compiled from court bankruptcies, receiverships and other filings.
Nationally, business failures fell to 36,481 during the first six months of 1995, a decrease of 1% from the 36,791 businesses that shut their doors in the year-earlier period. Dollar losses declined by 12% to $11.9 billion.
The figures represent a leveling off of the drastic economic swings of the past five years, said Reid Gearhart, a Dun & Bradstreet spokesman. Indeed, the 1995 declines were the lowest since 1990 when 28,669 businesses failed at the half-year mark, he said.
In addition, Gearhart said seven of the nine regions tallied by Dun & Bradstreet showed declines or flat levels of business failures. That shows a nationwide picture of stability compared to the mid-1980s, when the East and West coasts were booming but the rest of the country was struggling with failures in the oil industry, farming and manufacturing.
“The total picture of business failures around the country is really pretty good,” Gearhart said. “The trend in bankruptcies is continuing to improve because a lot of the companies that may have been weaker and borderline have failed.”
According to the Dun & Bradstreet data, only two areas showed double-digit increases in business failures: the South Central states of Arkansas, Oklahoma, Louisiana and Texas, up 12.7%; and the north central region from Minnesota to Kansas, up 11.2 %.
Kyser said the California figures may actually undercount certain growing industries unique to California and key to its economic recovery.
“We’re seeing growth in the motion picture industry and international trade but it’s hard to measure because so many people are independent contractors and the traditional wage and salary figures don’t capture the total picture,” Kyser said. “The tourist industry also growing but it’s scattered among a bunch of employment categories.”
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Improving Climate
A 5.5% drop in California business failures for the first six months of this year is another sign that the state’s economy is improving: Total failures: 8,155, 1995*
Note: *All figures are for the first six months of each year.
Source: Dun & Bradstreet Corp.
