Biden’s senior economic adviser Gene Sperling resigned after the stock plunge. But that’s not why he gave up

Claim:

President of the USA Joe BidenThe Fed’s senior economic advisor, Gene Sperling, resigned after stocks plunged around the world in early August 2024.

Assessment:

Context:

Sperling left the White House on Aug. 5, 2024, two days after a weak U.S. jobs report sent U.S. and global stocks tumbling on fears of a recession. But the implication that Sperling left due to the market meltdown was just speculation. In reality, he left to join Vice President Kamala Harris’ presidential election campaign as an economic policy advisor. Sperling served under former US 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.

Gene Sperling, the White House’s senior economic adviser, stepped down on August 5, 2024, two days after a weak US jobs report sent stock prices tumbling. This led some netizens to suggest that the liquidation caused him to leave (filed):

https://x.com/LeadingReport/status/1820491955257934016

This post has been viewed 744,300 times and liked 22,000 times as of this writing. The responses show that several X users believed there was a connection between the two events. “There is a great example of employees evading any responsibility,” one wrote. “We need to know everything that guy advised… we can’t let them get away so easily.” “Like a mouse running away from a sinking ship“, another said.

Two conservative media outlets, The New York Post Office It is Fox Businessmade 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 following the start of market turmoil on August 2, 2024. For this reason, we rate the statement as “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 US 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 to former Presidents Bill Clinton and Barack Obama, as well as current President Joe Biden. He also worked with Harris during her terms as California attorney general and as a U.S. senator from California. The two also joined forces during their vice presidency to develop and promote several economic policies designed, in part, to help the country recover from the fallout from the COVID-19 pandemic.

Harris, whose run for the White House began when Biden announced he would not run for re-election, had now secured majority votes (filed) of the Democratic Party delegates, becoming the official Democratic candidate. As she prepared to announce her running mate, Minnesota Governor Tim Walzit was clear that the timing of Sperling’s hiring was tied to Harris campaign developments rather than economic news and market volatility.

What caused the market defeat

The global stock sell-off began on the first Friday of August 2024, as soon as investors and analysts took hold of the July 2024 US Jobs Report. The US Bureau of Labor Statistics (BLS) said US employers added 114,000 new jobs in July, down from 175,000 economists interviewed by Reuters expected, and far below the 200,000 that the economy needed to keep up with population growth. This was also well below the monthly average of 215,000 from the previous 12 months. Additionally, the BLS revised down the jobs number for May by 2,000 and the June number by 27,000. Meanwhile, the unemployment rate rose to 4.3%, the highest since October 2021.

This happened two days after the US Federal Reserve decided to maintain its key interest rate at 5.33%, opting instead to postpone a possible cut until September 2024. “The economy is approaching the point at which it will be appropriate to reduce our key rate” , Fed Chairman Jerome Powell said during the meeting. Press conference that accompanied the decision. “That moment is approaching. That moment could be in September if the data supports that.”

But investors worried that the Fed was taking too long to reduce its historically high rate. Initially set above 5% to help calm inflation, they feared that keeping it at that level would now contribute to a call forced landingwhen an expanding economy slows down abruptly.

Meanwhile, the results obtained in the technology sector disappointed investors, who also expressed skepticism about the possibility of artificial intelligence generating 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 delays in chip production and that investor Warren Buffett, from Berkshire Hathaway, had sold almost half of its Apple shares in the second quarter of the year. Furthermore, a judge ruled that the search engine Google had illegally exploited its dominance in Internet searches, causing its parent company’s shares to fall 4.4%. The seven companies had a disproportionate weight in stock market returns, according to asset management firm Vanguardtherefore, any headwinds they could face would have a disproportionate impact on investors.

This fear has spread from the US to other parts of the world. As overseas investors focused on the largest economy in the worldthe contagion triggered a Japan’s Nikkei 225 drops 12.4% index, the highest since 1987. The prospect of a reduction in US interest rates would make Japanese products more expensive and its currency, the yen, stronger against the dollar, which would harm its exports.

But on August 6, 2024, after San Francisco Fed President Mary Daly said that 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 almost 10.23%. Some also said the market crash in early August 2024 was a bit of an overreaction, as the summer job market tends to slow down.

Sources:

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