JACKSON HOLE, Wyo. — Federal Reserve Chairman Ben Bernanke is betting the new US economy is the same as the old one as he lays out arguments for more stimulus to revive it.
He made that diagnosis last week in a rebuttal to those who blame an 8.3 percent unemployment rate on structural shifts in the economy wrought by the financial crisis and who contend joblessness is permanently elevated.
‘‘I see little evidence of substantial structural change in recent years,’’ Bernanke told fellow central bankers and economists at the annual monetary-policy symposium in Jackson Hole, Wyo. ‘‘Following every previous US recession since World War II, the unemployment rate has returned close to its pre-recession level.’’
The message for investors is Bernanke believes what he calls the ‘‘grave concern’’ of 12.8 million Americans out of work can be tackled by a stronger economic recovery, driven by monetary support if necessary. The view that the woes are cyclical was a keen subject of debate in the shadow of the Teton mountains, dividing Bernanke’s fellow central bankers, Wall Street economists, and academics.
Backing Bernanke are Princeton University’s Alan Blinder, Jan Hatzius of Goldman Sachs, and Stanford University’s Edward Lazear. On the other side are Richmond Fed President Jeffrey Lacker, Northwestern University’s Robert Gordon and Mohamed El-Erian, and Bill Gross of Pacific Investment Management Co., who popularized the term ‘‘new normal’’ to describe how growth patterns changed after the worst recession since the Great Depression.
Bernanke and his supporters argue that the sluggish recovery and lingering unemployment are more the result of temporary headwinds, such as tight credit conditions and housing-market weakness, and can be cured with monetary aid. His critics blame structural changes, such as a mismatch between job openings and skills. They say further easing will help little and may even do harm by fanning inflation.
‘‘In an environment where the actual unemployment rate is not coming down, at least not quickly, I think there’s still room for monetary policy to do more,’’ said Goldman Sachs chief economist Hatzius, whose estimate of the so-called natural rate of unemployment that triggers inflation is just below the 6 percent calculation of Fed researchers. ‘‘My view of this is pretty similar to the Fed’s.’’
At Pimco, co-chief investment officers El-Erian and Gross estimate the natural rate is closer to 7 percent.
‘‘Our analysis strikes a different balance between cyclical and structural factors,’’ El- Erian said in an e-mail after Bernanke’s Aug. 31 speech. ‘‘It places greater emphasis on structural headwinds, including segments of the labor, housing, and credit markets.’’
Those headwinds can be affected ‘‘only at the margin’’ by quantitative easing, or large-scale asset purchases, Gross said in a separate e-mail.
‘‘That is why after three-plus years of zero-based interest rates and $2 trillion of the Fed’s balance-sheet expansion, the economy is only growing at 2 percent,’’ he said.
Just what is ailing the US economy formed part of Bernanke’s case for greater Fed intervention that may come as soon as the next meeting of policy makers on Sept. 12-13. Bernanke’s defense of unorthodox policies such as bond-buying signaled he may deploy them again.
‘‘The costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant,’’ Bernanke said.