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Washington — South Asia’s youth bulge is a ticking time bomb. A demographic dividend looms, but millions of young people lack the job skills to cash in, choking the region’s economic potential.

Almost half of South Asia’s population of 1.9 billion is under 24, the highest number of any region in the world. With nearly 100,000 young people entering the job market daily, the region boasts the largest youth labor force globally.

For years, experts have sounded the alarm: Many of South Asia’s youth lack the education and skills for a modern labor force. A 2019 UNICEF study warned that if nothing changes, more than half risked not finding decent jobs in 2030.

Now, International Youth Day has put the spotlight on the region’s skills-gap crisis. While some South Asian countries have made progress in recent years, UNICEF’s latest figures paint a sobering picture: Ninety-three million children and adolescents in South Asia are out of school; almost 6 in 10 can’t read by age 10; and nearly a third are not in any form of education, employment or training, known as NEET.

“We know that the region has the highest number of children and young people, but sadly at the same time, despite the opportunity that that might bring, we know that for many young people, learning and skilling is not good enough,” Mads Sorensen, UNICEF’s chief adolescent adviser for South Asia, said in an interview with VOA. “This clearly holds them back from reaching their full potential.”

The problem, Sorensen said, comes down to the quality of education: Many teachers cling to old methods, schools in many regions lack basic tools such as computers, and students are not taught the digital skills needed to thrive in the modern workplace.

“So, young people are not really acquiring those skills that we know are very much sought after by the labor market, especially the private sector,” Sorensen said.

The skill deficit extends beyond K-12 education. Higher education enrollment in South Asia has tripled in the past two decades, reaching an average of 27% in 2022, according to the World Bank. Yet the quality of college education remains uneven, with many graduates finding that their hard-earned degrees ill-prepare them for today’s job market.

Big investment but scant returns

Take Ariful Islam, a recent graduate with a business administration degree, who now helps his father in his sweets shop in the Bangladeshi capital, Dhaka. After graduating last year, he had multiple job interviews. But none yielded an offer, forcing him to settle for a position that barely covered his expenses.

Having invested nearly $13,000 on Islam’s education, his father, Akram Khan, said he had to quit his job to start a modest business.

“I spent so much money to educate my son, but now he is not getting a job according to his qualifications,” Khan said in an interview with VOA. “As a father, [I] will feel bad.”

Others such as Zahirul Haque, a 2022 graduate in public administration, have been locked out of coveted government jobs.

A controversial quota system favoring Liberation War veterans and their offspring, at the heart of Bangladesh’s recent turmoil, has thwarted his aspirations for public service.

After two years of fruitless government-administered exams, he reluctantly accepted a low-paying job with a local nongovernmental organization.

“It was a little disappointing,” he told VOA.

Bangladesh’s strained job market offers few prospects for young graduates such as Haque. But he said he hasn’t given up hope for a better job.

Good news, sobering news

Bangladesh, once among Asia’s poorest countries, has surged economically in recent decades and is now on track to become a middle-income country by 2026.

Collectively, South Asia is poised to be the fastest-growing emerging market this year, according to the World Bank. In a new report released on Monday, the International Labour Organization, or ILO, said South Asia’s youth unemployment rate fell to a 15-year low of 15.1% last year.

Though signaling an easing job market for young people, the unemployment rate was the highest in the Asia Pacific region, ILO said. What’s more, “too many” young women are excluded from the labor market in South Asia, with the number of women not working or learning at more than 42%, the highest in the region, the ILO said.

Sorensen said that while countries such as Bhutan, the Maldives and Sri Lanka have narrowed the skills gap in recent years, the region’s most populous nations — India, Bangladesh and Pakistan — are lagging behind.

The plight of young women is even more grim. One in four girls in South Asia are married before age 18, their education and careers squandered. Bangladesh’s underage marriage numbers have worsened in recent years, Pakistan’s remains “dire,” Sorensen said.

Pakistan lags most of the region in higher education, with 13% enrollment as of 2022. While the country boasts quality universities, many students complain about outdated curriculums.

The curriculum is “not incorporating the emerging trends of the 21st century,” said Noor Ul Huda, an English major at a public university in Islamabad.

Huda said her major is considered “less practical” than academic fields such as engineering and business, leaving her job prospects bleak.

“The job market is overwhelmingly competitive, and I think I’d have a lot of difficulty finding a job,” she said.

Not ready for jobs

Many parents pouring money into their children’s education confront the same reality: Schools fail to equip students for the job market.

Humna Saleem, a preschool teacher in Rawalpindi, worries about her son, a soon-to-be computer science graduate from a private university. Despite a hefty tuition, he had to learn coding on his own, Saleem said.

“What I observed as an adult is that he is taught a lot of theoretical knowledge, but there are practical skills that are not taught to the students,” she told VOA.

Pakistan’s classrooms, she said, remain stuck in the past, while the world has changed. Students need digital skills and “soft skills,” such as critical thinking and interpersonal communication, not just degrees, she said.

“It doesn’t matter if you are a doctor, or you’re an accountant, or you are an engineer. Whatever profession you choose for yourself, you need to have those skills,” Saleem said.

In recent years, governments in the region have stepped up efforts to close the skills gap.

In India, the Ministry of Skill Development and Entrepreneurship has partnered with UNICEF to provide youth with 21st-century skills, apprenticeships and entrepreneurial opportunities.

In Pakistan, the prime minister’s Youth Skill Development Program, launched in 2013, aims to equip youth with market-driven skills in IT, entrepreneurship, agriculture, tourism and vocational fields.

“We have to equip our youth with the skills in line with modern requirements so that they can contribute to the country’s development,” Pakistan’s education minister, Khalid Maqbool Siddiqui, said in July, according to Associated Press of Pakistan.

In Bangladesh, the National Skills Development Council, led by the prime minister, has introduced a new policy to enhance workforce skills for the modern economy.

Colleges and universities in South Asia have tackled the skills gap crisis by emphasizing critical thinking, creativity, innovation and entrepreneurship. Some have also ramped up digital skills and vocational training to better prepare their graduates for the job market.

Sorensen lauded the regional efforts but said more needs to be done to build a vibrant, modern workforce in South Asia.

“We keep saying that young people are leaders of today, which they are, but they’re also more so leaders of tomorrow,” Sorensen said.

VOA’s Afghan, Bangla and Urdu services contributed to this report.
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Washington — The great inflation spike of the past three years is nearly spent — and economists credit American consumers for helping slay it.

Some of America’s largest companies, from Amazon to Disney to Yum Brands, say their customers are increasingly seeking cheaper alternative products and services, searching for bargains or just avoiding items they deem too expensive. Consumers aren’t cutting back enough to cause an economic downturn. Rather, economists say, they appear to be returning to pre-pandemic norms, when most companies felt they couldn’t raise prices very much without losing business.

“While inflation is down, prices are still high, and I think consumers have gotten to the point where they’re just not accepting it,” Tom Barkin, president of the Federal Reserve Bank of Richmond, said last week at a conference of business economists. “And that’s what you want: The solution to high prices is high prices.”

A more price-sensitive consumer helps explain why inflation has appeared to be steadily falling toward the Federal Reserve’s 2% target, ending a period of painfully high prices that strained many people’s budgets and darkened their outlooks on the economy. It also assumed a central place in the presidential election, with inflation leading many Americans to turn sour on the Biden-Harris administration’s handling of the economy.

The reluctance of consumers to keep paying more has forced companies to slow their price increases — or even to cut them. The result is a cooling of inflation pressures.

Other factors have also helped tame inflation, including the healing of supply chains, which has boosted the availability of cars, trucks, meats and furniture, among other items, and the high interest rates engineered by the Fed, which slowed sales of homes, cars and appliances and other interest rate-sensitive purchases.

Still, a key question now is whether shoppers will pull back so much as to put the economy at risk. Consumer spending makes up more than two-thirds of economic activity. With evidence emerging that the job market is cooling, a drop in spending could potentially derail the economy. Such fears caused stock prices to plummet a week ago, though markets have since rebounded.

This week, the government will provide updates on both inflation and the health of the American consumer. On Wednesday, it will release the consumer price index for July. It’s expected to show that prices — excluding volatile food and energy costs — rose just 3.2% from a year earlier. That would be down from 3.3% in June and would be the lowest such year-over-year inflation figure since April 2021.

And on Thursday, the government will report last month’s retail sales, which are expected to have climbed a decent 0.3% from June. Such a gain would suggest that while Americans have become vigilant about their money, they are still willing to spend.

Many businesses have noticed.

“We’re seeing lower average selling prices … right now because customers continue to trade down on price when they can,” said Andrew Jassy, CEO of Amazon.

David Gibbs, CEO of Yum Brands, which owns Taco Bell, KFC and Pizza Hut, told investors that a more cost-conscious consumer has slowed its sales, which slipped 1% in the April-June quarter at stores open for at least a year.

“Ensuring we provide consumers affordable options,” Gibbs said, “has been an area of greater focus for us since last year.”

Other companies are cutting prices outright. Dormify, an online retailer that sells dorm supplies, is offering comforters starting at $69, down from $99 a year ago.

According to the Fed’s “Beige Book,” an anecdotal collection of business reports from around the country that is released eight times a year, companies in nearly all 12 Fed districts have described similar experiences.

“Almost every district mentioned retailers discounting items or price-sensitive consumers only purchasing essentials, trading down in quality, buying fewer items or shopping around for the best deals,” the Beige Book said last month.

Most economists say consumers are still spending enough to sustain the economy consistently. Barkin said most of the businesses in his district — which covers Virginia, West Virginia, Maryland and North and South Carolina — report that demand remains solid, at least at the right price.

“The way I’d put it is, consumers are still spending, but they’re choosing,” Barkin said.

In a speech a couple of weeks ago, Jared Bernstein, who leads the Biden administration’s Council of Economic Advisers, mentioned consumer caution as a reason why inflation is nearing the end of a “round trip” back to the Fed’s 2% target level.

Emerging from the pandemic, Bernstein noted, consumers were flush with cash after receiving several rounds of stimulus checks and having slashed their spending on in-person services. Their improved finances “gave certain firms the ability to flex a pricing power that was much less prevalent pre-pandemic.” After COVID, consumers were “less responsive to price increases,” Bernstein said.

As a result, “the old adage that the cure for high prices is high prices [was] temporarily disengaged,” Bernstein said.

So some companies raised prices even more than was needed to cover their higher input costs, thereby boosting their profits. Limited competition in some industries, Bernstein added, made it easier for companies to charge more.

Barkin noted that before the pandemic, inflation remained low as online shopping, which makes price comparisons easy, became increasingly prevalent. Major retailers also held down costs, and increased U.S. oil production brought down gas prices.

“A price increase was so rare,” Barkin said, “that if someone came to you with a 5% or 10% price increase, you almost just threw them out, like, ‘How could you possibly do it?’ ”

That changed in 2021.

“There are labor shortages, Barkin said. “Supply chain shortages. And the price increases are coming to you from everywhere. Your gardener is raising your prices, and you don’t have the capacity to do anything other than accept them.”

The economist Isabella Weber at the University of Massachusetts, Amherst, dubbed this phenomenon “sellers’ inflation” in 2023. In an influential paper, she wrote that “publicly reported supply chain bottlenecks” can “create legitimacy for price hikes” and “create acceptance on the part of consumers to pay higher prices.”

Consumers are no longer so accepting, Barkin said.

“People have a little bit more time to stop and say, ‘How do I feel about paying $9.89 for a 12-pack of Diet Coke when I used to pay $5.99?’ They don’t like it that much, and so people are making choices.”

Barkin said he expects this trend to continue to slow price increases and cool inflation.

“I’m actually pretty optimistic that over the next few months, we’re going to see good readings on the inflation side,” he said. “All the elements of inflation seem to be settling down.”
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Geneva — Global youth unemployment rates fell to 13% in 2023, a 15-year low. But a new study by the International Labor Organization warns the post-COVID economic recovery is uneven, with some regions seeing an increase in the number of out-of-work young people. 

The ILO has issued its Global Employment Trends for Youth 2024 report to coincide with International Youth Day on August 12, to raise awareness of the needs, hopes, and aspirations of young people.    

The current report reflects these issues and analyzes current and future prospects. 

The report predicts that the four-year-long improved global labor market for young people will continue its upward trend for two more years, with unemployment rates expected to fall further to 12.8% this year and next.   

This bright outlook, however, is not universal. The report notes that several regions are falling behind and not getting the benefits of the economic recovery. 

“In three regions, mainly in the Arab States, Southeast Asia and the Pacific, youth unemployment rates were higher in 2023 than in 2019 in pre-COVID-19 days,” Gilbert Houngbo, ILO director-general, told journalists in Geneva last week at a briefing ahead of the report’s publication. 

“At the same time, the recovery has not been the same for young men and young women,” he said. “Some of you may recall, before the pandemic, that young men globally experienced higher unemployment rates than young women. But by 2023, unemployment rates for young women and young men almost converged — 20.9% for young women versus 13.1% for young men. 

“This highlights the disproportionate impact of the pandemic on young women’s employment opportunities and ensures that some young women will have been left behind in the recovery process,” he said. 

Flagging another issue of concern, authors of the report point out that only six percent of the world’s youth population were unemployed in 2023, but a much larger share — 20.4% — was not in employment (individuals without a job and not seeking one), education or training. This is referred to as NEET in ILO parlance. 

The report finds that one in five young people between the ages of 15 and 24 was NEET in 2023 and two in three were female.    

The report underscores the persistent challenges facing young people in gaining decent jobs in developing countries. It highlights the glaring equality gap between rich and poor countries where “the inequalities of opportunity have gotten worse.” 

“Today, only one in four young workers in the low-income countries has a regular secure job compared to three-quarters of young workers in high income countries,” ILO chief Houngbo said. “However, two-thirds of young adults in low- and middle-income countries face education jobless matches because their qualifications do not necessarily align well with their qualifications and requirements.” 

ILO data reveals that youth unemployment rates have reached “historic lows” in North America, in areas of western Europe, and have come down substantially in Latin America in recent years. The data, however, show that youth unemployment rates remain critically high in the Arab states and North Africa. 

“In both subregions, more than one in three economically active youth were unemployed in 2023. Fewer than one in 10 women and fewer than one in three young men in the two subregions are working,” authors of the report say. 

The situation in sub-Saharan Africa is quite different where, according to the report, youth unemployment rates stand at 8.9%, “which are among the lowest in the world.” 

Sara Elder, head of ILO’s employment analyses and economic policies unit, explains, “The issue here is that young people in certain contexts do not have the luxury of being unemployed. They have to take up a job. They have to earn some income. 

“Often it is poverty driven and this is very much what we see in young people in sub-Saharan Africa,” she said, adding that the region “has a very distinct problem of decent work deficits.” 

“It is a region where three in four young people do not have access to what we deem to be a more secure form of employment and also a region where one in three persons is working in a low paid job,” she said. 

Her colleague, Mia Seppo, ILO assistant director-general for jobs and social protection, points out that most young people, around 60%, eke out a living in the agricultural sector, “and a lot of that is in employment that is informal and insecure. And, that is not necessarily reflective of young people’s aspirations.” 

“So, there actually lies the potential in terms of agri-food supply chains and in developing the agricultural sector in terms of new jobs and trying to make agriculture something that is attractive and provides more decent jobs for young people,” she said. 

Authors of the report say demographic trends, notably, the so-called African “youthquake,” means that creating enough decent jobs, “will be critical for social justice and the global economy.” 

The report calls for increased and more effective investment in boosting job creation, especially for young women. It says governments must strengthen labor market policies that target employment for disadvantaged youth, make sure that young people receive equal treatment and social protection at work, and “tackle global inequalities through improved international cooperation.” 
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New York — A week of wild market swings has investors looking ahead to inflation data, corporate earnings and presidential polls for signals that could soothe a recent outbreak of turbulence in U.S. stocks. 

Following months of placid trading, U.S. stock volatility has surged this month as a run of alarming data coincided with the unwinding of a massive, yen-fueled carry trade to deal equities their worst selloff of the year. The S&P 500 .SPX is still down around 6% from a record high set last month, even after making up ground in a series of rallies after Monday’s crushing selloff.  

At issue for many investors is the trajectory of the U.S. economy. After months of betting on an economic soft landing, investors rushed to price in the risk of a more severe downturn, following weaker-than-expected manufacturing and employment data last week.  

“Everybody is now worried about the economy,” said Bob Kalman, a portfolio manager at Miramar Capital. “We are moving away from the greed portion of the program and now the market is facing the fear of significant geopolitical risks, a hotly contested election and volatility that is not going away.”  

Though stocks have rallied in recent days, traders believe it will be a while before calm returns to markets. Indeed, the historical behavior of the Cboe Volatility Index .VIX – which saw its biggest one-day jump ever on Monday – shows that surges of volatility usually take months to dissipate.  

Known as Wall Street’s fear gauge, the index measures demand for options protection from market swings. When it closes above 35 – an elevated level that it topped on Monday – the index has taken 170 sessions on average to return to 17.6, its long-term median and a level associated with far less extreme investor anxiety, a Reuters analysis showed.  

One potential flashpoint will be when the U.S. reports consumer price data on Wednesday. Signs that inflation is dropping too steeply could bolster fears that the Federal Reserve has sent the economy into a tailspin by leaving interest rates elevated for too long, contributing to market turbulence.  

For now, futures markets are pricing in a 55% chance the central bank will bring down benchmark interest rates by 50 basis points in September, at its next policy meeting, compared with a roughly 5% chance seen a month ago.  

“Slower payroll growth reinforces that U.S. economic risks are becoming more two-sided as inflation cools and activity slows,” said Oscar Munoz, chief U.S. macro strategist at TD Securities, in a recent note.  

Corporate earnings, meanwhile, have been neither strong enough nor weak enough to give the market direction, said Charles Lemonides, head of hedge fund ValueWorks LLC.  

Overall, companies in the S&P 500 have reported second-quarter results that are 4.1% above expectations, in line with the long-term average of 4.2% above expectations, according to LSEG data.  

Walmart WMT.N and Home Depot HD.N are among companies reporting earnings next week, with their results seen as offering a snapshot on how U.S. consumers are holding up after months of elevated interest rates.  

The end of the month brings earnings from chip giant Nvidia NVDA.O, whose shares are up around 110% this year even after a recent selloff. The Fed’s annual Jackson Hole gathering, set for Aug. 22-24, will give policymakers another chance to fine tune their monetary policy message before their September meeting.  

Lemonides believes the recent volatility is a healthy correction during an otherwise strong bull market, and he initiated a position in Amazon.com AMZN.O to take advantage of its weakness.  

The U.S. presidential race is also likely to ramp up uncertainty. 

Democrat Kamala Harris leads Republican Donald Trump 42% to 37% in the race for the Nov. 5 presidential election, according to an Ipsos poll published on Thursday. Harris, the vice president, entered the race on July 21 when President Joe Biden folded his campaign following a disastrous debate performance on June 27 against Trump.  

With nearly three months until the Nov. 5 vote, investors are braced for plenty of additional twists and turns in an election year that has already been one of the most dramatic in recent memory.  

“While early events suggested a clearer picture of US Presidential and Congressional outcomes, more recent events have again thrown the outcome into doubt,” analysts at JPMorgan wrote.  

Chris Marangi, co-chief investment officer of value at Gabelli Funds, believes the election will add to market volatility. At the same time, expected rate cuts in September could boost a rotation into areas of the market that have lagged in a year that has been dominated by Big Tech, he said.  

“We expect increased volatility into the election but the underlying rotation to continue as lower rates offset economic weakness,” he said. 
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BEIJING — Chinese authorities are chasing unpaid taxes from companies and individuals dating back decades, as the government moves to plug massive budget shortfalls and address a mounting debt crisis.

More than a dozen listed Chinese companies say they were slapped with millions of dollars in back taxes in a renewed effort to fix local finances that have been wrecked by a downturn in the property market that hit sales of land leases, a main source of revenues.

Policies issued after a recent planning meeting of top Communist Party officials called for expanding local tax resources and said localities should expand their “tax management authority and improve their debt management.”

Local government debt is estimated at up to $11 trillion, including what’s owed by local government financing entities that are “off balance sheet,” or not included in official estimates. More than 300 reforms the party has outlined include promises to better monitor and manage local debt, one of the biggest risks in China’s financial system.

That will be easier said than done, and experts question how thoroughly the party will follow through on its pledges to improve the tax regime and better balance control of government revenues.

“They are not grappling with existing local debt problems, nor the constraints on fiscal capacity,” said Logan Wright of the Rhodium Group, an independent research firm. “Changing central and local revenue sharing and expenditure responsibilities is notable but they have promised this before.”

The scramble to collect long overdue taxes shows the urgency of the problems.

Chinese food and beverage conglomerate VV Food & Beverage reported in June it was hit with an 85 million yuan ($12 million) bill for taxes dating back as far as 30 years ago. Zangge Mining, based in western China, said it got two bills totaling 668 million RMB ($92 million) for taxes dating to 20 years earlier.

Local governments have long been squeezed for cash since the central government controls most tax revenue, allotting a limited amount to local governments that pay about 80% of expenditures such as salaries, social services and investments in infrastructure like roads and schools.

Pressures have been building as the economy slowed and costs piled up from “zero-COVID” policies during the pandemic.

Economists have long warned the situation is unsustainable, saying China must beef up tax collection to balance budgets in the long run.

Under leader Xi Jinping, the government has cut personal income, corporate income, and value-added taxes to curry support, boost economic growth and encourage investment — often in ways that favored the rich, tax scholars say. According to most estimates, only about 5% of Chinese pay personal income taxes, far lower than in many other countries. Government statistics show it accounts for just under 9% of total tax revenues, and China has no comprehensive nationwide property tax.

Finance Minister Li Fo’an told the official Xinhua News Agency that the latest reforms will give local governments more resources and more power over tax collection, adjusting the share of taxes they keep.

“The central government doesn’t have a lot of responsibility for spending, so it doesn’t feel the pain of cutting taxes,” said Cui Wei, a professor of Chinese and international tax policy at the University of British Columbia.

The effectiveness of the reforms will depend on how they’re implemented, said Cui, who is skeptical that authorities will carry out a proposal to increase central government spending. That “will require increasing central government staffing, and that’s an ‘organizational’ matter, not a simple spending matter,” he said.

“I wouldn’t hold my breath,” Cui said.

Sudden new tax bills have hit some businesses hard, further damaging already shaky business confidence. Ningbo Bohui Chemical Technology, in Zhejiang on China’s eastern coast, suspended most of its production after the local tax bureau demanded 500 million yuan ($69 million) in back taxes on certain chemicals. It is laying off staff and cutting pay to cope.

Experts say the arbitrary way taxes are collected, with periods of leniency followed by sudden crackdowns, is counterproductive, discouraging companies from investing or hiring precisely when they need to.

“When business owners are feeling insecure, how can there be more private investment growth in China?” said Chen Zhiwu, a finance professor at the University of Hong Kong’s business school. “An economic slowdown is inevitable.”

The State Taxation Administration has denied launching a nationwide crackdown, which might imply past enforcement was lax. Tax authorities have “always been strict about preventing and investigating illegal taxation and fee collection,” the administration said in a statement last month.

As local governments struggle to make ends meet, some are setting up joint operation centers run by local tax offices and police to chase back taxes. The AP found such centers have opened in at least 23 provinces since 2019.

Both individuals and companies are being targeted. Dozens of singers, actors, and internet celebrities were fined millions of dollars for avoiding taxes in the past few years, according to a review of government notices.

Internet livestreaming celebrity Huang Wei, better known by her pseudonym, Weiya, was fined 1.3 billion yuan ($210 million) for tax evasion in 2021. She apologized and escaped prosecution by paying up, but her social media accounts were suspended, crippling her business.

The hunt for revenue isn’t limited to taxes. In the past few years, local authorities have drawn criticism for slapping large fines on drivers and street vendors, similar to how cities like Chicago or San Francisco earn millions from parking tickets. Despite pledges by top leaders to eliminate fines as a form of revenue collection, the practice continues, with city residents complaining that Shanghai police use drones and traffic cameras to catch drivers using their mobile phones at red lights.

Outside experts and Chinese government advisers agree that structural imbalances between local and central governments must be addressed. But under Xi, China’s most authoritarian leader in decades, decision-making has grown more opaque, keeping businesses and analysts guessing, while vested interests have pushed back against major changes.

“They have a hermetically sealed process that makes it difficult for people on the outside to know what is going on,” says Martin Chorzempa, senior fellow at the Peterson Institute for International Economics.

Beijing has been reluctant to rescue struggling local governments, wary it might leave them dependent on bailouts. So, the central government has stepped in only in dire cases, otherwise leaving local governments to resolve debt issues on their own.

“In Chinese, we have a saying: You help people in desperate need, but you don’t help the poor,” said Tang Yao, an economist at Peking University. “You don’t want them to rely on soft money.”

Economists say intervention may be required this time around and that the central government has leeway to take on more debt, with a debt-to-GDP ratio of only around 25%. That’s much lower than many other major economies.

Accumulated total non-financial debt, meanwhile, is estimated at nearly triple the size of the economy, according to the National Institution for Finance and Development and still growing.

“This is a huge structural problem that needs a huge structural solution that is not forthcoming,” said Logan Wright of the Rhodium Group, an independent research firm. “There’s really no way around this. And it’s getting worse, not better.”
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NEW YORK — U.S. stocks rallied Thursday in Wall Street’s latest sharp swerve after a better-than-expected report on unemployment eased worries about a slowing economy. 

The S&P 500 jumped 2.3% for its best day since 2022 and shaved off all but 0.5% of its loss from what was a brutal start to the week. The Dow Jones Industrial Average rose 683 points, or 1.8%, and the Nasdaq composite climbed 2.9% as Nvidia and other Big Tech stocks helped lead the way. 

Treasury yields also climbed in the bond market in a signal that investors are feeling less worried about the economy after a report showed fewer U.S. workers applied for unemployment benefits last week. The number was better than economists expected. 

It was exactly a week ago that worse-than-expected data on unemployment claims helped enflame worries that the Federal Reserve has kept interest rates too high for too long in order to beat inflation. That helped send markets reeling worldwide, along with a rate hike by the Bank of Japan that sent shockwaves worldwide by scrambling a favorite trade among some hedge funds. 

At the worst of it, at least so far, the S&P 500 was down nearly 10% from its all-time high set last month. Such drops are regular occurrences on Wall Street, and corrections of 10% happen roughly every year or two. After Thursday’s jump, the index is back within about 6% of its record. 

What made this decline particularly scary was how quickly it happened. A measure of how much investors are paying to protect themselves from future drops for the S&P 500 briefly surged toward its highest level since the COVID crash of 2020. 

Still, the market’s swings look more like a “positioning-driven crash” caused by too many investors piling into similar trades and then exiting them together, rather than the start of a long-term downward market caused by a recession, according to strategists at BNP Paribas.
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New York — U.S. stocks are bouncing back, and calm is returning to Wall Street after Japan’s market soared earlier Tuesday to claw back much of the losses from its worst day since 1987.   

The S&P 500 was rallying by 1.6% in midday trading and on track to break a brutal three-day losing streak. It had tumbled a bit more than 6% after several weaker-than-expected reports raised worries the Federal Reserve had pressed the brakes too hard for too long on the U.S. economy through high interest rates in order to beat inflation.   

The Dow Jones Industrial Average was up 480 points, or 1.2%, as of 11 a.m. Eastern time, and the Nasdaq composite was 1.7% higher. The vast majority of stocks were climbing in a mirror opposite of the day before, from smaller companies that need U.S. households to keep spending to huge multinationals more dependent on the global economy.   

Stronger-than-expected profit reports from several big U.S. companies helped drive the market. Kenvue, the company behind Tylenol and Band-Aids, jumped 12.7% after reporting stronger profit than expected thanks in part to higher prices for its products. Uber rolled 7.9% higher after easily topping profit forecasts for the latest quarter.   

Caterpillar veered from an early loss to a gain of 3.8% after reporting stronger earnings than expected but weaker revenue.  

Several technical factors may have accelerated the recent swoon for markets, beyond weak U.S. hiring data and other dispiriting U.S. economic reports, in what strategists at Barclays called “a perfect storm” for causing extreme market moves. One is centered in Tokyo, where a favorite trade for hedge funds and other investors began unraveling last week after the Bank of Japan made borrowing more expensive by raising interest rates above virtually zero.   

That scrambled trades where investors had borrowed Japanese yen at low cost and invested it elsewhere around the world. The resulting exits from those investments may have helped accelerate the declines for markets around the world.   

Japan’s Nikkei 225 jumped 10.2% Tuesday to claw back much of its 12.4% sell-off the day before, which was its worst since the Black Monday crash of 1987. Stocks in Tokyo rebounded as the value of the Japanese yen stabilized against the U.S. dollar following several days of sharp gains.   

“The speed, the magnitude and the shock factor clearly demonstrate” how much of the moves were driven by how traders were positioned, according to the strategists at Barclays led by Stefano Pascale and Anshul Gupta. That could indicate it wasn’t just worries about the U.S. economy.   

Still, some voices along Wall Street are continuing to urge caution.   

Barry Bannister, chief equity strategist at Stifel, is warning more drops could be ahead because of a slowing U.S. economy and sticky inflation. He’s forecasting both will be worse in the second half of this year than what much of Wall Street expects, while saying a measure of how expensive the U.S. stock market is still looks “frothy” when compared with bond yields and other financial conditions.   

The stock market’s “dip is not a blip,” he warned in a report, and called it “too soon to jump back in.”   

He had been predicting a coming “correction” in U.S. stock prices for a while, including an acknowledgement in July that his initial call was early. That was a couple days before the S&P 500 set its latest all-time high and then began sinking.   

While fears are rising about a slowing U.S. economy, it is still growing, and a recession is far from a certainty. The U.S. stock market is also still up a healthy amount for the year so far, and the Federal Reserve says it has ample room to cut interest rates to help the economy if the job market weakens significantly.   

The S&P 500 has romped to dozens of all-time highs this year, in part due to a frenzy around artificial-intelligence technology, and critics have been saying that’s sent stock prices too high in many cases.   

They’ve pointed in particular to Nvidia, Apple and the other handful of Big Tech stocks in the “Magnificent Seven” that were the main reason the S&P 500 set so may records this year. Propelled in part by the mania around AI, they helped overshadow weakness across other areas of the stock market, which were struggling under the weight of high interest rates.   

A set of underwhelming profit reports recently, kicked off by Tesla and Alphabet, added to the pessimism and dragged Big Tech stocks lower. Nvidia dropped nearly 19% from the start of July through Monday on such concerns, but it rose 4.8% Tuesday and was one of the strongest forces pushing upward on the market.   

Apple, though, fell another 0.8% and was the heaviest weight on the S&P 500.   

In the bond market, Treasury yields were ticking higher to claw back some of their sharp drops since April, driven by rising expectations for coming cuts to interest rates by the Federal Reserve.   

The yield on the 10-year Treasury rose to 3.86% from 3.78% late Monday. It had briefly dropped below 3.70% during Monday when fear in the market was spiking and investors were speculating the Federal Reserve could even have to call an emergency meeting to cut interest rates quickly. 
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Bangkok — Japan’s benchmark Nikkei 225 index soared more than 10% on Tuesday, rebounding after a rollercoaster start to the week that sent markets tumbling in Europe and on Wall Street.

European markets were mostly lower, with Germany’s DAX down 0.4% at 17,277.27 and the CAC 40 in Paris 0.7% lower, at 7,098.89.

In London, the FTSE 100 shed 0.4% to 7,974.44.

Those modest declines and gains in Asia suggested a respite from the turmoil of the past two trading sessions, when the Nikkei lost a combined 18.2% and other markets also swooned. U.S. futures showed solid gains, with the contract for the S&P 500 up 0.5% and that for the Dow Jones Industrial Average gaining 0.3%.

Monday’s plunge reminiscent of a crash in 1987 that swept around the world pummeled Wall Street with more steep losses, as fears worsened about a slowing U.S. economy.

The Nikkei gained nearly 11% early Tuesday and bounced throughout the day to close up 3,217.04 points at 34,675.46 as investors snapped up bargains after the 12.4% rout of the day before.

“Calm finally appears to be returning,” Bas van Geffen of Rabobank said in a report. The Nikkei’s 10% gain didn’t make up for Monday’s loss, he said, “but at least it takes some of the ‘panic’ out of the selling.”

The dollar rose to 144.87 yen from 144.17 yen. The yen’s rebound against the dollar after the Bank of Japan raised its main interest rate on July 31 was one factor behind the recent market swings, as investors who had borrowed in yen and invested in dollar assets like U.S. stocks sold their holdings to cover the higher costs of those “carry trade” deals.

Elsewhere in Asia, South Korea’s Kospi jumped 3.3% to 2,522.15. It had careened 8.8% lower on Monday.

Hong Kong’s Hang Seng index gave up early gains to close 0.3% lower at 16,647.34. The Shanghai Composite index, largely bypassed by Monday’s drama, rose 0.2% to 2,867.28.

In Australia, the S&P/ASX 200 advanced 0.4% to 7,680.60 as the central bank kept its main interest rate unchanged. Taiwan’s Taiex was up 1.2% after plunging 8.4% the day before and the SET index in Bangkok gained 0.3%.

On Monday, the S&P 500 dropped 3% for its worst day in nearly two years. The Dow declined 2.6% and the Nasdaq composite slid 3.4%.

The global sell-off that began last week and gained momentum after a report Friday showed that American slowed their hiring in July by much more than economists expected. That and other weaker than expected data added to concern the Federal Reserve has pressed the brakes on the U.S. economy by too much for too long through high interest rates in hopes of stifling inflation.

But sentiment was helped by a report Monday by the Institute for Supply Management said growth for U.S. services businesses was a touch stronger than expected, led by the arts, entertainment and recreation sectors, along with accommodations and food services.

The U.S. economy is still growing, so a recession is far from certain. The U.S. stock market is still up a healthy amount for the year, with double-digit percentage gains for the S&P 500, the Dow and the Nasdaq.

Markets have romped to dozens of all-time highs this year, in part due to a frenzy around artificial-intelligence technology and critics have been saying prices looked too expensive.

Other worries also are weighing on the market. The Israel-Hamas war and other global hotspots could cause sharp swings for the price of oil.

Early Tuesday, U.S. benchmark crude oil was up 12 cents at $73.06 per barrel. Brent crude, the international standard, picked up 3 cents to $76.33 per barrel.

The euro fell to $1.0910 from $1.0954.
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Islamabad — Pakistan’s military revealed Monday that millions of liters of Iranian oil are being smuggled into the country each day, but rejected long-standing allegations that it is also playing a role in the illegal trade.

Lt. Gen. Ahmed Sharif Chaudhry, the army spokesperson, told a televised news conference that “consistent efforts” are being made to enhance security along the country’s more than 900-kilometer border with Iran in order to restrict oil smuggling.

“If you look at the numbers, [the fuel smuggling] has come down from 15-16 million liters per day to 5-6 million liters per day, thanks to the combined efforts of the army, Frontier Corps [paramilitary force], law enforcement, and intelligence agencies,” Chaudhry stated.

He did not provide further details, but Chaudhry is the first Pakistani official to publicly share estimates regarding the ongoing large-scale illegal oil trade between the two countries.

A rare comprehensive investigative report on the long-running illicit trade, conducted by two Pakistani official spy agencies and leaked to local media last May, revealed that Iranian traders smuggle more than $1 billion worth of petrol and diesel into Pakistan annually.

The probe found that the illegal fuel supply accounted for about 14% of Pakistan’s yearly consumption, resulting in hundreds of millions of dollars in losses “to the exchequer.”

The report identified more than 200 oil smugglers as well as government and security officials benefiting from the lucrative illegal oil trade. 

It said that up to 2,000 vehicles, each with a capacity of 3,200-3,400 liters, are used daily to transport diesel across the border. Additionally, some 1,300 boats, each with a capacity of “1,600 to 2,000” liters, are also used to smuggle Iranian fuel.

Petroleum dealers attributed the surge in cross-border smuggling to years of U.S.-led Western sanctions on the Iranian oil sector, which compelled Tehran to seek alternative markets for its exports.

Iranian traders reportedly sell fuel in their local currency to buyers in Pakistan’s southwestern border province of Baluchistan and collect dollars from the Pakistani market. The illegal fuel is then transported elsewhere in the South Asian nation.

Islamabad mainly sources its fuel from the Middle East. The government has dramatically raised fuel prices in recent months as part of efforts to secure a new International Monetary Fund loan of about $7 billion. 

Due to depleting foreign exchange reserves, analysts believe cash-strapped Pakistan could be allowing Iranian oil to be smuggled into the country to fulfill domestic needs.

Chaudhry, while speaking Monday, cautioned that sealing the border with Iran to stop the long-standing oil smuggling without providing alternative livelihood opportunities could have disastrous consequences for poverty-stricken and underdeveloped Pakistani border towns.

The intelligence report published in May estimated that up to 2.4 million individuals in insurgency-hit Balochistan relied on the smuggling of Iranian oil for their sustenance, and they would be left without means of survival if the illicit trade were to cease.

Pakistani government officials did not immediately respond to VOA inquiries seeking a response to Monday’s revelations in time for publication.

Afghan border

Meanwhile, the military spokesperson criticized neighboring Afghanistan’s Taliban rulers for not effectively guarding their side of the nearly 2,600-kilometer border between the two countries.

Chaudhry stated that the Pakistani military has established more than 1,450 border posts while the Afghan side has only more than 200. He argued that the Taliban’s limited number of posts could result from apathy or lack of resources to staff the border crossings.

“Interestingly, it’s not just the lesser number of posts or the border guards,” the army spokesperson said. “We have also noticed that whenever illegal movement or smuggling attempts occur, or people are assisted in crossing the border, gunfire is typically initiated from the Afghan side, or other tactics are used to facilitate such activities.”

Pakistan maintains that anti-state militants have moved their sanctuaries to Afghanistan since the Taliban regained control of the country three years ago and intensified cross-border attacks, killing hundreds of Pakistani security forces and civilians.

There was no immediate reaction from Taliban authorities to Pakistani allegations, but they have previously rejected them as baseless, saying terrorist groups do not operate on Afghan soil and that nobody is allowed to threaten neighboring countries. 
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AMSTERDAM — Semiconductor industry group SEMI Europe called on the European Union on Monday to place as few restrictions as possible on outbound investment in foreign computer chip technology by companies based in the bloc. 

Proposals to screen outbound investment — European capital being invested in foreign semiconductor, AI and biotechnology companies — are being considered, though no EU decision is expected before 2025. 

The U.S. has issued draft rules for banning some such investments in China that could threaten U.S. national security, part of a broader push to prevent U.S. know-how from helping the Chinese to develop sophisticated technology and dominate global markets. 

“European semiconductor companies must be as free as possible in their investment decisions or otherwise risk losing their agility and relevance,” SEMI Europe said in a paper outlining its recommendations. 

It said policies under consideration by the EU appear to be overly broad and if adopted could force companies to disclose sensitive business information, adding that restrictions on cross-border research cooperation would be misplaced. 

“We encourage the European Commission to further address these aspects and to not infringe on the ability of European multinational companies to carry out the necessary investments to sustain their operations,” it said. 

SEMI Europe represents about 300 Europe-based semiconductor firms and institutions, including companies such as ASMLASML.AS, ASMASMI.AS, InfineonIFXGn.DE, STMicroelectronicsSTMPA.PA, NXPNXPI.O, and research centers such as imec, CEA-Leti and Fraunhofer. 

Alongside the proposals for outbound investment screening, the EU has also been moving towards a law that screens inbound investments of foreign capital that might pose a security risk, such as purchases of European ports, nuclear plants and sensitive technologies. 

 
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New York — U.S. stocks are tumbling Friday on worries about whether the U.S. economy can hold up amid the countdown for a cut to interest rates by the Federal Reserve, as a sell-off for stocks whips all the way around the world back to Wall Street.

The S&P 500 was sinking by 2.5% in late morning trading, potentially on pace for its worst day since 2022, and on track for its first back-to-back loss of more than 1% since April. The Dow Jones Industrial Average was down 806 points, or 2%, as of 10:45 a.m. Eastern time, and the Nasdaq composite was 3.1% lower.

A report showing hiring by U.S. employers slowed last month by much more than economists expected sent fear through markets, with both stocks and bond yields dropping sharply. It followed a batch of weaker-than-expected reports on the economy from a day earlier, including a worsening for U.S. manufacturing activity, which has been one of the areas hurt most by high rates.

It was just a couple days ago that U.S. stock indexes jumped to their best day in months after Fed Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for cuts to rates to begin in September.

Now, worries are rising the Fed kept its main interest rate at a two-decade high for too long in its zeal to stifle inflation. A rate cut would make it easier for U.S. households and companies to borrow money and support the economy, but it could take months to a year for the full effects to filter through.

“The Fed is seizing defeat from the jaws of victory,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Economic momentum has slowed so much that a rate cut in September will be too little and too late. They’ll have to do something bigger than” the traditional cut of a quarter of a percentage point ”to avert a recession.”

Traders are now betting on a roughly two-in-three chance that the Fed will cut its main interest rate by half a percentage point in September, according to data from CME Group. That’s even though Powell said on Wednesday that such a deep reduction is “not something we’re thinking about right now.”

U.S. stocks had already appeared to be headed for losses before the disappointing jobs report thudded onto Wall Street.

Several big technology companies turned in underwhelming profit reports, which continued a mostly dispiriting run that began last week with results from Tesla and Alphabet.

Amazon fell 11.9% after reporting weaker revenue for the latest quarter than expected. The retail giant also gave a forecast for operating profit for the summer that fell short of analysts’ expectations.

Intel dropped even more, 27.9%, after the chip company’s profit for the latest quarter fell well short of forecasts. It also suspended its dividend payment and said it expects to lose money in the third quarter, when analysts were expecting a profit.

Apple was holding steadier, up 2.4%, after reporting better profit and revenue than expected.

Apple and a handful of other Big Tech stocks known as the “ Magnificent Seven ” have been the main reasons the S&P 500 has set dozens of records this year, in part on a frenzy around artificial-intelligence technology. But their momentum turned last month on worries investors had taken their prices too high and expectations for their profit gains are growing too difficult to meet.

Friday’s losses for tech stocks dragged the Nasdaq composite down by more than 10% from its record set in the middle of last month.

Helpfully for Wall Street, other areas of the stock market beaten down by high interest rates had been rebounding at the same time tech stocks were regressing, particularly smaller companies. But they tumbled too Friday on worries that a fragile economy could undercut their profits.

The Russell 2000 index of smaller stocks dropped 4.2%, more than the rest of the market.

In the bond market, Treasury yields fell sharply as traders raised their expectations for how deeply the Federal Reserve would have to cut interest rates. The yield on the 10-year Treasury fell to 3.82% from 3.98% late Thursday and from 4.70% in April.

Amid all the fear, some voices on Wall Street were still advising caution.

“While worries of a policy mistake are rising, one negative miss shouldn’t lead to overreaction,” according to Lara Castleton, U.S. head of portfolio construction and strategy at Janus Henderson Investors.

She points out the U.S. economy is still growing, and inflation is still coming down. The S&P 500, meanwhile, isn’t far off its record set two weeks ago. “Equities selling off should be seen as a normal reaction, especially considering the high valuations in many pockets of the market. It’s a good reminder for investors to focus on the earnings of companies going forward.”

In stock markets abroad, Japan’s Nikkei 225 dropped 5.8%. It’s been struggling since the Bank of Japan raised its benchmark interest rate on Wednesday. The hike pushed the value of the Japanese yen higher against the U.S. dollar, potentially hurting profits for exporters and deflating a boom in tourism.

Chinese stocks extended losses this week as investors registered disappointment with the government’s latest efforts to spur growth through various piecemeal measures, instead of hoped-for infusions of broader stimulus, and stock indexes fell across much of Europe.

Commodity prices have also had a rough ridet this week. Oil prices surged after the killings of leaders of Hamas and Hezbollah that fueled fears that a widening conflict in the Middle East could disrupt the flow of crude.

But prices fell back Thursday and Friday on worries that a weakening economy will burn less fuel. A barrel of benchmark U.S. crude tumbled 3.4% Friday to $73.73 and brought its loss for the week to 4.5%.

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BANGKOK — China’s powerful Politburo has endorsed the ruling Communist Party’s long-term strategy for growing the economy by encouraging more consumer spending and weeding out unproductive companies to promote “survival of the fittest.”

A statement issued after the meeting of the 24 highest leaders of the party warned that coming months would be tough, perhaps alluding to mounting global uncertainties ahead of the U.S. presidential election in November.

“There are still many risks and hidden dangers in key areas,” it said, adding that the tasks for reform and stability in the second half of the year were “very heavy.”

The Politburo promised unspecified measures to restore confidence in financial markets and boost government spending, echoing priorities laid out by a wider meeting of senior party members earlier in July. After that gathering, China’s central bank reduced several key interest rates and the government doubled subsidies for electric vehicles bought to replace older cars as part of the effort to spur growth.

The Politburo’s calls to look after low- and middle-income groups reflect pledges to build a stronger social safety net to enable families to spend more instead of socking money away to provide for health care, education and elder care. But it provided no specifics on how it will do that.

“This sounds promising on paper. But the lack of any specifics means it is unclear what it will entail in practice,” Julian Evans-Pritchard of Capital Economics said in a commentary.

The party’s plans for how to improve China’s fiscal policies at a time of burgeoning local government debt were “short on new ideas,” he said.

Instead, the emphasis is on moving faster to implement policies such as the government’s campaign to convince families to trade in old cars and appliances and redecorate their homes that includes tax incentives and subsidies for purchases that align with improved efficiency and reducing use of polluting fossil fuels.

China’s economy grew at a 4.7% annual rate in the last quarter after expanding 5.3% in the first three months of the year. Some economists say the official data overstate the rate of growth, masking long-term weaknesses that require broad reforms to rebalance the economy away from a heavy reliance on construction and export manufacturing.

Under leader Xi Jinping, China has prioritized developing industries using advanced technologies such as electric vehicles and renewable energy, a strategy that has made the country a leader in some areas but also led to oversupplies that are now squeezing some manufacturers, such as makers of solar panels.

The Politburo’s statement vowed support for “gazelle enterprises and unicorn enterprises,” referring to new, fast-growing companies and high-tech start-ups. It warned against “vicious competition” but also said China should improve mechanisms to ensure “survival of the fittest” and eliminate “backward and inefficient production capacity.”

The party has promised to help resolve a crisis in the property sector, in part by encouraging purchases of apartments to provide affordable housing and to adapt monetary policy to help spur spending and investment.

But the document issued Tuesday also highlighted longstanding concerns. The countryside and farmers need more support to “ensure that the rural population does not return to poverty on a large scale,” it said.

It also condemned what analysts have said is widespread resistance to fresh initiatives, saying that “formalism and bureaucracy are stubborn diseases and must be corrected” and warning that economic disputes should not be resolved by “administrative and criminal means.”

Chinese markets have not shown much enthusiasm for the policies outlined in recent weeks.

On Tuesday, the Hong Kong benchmark Hang Seng index sank 1.4%, while the Shanghai Composite index lost 0.4%. The Hang Seng has fallen 4.3% in the past three months while Shanghai’s index is down 7.3%.
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