The U.S. economy expanded at a three percent annual pace in July, August and September, about the same pace as the prior quarter.

Friday’s Commerce Department data surprised economists, who thought damage from two hurricanes would cut growth to a lower level. The data show the world’s largest economy is now about 2.3 percent larger than it was at this time last year.

Stuart Hoffman of PNC bank says the “solid” growth data is likely to help corporate profits and reinforce the U.S. central bank’s determination to raise interest rates in December. Josh Bivens of the Economic Policy Institute says the figures “overstate” growth, and he notes inflation is still below the Fed’s two percent target, making an interest rate hike unnecessary at this time.

Officials raise rates to fend off high inflation by cooling economic activity. Rates were slashed during the recession to bolster growth and employment. 

Federal Reserve leaders gather Tuesday and Wednesday in Washington to debate interest rate policy. Most economists predict they will not raise rates until their next meeting in mid-December.

Next Friday, government experts will publish unemployment data for October. September’s rate was a low 4.2 percent.
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President Trump says he is “very close” to picking a person for the most important economic post in the country: the head of the US Federal Reserve. Current Chair Janet Yellen, whose term expires early next year, is one of at least five candidates under consideration. Regardless of the president’s choice, most analysts who spoke with VOA don’t expect big changes in US monetary policy. But as Mil Arcega reports, others say, sooner or later the next Fed Chief could face a slowing economy.
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The United States has announced changes to its nonimmigrant work visa policies that are expected to make renewals more difficult.

In the past, U.S. Citizenship and Immigration Services would generally approve the renewals unless the visa holder had committed a crime. Now, renewals will face the same scrutiny as the original applications.

“USCIS officers are at the front lines of the administration’s efforts to enhance the integrity of the immigration system,” USCIS Director L. Francis Cissna said, according to the announcement posted on USCIS’ website this week. “This updated guidance provides clear direction to help advance policies that protect the interests of U.S. workers.”

The new regulations could affect more than 100,000 people holding at least eight different types of work visas who fill out the I-129 form for renewals.

Sam Adair, a partner at the Graham Adair business immigration law firm in California and Texas, said that for the most part, he expected visa holders would most likely face lengthier adjudication periods in their renewal processes, as opposed to increased numbers of denials.

“I don’t think it’s going to be a big shift for us,” Adair told VOA. “But I think what we’ll see is just an increase in the number of requests for evidence, an increase in the delays on the adjudication of these petitions, and really it’s going to just result in more costs for the employers who are filing these petitions.”

‘High-skilled’ workers

Of all visa holders affected by this policy, those in the United States on an H-1B, a visa for “high-skilled” workers, are the biggest group. Of 109,537 people who had to submit I-129 forms in fiscal 2017, 95,485 were H-1B holders, according to data sent to VOA by USCIS.

H-1B visas have been threatened in the past, most recently by a bill proposed this year that would have raised the minimum salary requirement for workers brought in on the visa. While advocates of the program argued that it would keep workers from being exploited, many H-1B holders feared that businesses would be less willing to hire them or keep them on board.

But some Americans support the new regulations, saying that nonimmigrant work visas hurt American workers.

“It’s prudent to make sure that the people that receive those visas are in complete compliance with all of the requirements,” Joe Guzzardi, national media director of Californians for Population Stabilization, told VOA.

“It just isn’t possible to think that there aren’t American workers that couldn’t fill these jobs,” he said, noting that while the regulations might hurt businesses, they would help Americans looking for work.
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President Donald Trump says he is “very close” to picking a person for the most important economic post in the United States, the head of the Federal Reserve. Current Chair Janet Yellen’s term expires early next year and she is one of at least five candidates for the job.

Besides Yellen, the candidates include Fed board member Jerome Powell, former Fed governor Kevin Warsh, Stanford University economist John Taylor and Trump economic adviser Gary Cohn.

Moody’s Analytics economist Ryan Sweet says a new Fed chief is likely to continue current policy at least for a while because “rocking the boat” could rattle financial markets.

The Fed’s job is to manage the world’s largest economy in ways that maximize employment and maintain stable prices. During recessions, the bank cuts interest rates in a bid to boost economic growth and create more jobs.To cope with the most recent recession, the U.S. central bank slashed interest rates nearly to zero.

The jobless rate fell from 10 percent to the current 4.2 percent, and the economy stopped shrinking and began growing slowly.

Critics of the record-low interest rates said keeping rates too low for too long could spark strong inflation and damage the economy. However, the inflation rate has been below the two percent level that many experts say is best for the economy.

As a member of the Fed’s board and later as Chair, Yellen supported low interest rates and a slow, cautious return to “normal” rates. Experts also say she improved communication between the Fed and financial markets, which reduced uncertainty and reassured investors.

Trump criticized Yellen during the campaign, but then as president, praised her work. Analysts Tom Buerkle of “Reuters Breaking Views” gives the Fed credit for taking effective action during a crisis when Congress was reluctant to act.

Another candidate is former investment banker Gary Cohn, who now heads the National Economic Council at the White House. He has reportedly been working on efforts to reform taxes and boost spending on U.S. infrastructure.

Fed Board member Jerome Powell is also a candidate. He is a Republican with a background in private equity who served in a top Treasury Department post. Powell supported Yellen’s approach of slashing interest rates during the crisis, and returning them to historic levels as the economy recovers.

When rates were cut to nearly zero, Fed officials took the further step of buying huge quantities of bonds in an effort to push down long-term interest rates to give additional economic stimulus. The complex procedure is called “quantitative easing.”

“Ryan Sweet of Moody’s Analytics says when the next recession appears, Powell will be more willing to use tools like quantitative easing than more conservative candidates like Kevin Warsh and John Taylor.

Warsh is a former member of the Fed’s board, a lawyer, and a former executive of a major financial firm with experience at the president’s National Economic Council.

John Taylor of Stanford University and the Hoover Institution is an eminent economist who has served on advisory councils for presidents and congress and written books on economic topics. Taylor came up with an equation, called the “Taylor Rule,” that considers inflation as well as slack in the economy as a way to set interest rates. Some conservatives say the Taylor Rule would improve policymaking.

Critics say the economy is too complex to be managed by a computer, and the Taylor Rule would make the Fed less independent and effective.

Tara Sinclair of Indeed.com says independence is a “key part” of having an effective monetary policy. She says the interest rate-setting process and other decisions need to be separate from Congress and the administration so interest rates and other policies are based on long-run economic needs.

The president is expected to announce his choice in early November.
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More than four decades after selling 1,000 Volvos to North Korea, Sweden is still trying to get paid for the cars.

The vehicles were part of a $131 million trade package delivered to North Korea in 1974, during a period of openness. But Pyongyang never paid anything on the deal, leaving a debt that has now accumulated with interest to $328 million, according to the Swedish Foreign Ministry.

North Korea owes millions elsewhere in Europe from purchases made during the early 1970s, when Pyongyang was expanding economic relations with the West.

“Volvo Car Corporation sold approximately 1,000 of our 144 sedan(s) to North Korea in 1974,” said Per-Åke Fröberg of Volvo Heritage in the company’s press office in Sweden, who added that he did not know what else was included in the deal. The Swedish government was also unable to say what else was included.

Fröberg said the sale of the Volvos was insured through the Swedish Export Credit Agency, or EKN. “When North Korea failed to pay for the cars, EKN stepped in, meaning that Volvo Cars did not suffer financially,” he said. “The deal was closed from our point of view.”

But not for EKN, which twice a year reminds North Korea of its outstanding balance.

“For the most part, we get no response,” Carina Kemp, the EKN press manager, told VOA’s Korean service. However, “EKN’s position is that claims will be recovered.”

Many of the Volvos remain in service, as shown by an October 2016 tweet from the Swedish Embassy in Pyongyang describing “one of the Volvo’s from yr 1974 still unpaid for by DPRK.”

Sweden and North Korea have a long-standing relationship. It was the first Western European nation to establish diplomatic relations with Pyongyang; two years later, in 1975, it was the first to set up an embassy in Pyongyang.

Expanding relations

At the time, North Korea was expanding economic relations with the West. “In 1972-1973, before the global oil crisis, the prices of gold, silver, lead, zinc and other export items of North Korea were rising and Pyongyang must have been confident of its payment capabilities,” said Yang Moon-soo, professor of North Korean economy at the University of North Korea Studies, in the March 2012 issue of the KDI Review of the North Korea Economy, which is published by the Korea Development Institute, a think tank run by the South Korean government.

North Korea, after noting South Korea’s economic development through introduction of Western technologies, decided “to spur development with large-scale buildup of manufacturing plants with Western equipment and financing,” he said.

Of the 16 countries that owe a total of $729 billion to Sweden, North Korea’s share accounts for 45 percent, according to the EKN Annual Report 2016. Cuba, which is the next largest debtor, owes $225 billion as of December 2016 and began making payments that year, the EKN report shows.

Experts on sovereign debt told VOA there aren’t many ways for nations to recover what they are owed by cash-strapped North Korea.

“No payment has been made since 1989,” Katarina Byrenius Roslund, deputy director of the Swedish Foreign Ministry’s press office, told VOA in an email.

“This is the largest claim that Sweden has on a single country,” Roslund wrote. “Responsibility for the claim now lies with the Swedish Export Credits Guarantee Board, which sends a reminder to North Korea every six months.”

Roslund said the Volvos “are no longer a common sight on Pyongyang’s streets, but the odd Volvo 144 is still rolling down the country roads, often as a taxi.”

Paths to spare parts

Volvo’s Fröberg said he did not know whether the original deal included spare parts for the cars. But because the model purchased in bulk by North Korea, the 144, “was sold all over the world, they might have had their ways to get hold of parts through various channels.”

North Korea owes money elsewhere in Europe. The Swiss government reports it has claims for $241 million as of December 2016. North Korea owes Finland and private Finnish businesses more than $35 million, according to a YLE Uutiset report. Pyongyang “ordered paper machines and other assorted equipment” in the 1970s, according to YLE.

Isabel Herkommer, media spokeswoman at Switzerland’s State Secretariat for Economic Affairs (SECO), told VOA via email that “Swiss Export Risk Insurance (SERV) has an agreement with North Korea, which exempts the country from payment at the moment.”

According to the SERV Annual Report 2016, the agency signed a new restructuring agreement with North Korea in October 2011. Herkommer wrote that “there has not been a debt settlement with North Korea,” and when asked whether the Swiss government considered waiving all or part of the debt owed by North Korea as Russia recently did, she said, “No, this has not been considered.”

Outi Homanen of Finnvera, Finland’s export credit agency, said “that although the debts were not paid [on] original due dates, there are no defaulted receivables at the moment.”

However, experts on sovereign debt and the international monetary system say that there aren’t many ways for countries to recover their claims from North Korea. In 2014, Russia forgave 90 percent of the nearly $11 billion in debt that it and the Soviet Union before it was owed by North Korea.

“International debt is typically thought of as having two enforcing mechanisms. The first is that if a country wants to be able to borrow more, it has to be repaying or have repaid its previous debts,” said Dane Rowlands, a professor of international affairs at Carleton University’s Norman Paterson School of International Affairs in Ottawa, Ontario. “Since North Korea seems happy not to engage officially with the international community and capital market, cutting them off is not a useful enforcement tool.”

Asset seizure

He added that seizing exposed assets is another option for lenders but one that would not be effective against North Korea.

Hamid Zangeneh is an economics professor at Widener University in Chester, Pennsylvania. An expert in the debt of economically developing nations, he said that in North Korea’s case, “it really doesn’t matter because it is not part of the international monetary system.”

Rowlands speculated that Switzerland and North Korea might have made a deal when they signed the debt restructuring agreement in 2011.

“Given the relatively few channels of international finances that North Korea has access to, I could see them doing a deal with Switzerland saying we [North Korea] will pay back a portion of the debt. … What that would end up doing is Switzerland forgives the rest of the debt and they don’t have claim on seizing North Korean deposits for example,” he said.

According to the SERV 2016 report, the Swiss agency had claims of 179.1 million Swiss Francs ($210 million) with North Korea as of the end of 2016. However, the report says the claims have been reduced to 17.9 million Swiss Francs ($21 million), or about 10 percent of the original claim.

SECO’s Herkommer said, “There has not been any debt cancellation. We cannot make any further comment.”
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