Bankruptcy Filings Mount; Federal Reserve Admits to Possible Recession
ALEXANDRIA, Va. — Despite the tough means test, the American Bankruptcy Institute reported that due to economic issues, particularly those in the mortgage sector, consumer bankruptcy filings jumped 27 percent nationwide during the first quarter, compared to the same period in 2007.
And for the first time, Federal Reserve Chairman Ben Bernanke stated Wednesday that a "recession is possible" for the U.S. economy.
While he shied away from actually pointing to a recession, reports indicate that Bernanke did say that the economy is still "slightly growing at the moment," and admitted to the possibility it will shrink during the first half of this year.
The general consensus of many appears to be that if the economy suffers from two or more consecutive quarters of the GDP coming in negative, than the economy is in a recession. However, Bernanke would not indicate if that is the case.
Instead, he said he is relying on the analysis of the National Bureau of Economic Research to indicate if the economy is in a recession. The NBER is expected to review various economic statistics at some time in the coming months.
"I'm not yet ready to say whether the U.S. economy faces such a situation," Bernanke said, according to reports.
Automakers, dealers and auto lenders, however, may have a different perspective, given the lack of demand for new cars, the tightening of approval requirements for auto loans in some areas and in some instances, like AmeriCredit, across the board, and, according to a recent Wachovia report, the growing consumer interest in used vehicles (the industry tends to be cyclical).
Citing data from the National Bankruptcy Research Center, ABI indicated that consumer filings in March came in at 86,165, up 13.2 percent from 76,120 recorded in February and up 16.6 percent from March 2007.
Moreover, the institute said Chapter 13 filings accounted for 31.8 percent of all consumer cases in March, down slightly from last month.
"Bankruptcies are rising due to the heavy burden of household debt and growing mortgage problems," explained Samuel Gerdano, ABI executive director. "We expect this trend to continue through 2008."
Another indicator of the economy is jobless claims. And while often later revised, last week the number of initial claims increased to 407,000.
Those applying for unemployment benefits climbed to 38,000, which is the highest reading since Sept. 2005, according to reports. The number in 2005 came in the aftermath of the Gulf Coast hurricanes.
Moreover, reports indicate that the unemployment rate, which now stands at 4.8 percent, is expected to grow to 5 percent in March, with the jobless rate reaching 5.5 percent or higher by the end of the year.