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," Yellen 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 to 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.