Business failure rates down

Defying some predictions (similar to the unemployment rate), business failures are down through June and July. How much of that is due to the financial support packages is unknown.

We’re still in the middle of a wild global economic storm, and things will get worse. But no one expected us to actually eradicate covid, and our points of comparison are scant. The economy is doing vastly better than anyone anticipated.

Business are bracing, and have made significant layoffs and reduced hours, but the feared wave of company collapses hasn’t yet made even the hint of an appearance. Sectors unexposed to border closures are, however, basically back to normal.

I am not sure those complaining about the health:economy trade off give quite enough credit for how a successful response for the former bolsters the latter.

These stats are telling:
-Wage subsidy payment to business that have since failed: $11m
-Wage subsidy repayments by business who found the downturn actually wasn’t bad enough for them to qualify: $317m

The first stat will undoubtedly grow dramatically once the extension (effectively a subset of the most vulnerable) expires, but that is a crazy low baseline that suggests the contagion is far less acute than feared.

The wage subsidy extension expires this month, so the crunch will likely come from September onwards. It’s impossible to predict how bad (or not bad) it might be for both job losses and business failures.

See Unemployment statistics for June quarter 2020