May 19, 2009 / 3:41 PM / in 9 years

Business bankruptcies drop unexpectedly: CIBC

TORONTO (Reuters) - Business bankruptcies in Canada dropped unexpectedly in the first quarter, in contrast with the trend in the United States and a sharp rise seen during previous Canadian recessions, a report released on Tuesday said.

Business bankruptcies fell no less than 14 percent during the first three months of 2009 compared with the same period in 2008, according to the report by CIBC World Markets.

The total number of business bankruptcies in Canada fell 4.4 percent during the year ended March 2009.

The finding comes just a week after a government report showed first-quarter personal bankruptcies rose by 35.9 percent.

“Usually the collation between business bankruptcies and consumer bankruptcies is very tight,” said Benjamin Tal, who wrote the report.

“This trajectory is completely inconsistent with both the experience seen in any other recession and the current situation in the U.S., where business bankruptcies are rising at a rate not seen since 1975.”

Business bankruptcies rose very quickly in both the 1982 and 1991 recessions, reaching close to 50 percent year-over-year growth rates.

In the United States, business bankruptcies are currently rising by at least 40 percent on a year-over-year basis, said Tal.

The report also found that at the same stage in the 1982 and 1991 recession, business bankruptcies were already at 15 and 20 percent above their pre-recession levels, while current Canadian business bankruptcies are 10 percent below their pre-recession levels.

With more job losses expected in the coming months, the business bankruptcy numbers are a positive sign for employment numbers, said Tal.

“This time around we may not have to wait for business bankruptcies to recover before we see employment rising again,” said Tal. “The resiliency of business bankruptcies bodes well for the recovery in the labor market in 2010.”

Reporting by Julie Gordon; Editing by Frank McGurty

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