Claim:
U.S. President Joe Biden’s senior economic adviser, Gene Sperling, resigned after stocks tumbled around the world in early August 2024.
Rating:
Context:
Sperling left the White House on Aug. 5, 2024, two days after a weak U.S. jobs report sent stocks in the U.S. and the world tumbling on fears of a recession. But the implication that Sperling left because of the market rout was only speculation. In reality, he left to join the presidential election campaign of Vice President Kamala Harris as an economic policy adviser. Sperling served under former U.S. presidents Bill Clinton and Barack Obama, and also worked with Harris in her position as California attorney general, when she was elected to the U.S. Senate and during her vice presidency.
Gene Sperling, senior economic adviser to the White House, left his post on Aug. 5, 2024, two days after a weak U.S. jobs report sent stock prices plunging. This prompted some internet users to suggest that the sell-off had caused his departure (archived):
https://x.com/LeadingReport/status/1820491955257934016
This post had been viewed 744,300 times and liked 22,000 times as of this writing. Replies show several X users believed there was a connection between the two events. “There’s a great example of officials running from any accountability,” one wrote. “We need to know everything that guy advised on… can’t let them off the hook that easy.” “Like a rat fleeing the sinking ship,” another one said.
Two conservative news outlets, The New York Post and Fox Business, made a similar suggestion in their headlines, pointing to the timing of Sperling’s departure.
It is correct that the White House announced Sperling’s departure after the market rout began on Aug. 2, 2024. For this reason, we rated the claim “True.” But the suggestion that one had caused the other was mere speculation.
In reality, as The Associated Press and other sources reported, Sperling left to join the presidential campaign of U.S. Vice President Kamala Harris to help shape her economic policy proposals as she stood to run against former President Donald Trump. Sperling, a veteran to the White House, served as economic adviser under former presidents Bill Clinton and Barack Obama, as well as the current president, Joe Biden. He also worked with Harris during her tenures as California attorney general and as U.S. senator from California. The two also joined forces during her vice presidency to develop and promote various economic policies designed in part to help the country recover from the consequence of the COVID-19 pandemic.
Harris, whose bid to the White House started when Biden announced he would not run for reelection, had now secured the votes of a majority (archived) of the Democratic Party’s delegates, becoming the official Democratic nominee. As she prepared to announce her running mate, Minnesota Gov. Tim Walz, it was clear that the timing of Sperling’s hiring was tied to the developments in Harris’ campaign rather than economic news and market volatility.
What Caused the Market Rout
The global stock sell-off began on the first Friday of August 2024, as soon as investors and analysts got hold of the July 2024 U.S. jobs report. The U.S. Bureau of Labor Statistics (BLS) said U.S. employers had added 114,000 new jobs in July, fewer than the 175,000 jobs economists polled by Reuters had expected, and far below the 200,000 the economy needed to keep up with population growth. This was also well under the 215,000 monthly average of the previous 12 months. Further, the BLS revised down the job number for May by 2,000 and the number for June by 27,000. Meanwhile, the unemployment rate rose to 4.3%, the highest since October 2021.
This came two days after the U.S. Federal Reserve decided to maintain its key interest rate at 5.33%, choosing instead to delay a possible cut until September 2024. “The economy is moving closer to the point where it will be appropriate to reduce our policy rate,” Fed Chair Jerome Powell said during the news conference that accompanied the decision. “That time is drawing near. That time could be in September if the data support that.”
But investors worried that the Fed was taking too long to cut its historically high rate. Initially set above 5% to help cool inflation, they feared keeping it there would now contribute to a so-called hard landing, when a booming economy slows abruptly.
Meanwhile, earning results from the technology sector disappointed investors, who also expressed skepticism that artificial intelligence could result in revenue. On Aug. 5, 2024, the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla) lost a collective $653 billion in market capitalization, following news that Nvidia was facing chip production delays and that investor Warren Buffett, of Berkshire Hathaway, had sold nearly half his Apple stock in the second quarter of the year. In addition, a judge ruled that the search engine Google had illegally exploited its dominance over internet search, causing its parent company’s stock to fall 4.4%. The seven companies had a disproportionate weight on stock market returns, according to asset management firm Vanguard, so any headwind they might face would impact investors in outsized measure.
This fear spread from the U.S. to other parts of the world. As investors abroad focused on the world’s largest economy, contagion triggered a 12.4% drop in Japan’s Nikkei 225 index, the largest since 1987. The prospect of a cut in U.S. interest rates would make Japanese goods more expensive and its currency, the yen, stronger against the dollar, all of which would hurt its exports.
But on Aug. 6, 2024, after San Francisco Fed President Mary Daly said the economic indicators were on track and that the central bank was very focused on maintaining job growth, the Nikkei reversed most of its losses, rising nearly 10.23%. Some also said that the market plunge of early August 2024 had been a bit of an overreaction, as the job market in summer tends to slow down.
Sources:
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