By David Lawder
(Reuters) -U.S. Treasury Secretary Janet Yellen said on Friday that the U.S. economy is on a path to maintain a strong labor market while reducing inflation, even if the economy cools a bit more.
Yellen said in prepared remarks at a residential solar power company in New Orleans that strong household and business balance sheets will serve as a source of U.S. economic strength along with a continuing surge in U.S. factory construction.
Yellen, who is making a campaign-style visit to New Orleans to tout President Joe Biden’s economic agenda, said that the U.S. economy has defied persistent predictions of recession this year, proving more resilient than expected.
“I continue to believe that there is a path to reducing inflation while maintaining a healthy labor market. Without downplaying the significant risks ahead, the evidence that we’ve seen so far suggests that we are on that path,” Yellen said at a PosiGen Solar facility.
Yellen said business executives have increasingly voiced confidence in the U.S. economy.
“While there are parts of our economy that are slowing down, households are spending at a robust pace and businesses continue to invest,” she said. “Going forward, I expect the current strength of the labor market and robust household and business balance sheets to serve as a source of economic strength, even if our economy does cool a bit more as inflation falls.”
Yellen highlighted the benefits of direct spending and tax subsidies for manufacturing of semiconductors and clean energy products in legislation passed last year.
On Tuesday, the Treasury Department released a new analysis showing that real construction spending on new manufacturing facilities has doubled so far this year compared with the 2005-2022 average, driven largely by infrastructure, semiconductor and clean energy subsidies and tax incentives.
Real spending on computer, electronics and electrical manufacturing facilities nearly quadrupled over the same period, the Treasury said.
In later remarks at the Essence Festival’s Global Black Economic Forum, Yellen highlighted the Biden administration’s work to cut the Black unemployment rate and support Black business owners with $1.4 billion in COVID-related investments in Black-owned banks and community lenders and other credit programs.
Yellen also said a temporary expansion of the Child Tax Credit helped lift over 700,000 Black children out of poverty in 2021 and said over 40% of the recipients of emergency rental assistance were Black.
The Inflation Reduction Act, which provides generous tax subsidies for clean energy technology and electric vehicle battery manufacturing, provides added incentives for companies to invest in low-income communities, which Yellen said will provide more opportunities for people of color.
“Today, we can safely say that our economic recovery from the pandemic has been historically inclusive and broad-based,” she added.