EI, individual bankruptcies up in Canada

The number of people filing for bankruptcy and unemployment benefits in this country spiked in January, according to new numbers released Tuesday, further signs that the global economic recession is turning local in Canada.

The Office of the Superintendent of Bankruptcy Canada said that more than 117,000 Canadians filed for bankruptcy in the 12-month period ending in January 2009. That represented an increase of 15.8 per cent compared to the previous 12 months.

In January alone, more than 10,000 individuals in this country filed insolvency papers, up 2.9 per cent from December.

Perhaps more tellingly, the number of Canadians who filed for employment insurance benefits rose above the 500,000 level nationally for January, Statistics Canada said Tuesday.

That represented a jump of 23,700, or 4.4 per cent compared to December.

In fact, Canadians filing for jobless help is now 23 per cent higher than the level in February 2008, the most recent low for this indicator.

"In recent months, labour market conditions in Canada have deteriorated significantly. Through the early part of 2008, employment growth weakened, only to fall sharply later that year and into 2009, causing a spike in the unemployment rate. By February 2009, the unemployment rate hit 7.7 per cent, up almost two percentage points from a record low at the start of 2008," said Canada's statistical agency in a press release.

Both figures — the bankruptcies and EI claims — are signs of growing difficulties faced by individual Canadians as the recession in this country grows.

Part of the problem for Canadians is seen in the business bankruptcies in January.

In the first month of the year, 567 firms pulled the plug on their operations and filed insolvency papers. For the 12 months January to January, the numbers of corporate bankruptcies actually slipped slightly by 2.6 per cent but was up 2.5 per cent comparing this January to last December.

Across Canada

Company insolvencies rose sharply in Quebec, where the economy is undergoing a contraction in its industrial base. In January, 250 companies closed their doors versus 202 in December.

As well, Alberta, once the land of economic opportunity in Canada, had its own woes in January with personal bankruptcies up 57 per cent in January 2009 versus January 2008 and corporate insolvencies increasing 10.5 per cent comparing the same two months.

Ontario bankruptcies fell a bit in January, down half a percentage point compared to December.

Manufacturing bankruptcies were up 24 per cent in the month versus December.

Insolvency increase

The deterioration in Canada's bankruptcy situation accelerated in the fourth quarter of 2008. The total number of personal and corporate solvency filings rose 9.3 per cent in the October-to-December period.

That is compared to a tiny increase of 0.7 per cent in national bankruptcies in the third quarter versus the previous three months.

In Alberta, bankruptcies jumped 21 per cent comparing the final three months of the year to the previous quarter while, in Ontario, insolvencies rose 11.4 per cent.

The global credit crisis really took hold in September 2008.