This article appeared as a Guest Column in The Oklahoman on August 9, 2021.
When the COVID-19 pandemic began, it was impossible to predict how the disruptions would affect the economy.
Whole industries, such as restaurants, beauty salons, and tourism, were shuttered or significantly curtailed. Many individuals found themselves suddenly without a job, while others were forced to significantly change the way that they worked. As the pandemic took hold, it was difficult not to believe the pandemic would cause a significant recession.
Historically, when the unemployment rate jumps, bankruptcy filings also increase.
For example, in June 2008, Oklahoma had an unemployment rate of 3.9% and 11,224 total bankruptcy filings across Oklahoma’s three federal districts. One year later, in June 2009, as a national recession took hold, Oklahoma’s unemployment rate had risen to 6.3%, while bankruptcy filings in Oklahoma had increased by over 25% to 14,209.
Based on past experience, one would anticipate that the job losses resulting from the COVID-19 pandemic would similarly result in a rise in bankruptcy filings.
In June 2019, Oklahoma’s unemployment rate was just 3%. One year later, in June 2020, the employment rate had shot up to 8.2%. Yet, despite the considerable increase in unemployed Oklahomans, bankruptcy filings actually declined. Specifically, in 2019, Oklahoma’s three federal districts saw a combined total of 9,552 bankruptcy filings. In 2020, the number of bankruptcy filings actually fell by over 20%, to 7,484.
This decrease likely can be attributed to the billions of dollars in government assistance that was extended to businesses and individuals in the form of payroll loans and unemployment benefits. In addition, moratoriums on evictions and foreclosures certainly allowed many individuals to avoid having to seek bankruptcy protection.
Many of those assistance programs and moratoriums are beginning to end.
As they do, it will be interesting to see whether bankruptcy filings start to increase, which would indicate that the stimulus programs only delayed the financial collapse.
In Oklahoma, at least, there is some indication that the programs allowed many to avoid a bankruptcy altogether, as Oklahoma’s unemployment rate has been consistently falling, sitting at just 3.7% as of June 2021.
So far this year, bankruptcy filings have not increased, sitting at just 1,416 total filings for the first quarter of 2021.
It will likely take at least another year before the true consequences of the pandemic on Oklahoma’s economy can be fully assessed. However, there is at least evidence for being hopeful that things were not nearly as bad as everyone had feared.
For more information on how the information in this article may impact your business, please call 405.606.4792 or email Clayton D. Ketter.
Follow our coverage on FACEBOOK