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Pakistani authorities are touting the arrival of the first shipment of discounted Russian crude oil as “transformative,” however, analysts say the extent of relief it will bring the country’s crisis-riddled economy is not clear.  

Pakistan’s minister for petroleum, Musadik Malik, told the Reuters news agency that Islamabad paid Moscow for the cargo in yuan, the Chinese currency. The Pakistani government has so far not disclosed the price.

Announcing the arrival of the Russian vessel “Pure Point,” with a little more than 45,000 metric tons of crude oil, Pakistani Prime Minister Shehbaz Sharif said in a tweet Sunday night that the country was moving “one step at a time toward prosperity, economic growth and energy security and affordability.”

Authorities at the southern Karachi Port terminal began offloading the cargo Monday morning. Shariq Amin Farooqi, public relations officer for the Karachi Port Trust, told VOA the entire process would take 26 to 30 hours.  

Economic distress  

The discounted crude shipment comes at a time when import-dependent Pakistan faces a severe liquidity crunch. The country spends the biggest portion of its import funds, around $18 billion annually, on energy and fuel. 

According to recent central bank data, foreign exchange reserves were below $10 billion as of June 2, with the State Bank of Pakistan holding less than $4 billion – barely enough to cover a month of select imports.   

Pakistan has been teetering on the brink of default since last year. Its economy has grown at a rate of 0.29% in the fiscal year ending this month, according to government projections, while annual inflation reached a record high of almost 38% last month.  

Russian deal  

As part of what the government in Islamabad has called a “trial” shipment, Pakistan will receive a total of 100,000 metric tons of crude oil from Russia. The second shipment is expected in a few weeks.  

Islamabad began negotiating for discounted crude oil from Moscow last year in a bid to take advantage of the $60 per barrel price cap placed on Russian oil by the United States and its allies to deprive Moscow of funds in the wake of the war on Ukraine.

The deal was finalized in April after Pakistan’s minister for petroleum, Musadik Malik, led a delegation to Moscow late last year and a Russian delegation visited Islamabad in March to cement the details.   

The Pakistani government has so far not disclosed the payment method or the price at which it is acquiring crude from Moscow.

Dubai-based oil trading expert Ahmad Waqar told VOA that for the deal to truly ease Pakistan’s economic pain, it should include purchase on credit as Pakistan is strapped for cash.  

“In my opinion, right now, more than discount we need to get cargo on credit,” Waqar said.

Pakistan traditionally buys the bulk of its energy from Gulf countries with Saudi Arabia and the United Arab Emirates its top suppliers. While the Saudis have often supplied fuel on credit, Pakistan’s budget for the next fiscal year starting in July does not include any such facility from its Middle Eastern ally.  

Waqar said he believes the cost of getting cargo all the way from Russia via Oman, instead of from Gulf countries located nearby could also chip away at the possible benefit to Pakistan.    

“Russian cargoes are not as cheap as they used to be, let’s say, 10 months ago when India started buying from Russia…There was a different pricing level at the time. Since then, more international traders started buying and prices went up. It’s not possible to now say that ‘I can get Russian cargo very cheaply,’” Waqar said.  

In the past, petroleum minister Malik also tried to downplay the relief Russian oil could provide to Pakistanis at the pump, however, after the arrival of the cargo, local media quoted him saying Pakistanis will see a reduction in prices in a few weeks.  

How much usable fuel will be produced from the Russian crude is also not clear yet. Pakistan Refinery Limited, tasked with processing it, will submit a report to the government detailing the quality and quantity of the products.   

US approval  

Despite initial pushback from Washington, Pakistan’s neighbors China and India’s energy imports from Russia rose after the war in Ukraine began last year, with the latter seeing its purchases increase almost ten-fold since April 2022.  

Responding to Pakistan’s decision to purchase crude oil from Russia, the State Department in April said that it understood the demand for Russian energy and would not interfere in any country’s decision to buy from Moscow.  

“Countries will make their own sovereign decisions. We have never tried to keep Russian energy off the market,” said spokesperson Vedant Patel.    

The Pakistani ambassador to the U.S., Masood Khan, also dismissed concerns that the deal could damage already strained ties between Islamabad and Washington, saying U.S. officials had been consulted.   

“We have placed the first order for Russian oil, and this has been done in consultation with the United States government. There’s no misunderstanding between Washington and Islamabad on this count,” Khan told a gathering at the Washington-based Wilson Center in April.
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In a good month, Celina Chanthanouvong has about $200 left after rent, groceries and car insurance. That doesn’t factor in her student loans, which have been on hold since the start of the pandemic and are estimated to cost $300 a month. The pause in repayment has been a lifeline keeping the 25-year-old afloat. 

“I don’t even know where I would begin to budget that money,” said Chanthanouvong, who works in marketing in San Francisco. 

Now, after more than three years, the lifeline is being pulled away. 

More than 40 million Americans will be on the hook for federal student loan payments starting in late August under the terms of a debt ceiling deal approved by Congress last week. The Biden administration has been targeting that timeline for months, but the deal ends any hope of a further extension of the pause, which has been prolonged while the Supreme Court decides the president’s debt cancellation. 

Without cancellation, the Education Department predicts borrowers will fall behind on their loans at historic rates. Among the most vulnerable are those who finished college during the pandemic. Millions have never had to make a loan payment, and their bills will soon come amid soaring inflation and forecasts of economic recession. 

Advocates fear it will add a financial burden that younger borrowers can’t afford.

“I worry that we’re going to see levels of default of new graduates that we’ve never seen before,” said Natalia Abrams, president of the nonprofit Student Debt Crisis Center.

Chanthanouvong earned a bachelor’s in sociology from the University of California-Merced in 2019. She couldn’t find a job for a year, leaving her to rely on odd jobs for income. She found a full-time job last year, but at $70,000, her salary barely covers the cost of living in the Bay Area. 

“I’m not going out. I don’t buy Starbucks every day. I’m cooking at home,” she said. “And sometimes, I don’t even have $100 after everything.” 

Under President Joe Biden’s cancellation plan, Chanthanouvong would be eligible to get $20,000 of her debt erased, leaving her owing $5,000. But she isn’t banking on the relief. Instead, she invited her partner to move in and split rent. The financial pinch has them postponing or rethinking major life milestones. 

“My partner and I agreed, maybe we don’t want kids,” she said. “Not because we don’t want them, but because it would be financially irresponsible for us to bring a human being into this world.” 

Out of the more than 44 million federal student loan borrowers, about 7 million are below the age of 25, according to data from the Education Department. Their average loan balance is less than $14,000, lower than any other age group. 

Yet borrowers with lower balances are the most likely to default. It’s fueled by millions who drop out before graduating, along with others who graduate but struggle to find good jobs. Among those who defaulted in 2021, the median loan balance was $15,300, and the vast majority had balances under $40,000, according to the Federal Reserve Bank of New York.

Resuming student loan payments will cost U.S. consumers $18 billion a month, the investment firm Jefferies has estimated. The hit to household budgets is ill-timed for the overall economy, Jefferies says, because the United States is widely believed to be on the brink of a recession. 

Despite the student loan moratorium, Americans mostly didn’t bank their savings, according to Jefferies economist Thomas Simons. So they’ll likely have to cut back on other things — travel, restaurants — to fit resumed loan payments into their budgets. Belt-tightening could hurt an economy that relies heavily on consumer spending. 

Noshin Hoque graduated from Stony Brook University early in the pandemic with about $20,000 in federal student loans. Instead of testing the 2020 job market, she enrolled at a master’s program in social work at Columbia University, borrowing $34,000 more. 

With the payments paused, she felt a new level of financial security. She cut costs by living with her parents in New York City and her job at a nonprofit paid enough to save money and help her parents. 

She recalls splurging on a $110 polo shirt as a Father’s Day gift for her dad. 

“Being able to do stuff for my parents and having them experience that luxury with me has just been such a plus,” said Hoque, who works for Young Invincibles, a nonprofit that supports student debt cancellation. 

It gave her the comfort to enter a new stage of life. She got married to a recent medical school graduate, and they’re expecting their first child in November. At the same time, they’re bracing for the crush of loan payments, which will cost at least $400 a month combined. They hope to pay more to avoid interest, which is prohibited for them as practicing Muslims. 

To prepare, they stopped eating at restaurants. They canceled a vacation to Italy. Money they wanted to put toward their child’s education fund will go to their loans instead. 

“We’re back to square one of planning our finances,” she said. “I feel that so deeply.”

Even the logistics of making payments will be a hurdle for newer borrowers, said Rachel Rotunda, director of government relations at National Association of Student Financial Aid Administrators. They’ll need to find out who their loan servicers are, choose a repayment plan and learn to navigate the payment system. 

“The volume of borrowers going back on the system at the same time — this has never happened before,” Rotunda said. “It’s fair to say it’s going to be bumpy.”

The Education Department has promised to make the restart of payments as smooth as possible. In a statement, the agency said it will continue to push for Biden’s debt cancellation as a way to reduce borrowers’ debt load and ease the transition. 

For Beka Favela, 30, the payment pause provided independence. She earned a master’s in counseling last year, and her job as a therapist allowed her to move out of her parents’ house.

Without making payments on her $80,000 in student loans, she started saving. She bought furniture. She chipped away at credit card debt. But once the pause ends, she expects to pay about $500 a month. It will consume most of her disposable income, leaving little for surprise costs. If finances get tighter, she wonders if she’ll have to move back home.

“I don’t want to feel like I’m regressing in order to make ends meet,” said Favela, of Westmont, Illinois. “I just want to keep moving forward. I’m worried, is that going to be possible?” 
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Despite Western attempts to stifle Russia’s economy through sanctions following its invasion of Ukraine last year, Russian trade volumes with dozens of countries have actually increased since the war began — with NATO member Turkey providing a “critical” economic lifeline for Moscow, according to an analysis by the Washington-based Atlantic Council.

The countries that have increased trade since the February 2022 invasion include several European Union and NATO members, according to the analysis.

“Such surges in trade, however, are not necessarily an indicator of support” for the war launched by Russian President Vladimir Putin, the report says. “Instead, it is more likely they are predominantly the result of companies — and countries — pursuing legal opportunities for cheaper exports and new gaps in the Russian market.”

China

It notes that China’s trade with Russia had already been increasing at an average annual rate of 23% over the past five years, excluding the impact of the COVID-19 pandemic in 2020. It said China’s trade with Russia has jumped by another 27% since the Ukraine invasion.

Other countries have seen a far greater increase in trade with Russia since February 2022.

“We see increases of trade across a range of different countries, with places like India and Greece, for example, importing cheap Russian oil at below market prices. And this is what’s causing the surge of trade there,” said Niels Graham, a co-author of the Atlantic Council report, in an interview this week with VOA.

“But we also see other countries like Turkey, for example, exporting a lot of electronics as well as chemical industrial goods to Russia to take advantage of the holes in the Russian market that have been caused by the sort of G7 statecraft response,” he said.

He said that Beijing is actually showing signs of “restraint” since Moscow’s invasion of Ukraine.

“China is certainly engaging with Russia, certainly increasing its trade overall, but doing so very much in line overwhelmingly with the red lines the West has drawn — for fear of Western retaliation against China, cutting it off from a much more important Western market,” Graham told VOA.

Russian Oil

India’s trade with Russia has soared by 250% since 2021, the biggest increase by far among Russia’s trading partners.

China and India imported record volumes of Russian oil in May, according to Reuters, totaling about 110 million barrels for the month. Analysts say the world’s two biggest buyers of Russian oil are capitalizing on discounted prices after the G7 group of rich nations imposed a price cap of $60 per barrel in December.

Washington has warned that Moscow is seeking to circumvent the price cap by using the Eastern Siberia Pacific Ocean pipeline along with ports in eastern Russia, where there may be less Western oversight of trading activities.

The West never intended to completely block Russia oil sales, said Graham.

“Doing so against an oil producer as large as Russia would have skyrocketed global oil prices, would have likely tipped the global economy into recession, and would have made a lot of countries angry against Western actions,” he said.

Turkish lifeline

The Atlantic Council report says NATO member Turkey also provides a vital lifeline for Russia’s economy, with trade volumes increasing by some 93% since the invasion.

It said Turkey has sold Russia sensitive material like integrated circuits and semiconductors which could be used in weapons systems.

“Although Turkish exports of electronic machinery, including critical integrated circuits, fell in the immediate aftermath of Russia’s full-scale invasion, they have since recovered and grown well beyond the pre-invasion average. From March 2022 to March 2023, Turkish electronic exports to Russia jumped by about 85%,” the Atlantic Council report said.

“To Ankara’s credit, following pressure from the Group of Seven [G7], Turkey has agreed to halt its transit of sanctioned goods to Russia,” the report added. “However, its trade with Russia remains a vital economic lifeline for its businesses as the country recovers and reconstructs from a devastating earthquake earlier this year.”

Turkey assured the European Union in March that it would no longer ship or transit goods to Russia that are subject to sanctions or export controls, according to an EU official quoted by Reuters.

Ankara has denied exporting goods to Russia that could have military applications.
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Pakistanis traditionally give generously to charity, but most avoid paying taxes. Now, charities are feeling the pressure as donations drop amid record-setting 38% inflation. Low tax collection, meanwhile, hurts economic growth, forcing more to rely on charities for survival.

Every day, thousands of Pakistanis come to one of the Saylani Welfare Trust’s free food distribution centers, spread across the country, for a hot meal.

Security guard Muhammad Khursheed is one of them.

He said if the free food from Saylani wasn’t available, he would be spending all his salary on just food.

With an annual inflation rate of almost 38% eating through people’s incomes, Saylani, one of Pakistan’s largest charities, is seeing a rise in daily demand for its free food but a drop in donations.

Suhail Ahamed is a regional manager with the charity.

He said that up until a few months ago, he used to get 30,000 pieces of bread made. Now the number has reached almost 42,000. Donations have reduced but Saylani has not cut down its work, he added.

Charitable giving is a big part of Pakistani culture. In a 2021 Gallup Pakistan survey, around 76% of the respondents said they had given money to help someone in the year before.

At the same time, the proportion of Pakistanis who pay taxes has always remained dismally low.

The country’s tax to GDP ratio is below 10%, meaning the government receives less than 10% of the size of the economy in taxes.

What most countries need to sustain economic growth, according to experts, is a tax to GDP ratio of at least 15%.

Economic researcher Ali Khizar says in Pakistan, huge sectors such as agriculture, trade, retail and real estate use political muscle to keep their taxes low.

“These sacred cows have presence in the parliament. These sacred cows have really strong lobby in the military establishment, and they are very much entrenched in those who are making the decisions,” he said.

A complicated taxation system, ineffective implementation, and lack of trust in the government also cause many to evade taxes.

Broadening the tax net and increasing collection are among the conditions for reviving a stalled 2019 International Monetary Fund bailout deal. However, authorities will likely miss the target.

With Pakistan teetering on the brink of default, and millions getting pushed into poverty because of the rising cost of food and fuel, pressure on charities like Saylani is growing, says regional manager Ahmed.

He said they are very worried that their work may stop but will try their best to prevent that from happening.     
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The United States will push back on China’s targeting of American firms, which Washington considers politically motivated and unfair, U.S. Ambassador to China Nicholas Burns said on Wednesday.

Several U.S. companies have faced increased scrutiny in China in recent months, including U.S. memory chipmaker Micron Technology Inc, which China’s cyberspace regulator said in May would be barred from selling to operators of key infrastructure.  

Businesses groups have warned about the rise in China’s use of exit bans, pressure on foreign due diligence firms, and the vague wording of China’s new counterespionage law, which bans the transfer of any information related to national security and broadens the definition of spying.

Burns said five U.S. companies had been singled out by Chinese authorities in recent months: Micron, Deloitte, and consultancies Bain & Company, Capvision, and Mintz Group.

“It’s not happening to companies of other countries, but it is to ours,” Burns told a U.S. Global Leadership Coalition forum in Washington via video link from Beijing.

“It looks political in nature. It looks like payback from the Chinese perspective, and it’s wrong. And obviously we are going to resist this and we are going to push back,” Burns said.

Chinese leader Xi Jinping has emphasized national security since taking office in 2012 as suspicion of the U.S. and its allies grows, but that focus contrasts with Beijing’s message that it is opening up to overseas investment.

The Biden administration has pushed to boost engagement with China even as ties have deteriorated over disputes ranging from military activity in the South China Sea, Beijing’s human rights record, and technology competition.

Chinese officials complain that Washington has put hundreds of Chinese companies under various U.S. sanctions or on export ban lists.  

Burns said the U.S. was restricting American companies’ ability to sell technology such as advanced semiconductors to China so as to not give China’s military a “leg up.”  

“While we compete, it is important that we manage that competition so that it has limits and barriers, and it is always a peaceful competition,” Burns said. 
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After his May 29 inauguration, Nigerian president Bola Tinubu announced he would soon end a decades-old fuel subsidy, saying the country can no longer afford the cost. His comments sparked panic buying of gas and raised concerns about inflation in one of Africa’s top oil-producing countries. Gibson Emeka has this report from Abuja.

Camera: Gibson Emeka
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The World Bank on Tuesday raised its 2023 global growth forecast as the U.S. and other major economies have proven more resilient than predicted but said higher interest rates would cause a larger-than-expected drag next year.

Real global GDP is set to climb 2.1% this year, the World Bank said in its latest Global Economic Prospects report. That’s up from a 1.7% forecast issued in January but well below the 2022 growth rate of 3.1%.

The development lender cut its 2024 global growth forecast to 2.4% from 2.7% in January, citing the continuing effects of tighter monetary policy, particularly in reducing business and residential investment.

“Growth over the rest of 2023 is set to slow substantially as it is weighed down by the lagged and ongoing effects of monetary tightening, and more restrictive credit conditions,” it said.

“These factors are envisaged to continue to affect activity heading into next year, leaving global growth below previous projections.”

The bank predicted global growth rebounding to 3.0% in 2025.  

In January, the World Bank had warned that global GDP was slowing to the brink of recession, but since then, strength in the labor market and consumption in the U.S. had exceeded expectations as has China’s recovery from COVID-19 lockdowns.

U.S. growth for 2023 is now forecast at 1.1%, more than double the 0.5% forecast in January, while China’s growth is expected to climb to 5.6%, compared to a 4.3% forecast in January after COVID-reduced growth of 3% in 2022.

The bank, however, halved its previous 2024 U.S. growth forecast for the U.S. to 0.8%, and cut China’s forecast by 0.4 percentage point to 4.6%.

The euro zone got a forecast increase to 0.4% growth for 2023 from a flat outlook in January, but the forecast for next year was also cut slightly.

Recent banking sector stress is also contributing to tighter financial conditions that will continue into 2024, the lender said.

It cited one potential downside scenario where banking stress results in a severe credit crunch and broader financial market stress in advanced economies. This would likely cut 2024 growth by nearly half to just 1.3% – the slowest pace in 30 years outside of the 2009 and 2020 recessions.

“In another scenario where financial stress propagates globally to a far greater degree, the world economy would fall into recession in 2024,” the bank added.

The bank said inflation is expected to gradually edge down as growth decelerates and labor demand in many economies softens and commodity prices remain stable. But it added that core inflation is expected to remain above central bank targets in many countries throughout 2024.
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The U.S. Department of Homeland Security is looking at how artificial intelligence can be used to help identify goods made with child or forced labor and prevent those goods from entering the country. VOA’s Julie Taboh has more. VOA footage by Adam Greenbaum.
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Stretch limousines — once a symbol of the rich and famous — are now rarely seen on the roads and at red carpet events. Karina Bafradzhian investigates why demand for limousines has declined.
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The labor market in the United States continued to defy expectations in May, adding 339,000 new jobs. The figure was far above what economists had expected and signals that ongoing efforts to cool the economy and lower inflation are having, at best, only mixed success.

The increase in jobs came along with steadily rising wages. The figures released Friday show a 4.3% year-over-year increase in workers’ pay. The new jobs were also spread over various sectors of the economy, with professional services, government, health care, construction and transportation all showing significant increases.

The data also showed an upward revision of previous estimates of job growth for March and April, indicating another 93,000 jobs were added over those months.

“For all the talk of recession coming, you’d never know it by looking at the job market,” Greg McBride, senior vice president and chief financial analyst for Bankrate.com told VOA. “Another month of strong payroll growth, upward revisions to both March and April, and payroll growth that tended to be concentrated in higher paying jobs. You don’t see that very often … and that speaks to the robustness of the labor market.”

Unemployment ticks up

Counterintuitively, the Labor Department also reported an uptick in the unemployment rate from 3.4% to 3.7%. The number remains near historic lows, and it is not uncommon for the unemployment rate to increase even as the number of jobs increases. This is because the “establishment” survey, which the government uses to count jobs, and the “household” survey, which it uses to measure unemployment, are different.

The disparity was largely because many people previously listed as self-employed are now seeking work in the regular workforce, temporarily skewing the unemployment figures.

The numbers point to an American economy that has remained resilient through a period of sharp interest rate increases by the Federal Reserve, which has raised rates from near zero to between 5% and 5.25% in the 14 months since March 2022.

The aim of the Fed’s rate hikes has been to lower inflation, which spiked in 2022, hitting an annual rate of 9.1% in June of last year.

The rate of inflation has slowed markedly since then, to 4.9% in May, the latest data available. That figure is still outpacing wage growth, which leaves many workers feeling as though they are losing ground even with higher take-home pay.

Unalloyed good news

Joseph E. Gagnon, a senior fellow with the Peterson Institute for International Economics, told VOA that while there were many nuances to the report, one piece of what he called “unalloyed good news” is that the U.S. labor force is continuing to grow.

Friday’s data showed a seasonally adjusted U.S. labor force of 168.8 million, well above pre-pandemic levels, which Gagnon said is good for the economy as a whole and for those concerned about inflation.

“It means people are getting more income and more employment opportunities,” Gagnon said. “But it also means that there’s less inflation pressure, because if there’s more workers out there, they can produce more, and that can actually hold prices down.”

Biden celebrates

In Washington, Democrats and Republicans elected to view the jobs report through their preferred lenses.

In a statement released after the report, President Joe Biden celebrated the news, while noting that he had recently negotiated a deal with Republicans in the House of Representatives to raise the nation’s debt ceiling and avoid the potential for a catastrophic default on the nation’s debts.

“We have now created over 13 million jobs since I took office,” he said. “That is more jobs in 28 months than any President has created in an entire 4-year term.”

He added, “In short, the Biden economic plan is working. And due to the historic action taken by Congress this week, my economic plan will continue to deliver good jobs for the American people in communities throughout the country.”

GOP counters

Republicans were quick to point out that the rosy jobs report belies the fact that many Americans continue to feel that they are struggling economically.

“Real wages are down as 60 percent of workers report living paycheck-to-paycheck and 83% say the economic situation of the nation is negative,” the Republican National Committee tweeted. “Biden’s inflation is killing the financial well-being of American families.”

The Republicans’ claim that the strong economy is not benefiting all Americans appears to have some resonance with the public. On Tuesday, The Conference Board, which tracks consumer sentiment, reported that its consumer confidence index had dropped from 103.7 to 102.3 in May. (The Conference Board uses a scale that sets consumer confidence measured in 1985 as 100.)

“Consumer confidence declined in May as consumers’ view of current conditions became somewhat less upbeat while their expectations remained gloomy,” Ataman Ozyildirim, senior director of economics at The Conference Board, said in a statement.

Ozyildirim reported that consumers’ experience of the economy seems to be at odds with official numbers. Survey respondents estimated job availability to be lower than the government reports it to be and said that they expect higher inflation over the next six months, even as the official rate falls.

Impact on Fed

It is unclear, at this point, how the larger than expected jobs numbers for last month will affect the thinking of policymakers at the Federal Reserve, who had been signaling that they might be prepared to pause interest rate increases while they assess the impact current rates are having on inflation.

The Fed has been attempting to engineer what economists call a “soft landing.” That is, policymakers are attempting to slow the economy enough to push inflation down to a more manageable level, but not so much that the country is tipped into a recession. One expected effect of a cooling economy was supposed to have been slower, or even negative, job growth.

Gagnon said that it’s possible the central bank might consider another small rate increase this month but said much of the urgency that marked large rate increases a year ago no longer applies.

“I think the Fed is not in an ideal place, but it’s not horrible,” he said. “It can be patient, or slow. It’s a close call as to whether they might want to raise rates a bit more, but I don’t see the urgent need that we had a year ago of raising 75 basis points every meeting. We’re not there now.”
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The nation’s employers stepped up their hiring in May, adding a robust 339,000 jobs, well above expectations and evidence of strength in an economy that the Federal Reserve is desperately trying to cool. 

Friday’s report from the government showed that the unemployment rate rose to 3.7%, from a five-decade low of 3.4% in April. 

The stronger hiring demonstrates the job market’s resilience after more than a year of rapid interest rate increases by the Fed. Many industries, from construction to restaurants to health care, are still adding jobs to keep up with consumer demand and restore their workforces to pre-pandemic levels. 

Having imposed 10 straight rate hikes since March 2022, the Federal Reserve is widely expected to skip a rate increase when it meets later this month, though it may resume its hikes after that. Chair Jerome Powell and other Fed officials have made clear that they regard strong hiring as likely to keep inflation persistently high because employers tend to sharply raise pay in a tight job market. Many of these companies then pass on their higher wage costs to customers in the form of higher prices. 

The May jobs report adds to other recent evidence that the economy is still managing to chug ahead despite long-standing predictions that a recession was near. Consumers ramped up their spending in April, even after adjusting for inflation, and sales of new homes rose despite higher mortgage rates. 

Some cracks in the economy’s foundations, though, have begun to emerge. Home sales have tumbled. A measure of factory activity indicated that it has contracted for seven straight months. 

And consumers are showing signs of straining to keep up with higher prices. The proportion of Americans who are struggling to stay current on their credit card and auto loan debt rose in the first three months of this year, according to the Federal Reserve Bank of New York. 

Fed officials are expected to forgo a rate increase at their June 13-14 meeting to allow time to assess how their previous rate hikes have affected the inflation pressures underlying the economy. Higher rates typically take time to affect growth and hiring. The Fed wants to avoid raising its key rate to the point where it would slow borrowing and spending so much as to cause a deep recession. 

The U.S. economy as a whole has been gradually weakening. It grew at a lackluster 1.3% annual rate from January through March, after 2.6% annual growth from October through December and 3.2% from July through September. 

The Federal Reserve’s so-called Beige Book, a collection of anecdotal reports mostly from businesses across the country, reported this week that the pace of hiring gains in April and May had “cooled some” compared with previous reports. Many companies reported that they were fully staffed. 

At the same time, despite some high-profile job cuts by financial and high-technology companies, the pace of layoffs remains unusually low. The number of people seeking first-time unemployment benefits, a proxy for layoffs, barely rose from a low level last week.

Many employers are still engaged in so-called “catch-up hiring,” particularly in such sectors as restaurants, hotels and entertainment venues. Even as customer demand in these industries has spiked, the number of employed workers remains below pre-pandemic levels.

Consumers, who drive roughly two-thirds of economic activity, are still mostly spending at a solid pace, despite higher prices and borrowing rates. Their spending jumped 0.8% in April, the fastest monthly pace since January, as Americans flocked to airports, restaurants and concert halls, among other places. 
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President Joe Biden is set to sign the Fiscal Responsibility Act, legislation that suspends the U.S. government’s debt limit through January 2025 and avoids a potentially disastrous default on U.S. financial obligations.

He is scheduled to deliver remarks on the legislation’s passage Friday evening.

The U.S. Senate voted Thursday night 63-36 in support of the measure. Democratic senators John Fetterman, Elizabeth Warren, Ed Markey, Jeff Merkley and Bernie Sanders, who is an independent but caucuses with Democrats, joined 31 Republicans in voting against the bill.

“Tonight, senators from both parties voted to protect the hard-earned economic progress we have made and prevent a first-ever default by the United States,” Biden said in a statement Thursday.

The bill allows the government to continue to borrow more money over the next 19 months to meet its obligations, exceeding the current $31.4 trillion debt limit.

Despite objections by far-right Republican lawmakers who said it did not go far enough to cut spending and from Democratic progressives who said it trimmed too much, the bill passed the House of Representatives under a 314-117 vote Wednesday night.

The legislation does not set a new monetary cap, but the borrowing authority would extend to January 2, 2025, two months past next year’s presidential election.

In addition, the legislation calls for maintaining most federal spending at the current level in the fiscal year starting in October, with a 1% increase in the following 12 months.

“With the latest debt limit debate now behind us, our leaders must get serious about reforming this process so that we never again jeopardize the full faith and credit of the United States,” Kelly Veney Darnell, interim CEO of the Bipartisan Policy Center, said in a statement sent to VOA.

“Bipartisan legislation like the Responsible Budgeting Act, introduced in the last Congress, would require lawmakers to routinely address our fiscal health by annually debating and voting on significant deficit reducing legislation — but without the full faith and credit of the country hanging in the balance,” she said.

Republican House Speaker Kevin McCarthy, who negotiated the deal with Biden, told reporters that getting the bill passed “wasn’t an easy fight.” He emphasized the budget savings and criticized Democrats who wanted to separate the debate about future government spending from the need to suspend the debt limit so current financial obligations could be met.

“We put the citizens of America first and we didn’t do it by taking the easy way,” McCarthy said. “We didn’t do it by the ways that people did in the past by just lifting [the debt ceiling]. We decided you had to spend less, and we achieved that goal.”

McCarthy said he intends to follow Wednesday’s action with more efforts to cut federal spending.

The measure does not raise taxes on the wealthy, a step wanted by Democrats. Nor will it stop the national debt total from continuing to increase, perhaps by another $3 trillion or more over the next year-and-a-half until the next expiration of the debt limit.

Other pieces of the legislation include a reduction in the number of new agents hired by the country’s tax collection agency, a requirement that states return $30 billion in unspent coronavirus pandemic assistance to the federal government and extending from 50 to 54 the upper age bracket for those required to work in order to receive food aid.

Ken Bredemeier contributed to this report.
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A combination of crises, including high indebtedness, global inflation, the war in Ukraine, and a slow recovery from the COVID-19 pandemic has left many countries in the developing world without sufficient employment opportunities to support their populations, according to a report from the International Labor Organization.

The ILO’s annual Monitor on the World of Work finds that in much of the developing world, employment rates have still not returned to pre-pandemic levels, even as developed countries like the U.S. face labor shortages and wage inflation.

“The findings of this report are a stark reminder of growing global inequalities,” ILO Director-General Gilbert F. Houngbo said in a statement.

Houngbo called for concerted international investment in job creation in developing nations through an effort the ILO has called the Global Coalition for Social Justice.

“Investing in people through jobs and social protection will help narrow the gap between rich and poor nations and people,” he said. “The coalition will bring together a wide range of multilateral bodies and stakeholders. It will help to position social justice as the keystone of a global recovery, and make it a priority for national, regional, and global policies and actions.”

Regional differences

According to ILO data, unemployment is particularly acute in Africa and many Arab countries that, according to the agency’s projections, will remain below pre-pandemic levels of employment at least through the end of 2023.

In North Africa, for example, the unemployment rate is projected to be 11.2% in 2023, still above the 10.9% measured in 2019.

Other regions around the globe have enjoyed a more robust recovery. Unemployment is forecast to be 6.7% in Latin America and the Caribbean for the year, compared to 8% in 2019. In the region the ILO classifies as Northern, Southern, and Western Europe, unemployment will be 6.3% this year, compared to 7% in 2019. In Central and Western Asia, the rate will be 7.8% this year, compared to 9.2% prior to the pandemic.

‘Jobs gap’ revealed

Most assessments of global labor force participation rely on official unemployment reports, which often undercount the number of people who would work if they had the opportunity. To address the undercount, the ILO has developed a metric it refers to as the “jobs gap,” which supplements the official reports with information from labor force surveys to paint a fuller picture of individual countries’ job markets.

The global unemployment rate, according to ILO data, is 5.3% in 2023, lower than the pre-pandemic rate of 5.5% measured in 2019. However, the ILO argues that the jobs gap data shows a real unemployment rate of 11.7% globally, a little more than double the official rate.

The size of the jobs gap varies greatly across countries. On average, low-income countries face a jobs gap of 21.5%, the agency finds. That compares with just 11% in middle-income countries and 8.2% in high-income countries.

The disparity also varies by gender, with women experiencing a 14.5% gap worldwide compared to a 9% gap for men.

Heavily indebted countries

A lack of jobs is particularly acute in countries that are already experiencing high levels of indebtedness. Global increases in interest rates have made it significantly more expensive for many developing countries to service their debt, leaving less money for domestic investment.

The International Monetary Fund considers countries to be in “debt distress” when default or debt restructuring is either ongoing or imminent. According to ILO data, the jobs gap in debt-distressed countries is 25.7% on average, compared to just 11% in developing countries the IMF views as being at low risk of distress. Again, the gap for women in debt-distressed countries is especially high, at 31%.

“The correlation between debt distress and the jobs gap rate points to the critical importance of international financial support for debt-distressed countries in promoting both an economic and a job recovery,” the report finds.

Investment pays dividends

The report makes the case that social protection regimes that provide income support to the vulnerable — particularly old-age pension programs — can be a powerful job-creating force.

The report notes that there is a high correlation between countries that do not provide old-age pensions or other financial support to the elderly and significant jobs gaps. It estimates that the introduction of universal old-age pensions in developing countries where they do not currently exist would increase GDP by 14.8% over 10 years.

Old-age pensions, the report finds, are “a potentially extraordinary policy lever for sustainable development and social justice, and furthermore one that is backed by the strong international consensus on social protection floors.”

‘A particular crisis’

Cynthia M. Hewitt, director of the International Comparative Labor Studies Program at Morehouse College, told VOA that the ILO findings square with what she has observed in her work, which focuses primarily on Africa.

“Unemployment is a particular crisis, because a lot of small businesses went out of business during the pandemic,” she said. “Little restaurants, small hotels, they just simply went out of business.”

Hewitt said the ILO’s partial prescription for the problem — stronger social support programs — is necessary but difficult to achieve.

“There should be a floor of social support for people,” she said. “However, it’s not a zero-sum game. It requires the political will to shift the use of funds, and that’s what’s usually not available.”

Hewitt was also cautious about the call for wealthy countries to invest in job creation in the developing world, pointing out that in Africa especially, there is a long history of powerful foreign interests exerting outsized control over domestic economies.

She said it is important to maintain local control and endorsed a policy put forward by Patrice Lumumba, the former prime minister of the Republic of the Congo in 1960, who advocated a 49% limit on the foreign ownership share of any company in the country.
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The U.S. Senate could vote as soon as Thursday on a measure to suspend the government’s borrowing limit until early 2025 to avert a first-ever default when the United States in four days runs out of cash to pay its bills.

The House of Representatives overwhelmingly voted Wednesday night, with wide support from Republican and Democratic lawmakers alike, to allow the government to continue to borrow more money over the next year-and-a-half to meet its financial obligations, exceeding the current $31.4 trillion debt limit.

The legislation does not set a new monetary cap, but the borrowing authority would extend to January 2, 2025, two months past next year’s presidential election.

In addition, the legislation calls for maintaining most federal spending at the current level in the fiscal year starting in October, with a 1% increase in the following 12 months.

“The responsible thing for America is to pass it,” one Senate leader, Democrat Dick Durbin, told reporters. Durbin said he expects the bill to be approved Thursday night or Friday.

Both Democratic Senate Majority Leader Chuck Schumer and Mitch McConnell, the Senate Republican leader, support suspension of the debt limit and are calling for swift passage of the legislation so it can be sent to President Joe Biden for his signature.

Schumer told the Senate, “Time is a luxury the Senate does not have if we want to prevent default. There is no good reason — none — to bring this process down to the wire. … I hope we see nothing even approaching brinksmanship. The country cannot afford that now.”

The timetable for a Senate vote was uncertain, with a handful of senators calling for votes on changes they want to make to the House-passed legislation. If the Senate approves any of their amendments, the legislation would have to be sent back to the House for another vote.

“Any change to this bill that forces us to send it back to the House would be entirely unacceptable,” Schumer said. “It would almost guarantee default.”

The House approved the legislation on a 314-117 vote despite objections by far-right Republican lawmakers who said it did not go far enough to cut spending and from Democratic progressives who said it trimmed too much.

Seventy-one lawmakers from the majority Republican party in the House voted against the bill, as did 46 Democrats.

In a statement following Wednesday’s vote, Biden celebrated the agreement as a “bipartisan compromise.”

“It protects key priorities and accomplishments from the past two years, including historic investments that are creating good jobs across the country,” Biden said. “And, it honors my commitment to safeguard Americans’ health care and protect Social Security, Medicare, and Medicaid [pensions and health care insurance for older Americans and welfare payments for impoverished people]. It protects critical programs that millions of hardworking families, students, and veterans count on.”

Republican House Speaker Kevin McCarthy, who negotiated the deal with Biden, told reporters that getting the bill passed “wasn’t an easy fight.” He emphasized the budget savings and criticized Democrats who wanted to separate the debate about future government spending from the need to suspend the debt limit so current financial obligations could be met.

“We put the citizens of America first and we didn’t do it by taking the easy way,” McCarthy said. “We didn’t do it by the ways that people did in the past by just lifting [the debt ceiling]. We decided you had to spend less and we achieved that goal.”

McCarthy said he intends to follow Wednesday’s action with more efforts to cut federal spending.

The measure does not raise taxes, nor will it stop the national debt total from continuing to increase, perhaps by another $3 trillion or more over the next year-and-a-half until the next expiration of the debt limit.

Other pieces of the legislation include a reduction in the number of new agents hired by the country’s tax collection agency, a requirement that states return $30 billion in unspent coronavirus pandemic assistance to the federal government and extending from 50 to 54 the upper age bracket for those required to work in order to receive food aid.
…

Zimbabwe’s government has instituted several measures it says will increase demand for the local currency and raise its value, as well arrest demand for the U.S. dollar. But as Columbus Mavhunga reports from Harare, economists say the new measures will not work as Zimbabweans have lost faith in the local dollar which continues sliding against the greenback. Videographer: Blessing  Chigwenhembe     
…

The U.S. House of Representatives approved legislation to suspend the government’s borrowing limit until early 2025, a step toward averting a Washington political showdown five days before the country could run out of money to pay its bills.

With a late Wednesday vote of 314-117, the bill passed and now heads to the Senate with passage expected by week’s end, and eventually Biden’s signature at the White House. The measure suspends the government’s current $31.4 trillion debt ceiling.

Far-right Republican lawmakers had criticized the deal negotiated by Democratic President Joe Biden and Republican House Speaker Kevin McCarthy for not cutting enough in future government spending, while some progressive Democrats said it trims too much.

The contentious fight over the legislation is also turning into a test of McCarthy’s hold on the top leadership post in the House, which he won in January after 15 rounds of voting and after he promised archconservatives a greater say in attempting to rein in government budgets. The U.S. chronically records annual trillion-dollar deficits, adding to the long-term debt total.

Under informal Republican rules managing the House with a narrow majority, McCarthy had pledged to not bring up legislation for a full House vote without the support of at least 111 members of his 222-member Republican caucus. Before the vote, he expected at least 150 Republicans would support the debt ceiling suspension.

If McCarthy were to lose 111 Republicans on the debt ceiling vote, at least 107 of the 213 House Democrats would need to support it for the legislation to pass.

“House Democrats are going to make sure the country doesn’t default. Period. Full stop,” House Democratic leader Hakeem Jeffries told reporters early Wednesday.

One Freedom Caucus member, Representative Ken Buck, acknowledged to NBC News that the conservative lawmakers do not have enough votes to kill the legislation.

“The nation will not default,” Buck said.

But he and other Republicans have voiced skepticism about the legitimacy of Treasury Secretary Janet Yellen’s warning that the government will run out of money next Monday to meet all its financial obligations, including cash to pay interest on government bonds, pensions to older Americans and salaries to the military and government workers.

The House Rules Committee sent the legislation to the full House on a 7-6 vote Tuesday night that showed some of that discontent, with two Republicans voting against advancing the bill.

The proposal before Congress includes waiving the existing borrowing limit until January 2025 and a two-year budget deal that keeps federal spending flat in 2024 and increases it by 1% in 2025. The measure does not raise taxes, nor will it stop the national debt total from continuing to increase, perhaps by another $3 trillion or more over the next year and a half.

Other pieces of the legislation include a reduction in the number of new agents hired by the country’s tax collection agency, a requirement that states return $30 billion in unspent coronavirus pandemic assistance to the federal government and extending from 50 to 54 the upper age bracket for those required to work in order to receive food aid.

Some liberal Democratic lawmakers have objected to the deal, saying it cuts too much in social welfare spending or holds some programs at a flat spending level. Republicans say it allows for more spending than legislation they approved weeks ago calling for steeper cuts and a debt ceiling extension of less than a year totaling about $1.5 trillion.

Biden insisted on a new debt ceiling that extended beyond the November 2024 presidential election in which he is seeking a second four-year term, so the current contentious debate would not be repeated during the political campaign next year.

One Republican critic of the debt ceiling legislation, Representative Dan Bishop, complained Tuesday about the length of the debt ceiling extension.

“It removes the issue from the national conversation during the presidential election to come,” Bishop said. “How could you more successfully kneecap any Republican [presidential candidate] than to take that issue out of his or her hands?”

Biden and McCarthy have both, respectively, been lobbying Democrats and Republicans to pass the measure.

“The agreement prevents the worst possible crisis — a default — for the first time in our nation’s history,” Biden said at the White House last weekend. It “takes the threat of a catastrophic default off the table.”

“The agreement represents a compromise, which means not everyone gets what they want. But that’s the responsibility of governing,” Biden said in a statement.

McCarthy called the bill the “most conservative deal we’ve ever had.”
…

The U.S. House of Representatives is moving toward a Wednesday evening vote on legislation to suspend the government’s borrowing limit until early 2025, a Washington political showdown occurring just five days before the country could run out of money to pay its bills.

The measure suspending the government’s current $31.4 trillion debt ceiling is likely to be approved. But far-right Republican lawmakers are continuing to assail the deal negotiated by Democratic President Joe Biden and Republican House Speaker Kevin McCarthy for not cutting enough in future government spending, while some progressive Democrats say it trims too much.

The contentious fight over the legislation is also turning into a test of McCarthy’s hold on the top leadership post in the House, which he won in January after 15 rounds of voting and after he promised archconservatives a greater say in attempting to rein in government budgets. The U.S. chronically records annual trillion-dollar deficits, adding to the long-term debt total.

Under informal Republican rules managing the House with a narrow majority, McCarthy has pledged to not bring up legislation for a full House vote without the support of at least 111 members of his 222-member Republican caucus. He has said he expects at least 150 Republicans will support the debt ceiling suspension, but the figure is uncertain, with the most vocal Republicans in the far-right Freedom Caucus attacking McCarthy for supposedly caving to Biden in the negotiations.

If McCarthy were to lose 111 Republicans on the debt ceiling vote, at least 107 of the 213 House Democrats would need to support it for the legislation to pass and be sent to the Senate for consideration later in the week, and eventually Biden’s signature at the White House.

“House Democrats are going to make sure the country doesn’t default. Period. Full stop,” House Democratic leader Hakeem Jeffries told reporters early Wednesday.

One Freedom Caucus member, Representative Ken Buck, acknowledged to NBC News that the conservative lawmakers do not have enough votes to kill the legislation.

“The nation will not default,” Buck said.

But he and other Republicans have voiced skepticism about the legitimacy of Treasury Secretary Janet Yellen’s warning that the government will run out of money next Monday to meet all its financial obligations, including cash to pay interest on government bonds, pensions to older Americans and salaries to the military and government workers. 

The House Rules Committee sent the legislation to the full House on a 7-6 vote Tuesday night that showed some of that discontent, with two Republicans voting against advancing the bill.

The proposal before Congress includes waiving the existing borrowing limit until January 2025 and a two-year budget deal that keeps federal spending flat in 2024 and increases it by 1% in 2025. The measure does not raise taxes, nor will it stop the national debt total from continuing to increase, perhaps by another $3 trillion or more over the next year and a half.

Other pieces of the legislation include a reduction in the number of new agents hired by the country’s tax collection agency, a requirement that states return $30 billion in unspent coronavirus pandemic assistance to the federal government and extending from 50 to 54 the upper age bracket for those required to work in order to receive food aid.  

Some liberal Democratic lawmakers have objected to the deal, saying it cuts too much in social welfare spending or holds some programs at a flat spending level. Republicans say it allows for more spending than legislation they approved weeks ago calling for steeper cuts and a debt ceiling extension of less than a year totaling about $1.5 trillion.

Biden insisted on a new debt ceiling that extended beyond the November 2024 presidential election in which he is seeking a second four-year term, so the current contentious debate would not be repeated during the political campaign next year. 

One Republican critic of the debt ceiling legislation, Representative Dan Bishop, complained Tuesday about the length of the debt ceiling extension.

“It removes the issue from the national conversation during the presidential election to come,” Bishop said. “How could you more successfully kneecap any Republican [presidential candidate] than to take that issue out of his or her hands?”

Biden and McCarthy have both, respectively, been lobbying Democrats and Republicans to pass the measure.

“The agreement prevents the worst possible crisis — a default — for the first time in our nation’s history,” Biden said at the White House last weekend. It “takes the threat of a catastrophic default off the table.”    

“The agreement represents a compromise, which means not everyone gets what they want. But that’s the responsibility of governing,” Biden said in a statement.

McCarthy called the bill the “most conservative deal we’ve ever had.”
…