“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: Southern California bankruptcies rise for the first time in eight years.

Source: Accer via the American Bankruptcy Institute.

The trend

There were 18,736 filings in U.S. Bankruptcy Court’s California Central District in 2019’s first half, up 433 in a year, or 2%. Its the first year-over-year increase since 2011. Nationally, bankruptcy filings were essential flat. Statewide, bankruptcies rose 1%.

The dissection

Only one other district among the nation’s 93 had more filings nationally — the courts serving the Chicago area. But thanks to the local district’s sheer size in population and commerce, Southern California has ranked in the top two districts for bankruptcies since 2008.

Let’s just say it could be worse. There were 17 districts nationwide with larger increases — with the eastern district of Texas tops with an 18% jump in filings.

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And it has been worse. Far worse! Please don’t forget how bad things were during and shortly after the Great Recession.

Southern California filings this year represented 4.8% of filings nationwide. That’s half of the 2011 peak when local filings were 9.6% of U.S. bankruptcies. And in the past 14 years, local bankruptcies have averaged 6.6% of the nation.

And consider the scope of the local improvement. This year’s filings run 66% below the pace from 2009 to 2013. Only three districts had bigger drops in this period. And nationwide bankruptcies dipped only 43%.

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … TWO BUBBLES!

The seemingly mild increase in local bankruptcies may be tied to a noteworthy cooling in the region’s economy that has seen job growth cool and real estate and car sales dip. This broad-based slowdown could have walloped businesses and individuals who bet on a never-ending strong upswing.