During a speech Friday in Jackson Hole, Wyoming, Federal Reserve Chairman Ben Bernanke asserted that the extraordinary measures taken by the central bank during and after the Great Recession added millions of jobs to the economy. But he wouldn’t commit to doing anything more to boost the faltering recovery, even after admitting that high levels of unemployment “will wreak structural damage on our economy that could last for many years“:
Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy. For example, a study using the Board’s FRB/US model of the economy found that, as of 2012, the first two rounds of [large scale asset purchases] may have raised the level of output by almost 3 percent and increased private payroll employment by more than 2 million jobs, relative to what otherwise would have occurred. [...]
As we assess the benefits and costs of alternative policy approaches, though, we must not lose sight of the daunting economic challenges that confront our nation. The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.
Over the past five years, the Federal Reserve has acted to support economic growth and foster job creation, and it is important to achieve further progress, particularly in the labor market. Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
This has been a consistent theme for Bernanke, claiming that unemployment will result in long-term damage to the economy, while refusing to take additional steps to do anything about it. As economist Chad Stone shows in U.S. News & World Report this morning, the Fed has utterly failed to meet its obligation to bring down unemployment, even as inflation, the other half of the Fed’s dual mandate, stays low:
Not all members of the Federal Reserve board are content with the central bank sitting on its hands. As Boston Federal Reserve President Eric Rosengren said, “If there’s a slowdown and you have an independent central bank, the appropriate response is to act. I think that’s exactly what we should do.”