Throughout my career as an analyst of the plastics industry, it has been my distinct pleasure to survey, forecast and even root for the North American mold making segment. And over the years, I have observed a few dominant themes that continue to describe this sector. Three of the most prevalent are small business, optimism and bankruptcy. The shop owners and workers who constitute the mold making industry have greatly expanded and enhanced my appreciation and understanding of all three of these terms.
I cannot think of a more opportune time than now to review some data and trends that will shed some light on these themes. So far, we have survived a full seven months of the COVID-19 crisis. The first three months, roughly the second quarter of this year, we experienced the shortest and most severe economic recession on record. During the next three months, the third calendar quarter, we entered a recovery phase. As always, the question now is, "What's next?"
Before I dive more deeply into the numbers, I should state the information I am sharing here is not specific to the mold making sector, or even the plastics industry. Such granular data does not exist to my knowledge. But I believe many of the small businesses in the plastics industry will likely appreciate a better understanding of this data.
When the shutdown of the economy was implemented, there was justifiable concern among economists and policymakers about the impact the shutdown would have on small businesses. There was great fear that a multitude of small businesses — and all of the jobs they generate — would be lost during the shutdown. You will recall that many large businesses were bailed out by the government after the Great Recession in 2008, but most small businesses were not. That was a mistake.
This time Congress acted swiftly and passed a huge stimulus package. I am pleased and somewhat surprised to report it worked — at least so far. According to data compiled and reported by the American Bankruptcy Institute, total U.S. bankruptcy filings through September are down 28 percent when compared with the first three quarters of last year. That figure is so large I can only surmise that many businesses that would have otherwise declared bankruptcy had we not had a pandemic were spared, at least for this year.
The chart indicates that total bankruptcy filings exhibit a strong seasonal pattern, but otherwise they were incredibly stable during the four years preceding 2020. Then they plummeted in the second quarter of this year when they probably should have increased, and they stayed low in the third quarter. There is even some evidence to indicate that the pace of total new business formations so far this year is actually running above the historic average.