Claim:
American President Joe Biden's chief economic adviser, Gene Sperling, stepped down after global stock prices plummeted in early August 2024.
Judgement:
Context:
Sperling left the White House on August 5, 2024, two days after a weak U.S. jobs report sent U.S. and global stocks tumbling on recession fears. But the implication that Sperling left because of the market rout was just speculation. In reality, he left to join Vice President Kamala Harris’s presidential campaign as an economic policy adviser. Sperling served under former U.S. presidents Bill Clinton and Barack Obama, and also worked with Harris in her role as California Attorney General, when she was elected to the U.S. Senate, and during her vice presidency.
White House senior economic adviser Gene Sperling left his post on August 5, 2024, two days after a weak U.S. jobs report sent stocks tumbling, prompting some Internet users to suggest the selloff prompted his departure (archived):
https://x.com/LeadingReport/status/1820491955257934016
The post had been viewed 744,300 times and liked 22,000 times at the time of writing. Comments show that multiple X users believed there was a connection between the two events. “This is a great example of public servants running away from accountability,” wrote one. “We need to know everything that man advised… we can't just let them off the hook.”Like a rat fleeing a sinking ship” said another.
Two conservative news organizations, The New York Post and Fox Business, made a similar suggestion in their headlines, citing the time of Sperling's departure.
It is true that the White House announced Sperling’s departure after the market rout began on August 2, 2024. For that reason, we rated the claim “True.” But the suggestion that one caused the other was mere speculation.
In reality, as The Associated Press and other sources reported, Sperling left to join U.S. Vice President Kamala Harris’ presidential campaign to help shape her economic policy proposals as she ran against former President Donald Trump. Sperling, a White House veteran, served as an economic adviser under former Presidents Bill Clinton and Barack Obama, as well as current President Joe Biden. He also worked with Harris during her tenures as California’s attorney general and as a U.S. senator from California. The two also joined forces during her vice presidency to develop and promote several economic policies designed in part to help the country recover from the effects of the COVID-19 pandemic.
Harris, whose bid for the White House began when Biden announced he would not seek re-election, 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 appointment was tied to developments in Harris’ campaign rather than economic news and market volatility.
What caused the market decline
The global stock market sell-off began on the first Friday of August 2024, as investors and analysts got their hands on the July 2024 U.S. jobs report. The U.S. Bureau of Labor Statistics (BLS) said U.S. employers added 114,000 new jobs in July, below the 175,000 jobs economists polled by Reuters had expected and well below the 200,000 the economy needed to keep pace with population growth. This was also well below the 215,000 monthly average for the previous 12 months. The BLS also revised down its jobless figure for May by 2,000 and its June figure 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 keep its key interest rate at 5.33% and instead postpone a possible cut until September 2024. “The economy is getting closer to the point where it is appropriate to cut our policy rate,” Fed Chairman Jerome Powell said at the press conference accompanying the decision. “That moment is getting closer. That moment could be in September if the data supports that.”
But investors worried that the Fed was taking too long to cut its record-high interest rate. Initially set above 5% to cool inflation, they feared that keeping it there now would contribute to a so-called hard landing, when a booming economy slows abruptly.
Meanwhile, the tech sector’s results disappointed investors, who were also skeptical that artificial intelligence could lead to revenue. On August 5, 2024, the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla) collectively lost $653 billion in market capitalization, following news that Nvidia was facing chip production delays and that Berkshire Hathaway investor Warren Buffett had sold nearly half of his Apple shares in the second quarter of the year. In addition, a judge ruled that search engine Google had illegally abused its dominance over internet searches, sending its parent company’s shares plummeting 4.4%. According to asset manager Vanguard, the seven companies had a disproportionate weight in stock market returns, so any headwinds they faced would hit investors disproportionately.
The fear spread from the U.S. to other parts of the world. As foreign investors focused on the world’s largest economy, contagion sent Japan’s Nikkei 225 index down 12.4 percent, the biggest since 1987. The prospect of a U.S. interest rate cut would make Japanese goods more expensive and its currency, the yen, stronger against the dollar, all of which would hurt exports.
But on August 6, 2024, after San Francisco Fed President Mary Daly said economic indicators were on track and that the central bank was focused on maintaining job growth, the Nikkei reversed most of its losses, rising nearly 10.23%. Some also said that the market plunge in early August 2024 was a bit of an overreaction, as the labor market tends to slow in the summer.
Sources:
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