US economic growth and wage gains should “serve as a source of resilience” moving forward even if the economy continues to cool, Treasury Secretary Janet Yellen said in remarks released on Friday.

“I still believe that there is a path to continue reducing inflation while maintaining a healthy labour market,” she said, in excerpts of a speech to be delivered in Nevada next week.

“While there are risks, the evidence we’ve seen so far suggests that we are on such a path,” Yellen added.

The world’s biggest economy has defied expectations of a slowdown, picking up pace in the second quarter of the year, supported by business investment and consumer spending. Its labour market has remained robust as well.

The strength comes despite policymakers’ efforts to ease demand and rein in inflation, fueling hope that the central bank’s aggressive campaign of interest rate hikes will lower price increases without triggering a major recession.

Yellen noted in prepared remarks that annual inflation is now nearly six percentage points below its 9.1 per cent peak in June 2022, while the economy continues to expand.

Real average hourly earnings have increased over the past year as well, reversing some wage inequality that has accumulated in recent decades, she added.

“I expect the important gains that we’ve made over the past two and a half years to serve as a source of resilience in the weeks and months to come, even if we see further cooling in our economy,” Yellen said.

In July, consumer inflation inched up for the first time in around a year, keeping pressure on the central bank as officials mull further interest rate hikes.

But the inflation figure remains moderate compared with last year’s numbers.

An earlier data showed that US job growth likely slowed further in July, but retained enough momentum to shield the economy from a recession as hefty interest rate increases from the Federal Reserve cooled demand.

The Labor Department’s closely watched employment recent report is still expected to show a tight labor market, with the unemployment rate steady near multi-decade lows, though wage growth probably moderated. It would follow on the heels of data last month showing consumer spending resilient and the increase in annual inflation slowing sharply in June.

Economists who have long been forecasting a downturn by the fourth quarter of this year are increasingly becoming convinced that the “soft-landing” scenario for the economy envisaged by the Fed is now possible.

“There are signs that labor demand is decelerating, but it’s not like it’s fallen off a cliff,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina. “Certainly, if we get another payrolls number in the 200,000 region, that would add to evidence that the Fed can engineer a soft landing.”

Nonfarm payrolls likely increased by 200,000 jobs last month, after rising 209,000 in June, according to a Reuters survey of 80 economists. That would be the smallest gain since December 2020. Still, employment growth would be double the roughly 100,000 jobs per month needed to keep up with the increase in the working age population.

Companies are hoarding workers after struggling to find labor during the COVID-19 pandemic. Employment in some areas like leisure and hospitality remains below pre-pandemic levels.

Local government education also experienced accelerated retirements, which is boosting the hiring of teachers and support personnel. Economists did not see an impact from a heat wave, which blanketed large swathes of the country in July. “While the extreme heat may have delayed some construction projects and postponed certain leisure activities, history suggests that heat waves have little impact on hiring or work hours,” said Carl Riccadonna, chief economist at BNP Paribas in New York. “Rather, inclement weather disruptions tend to occur during the winter and around the hurricane season.”

Striking Hollywood writers and actors also likely had no impact on employment growth. The Labor Department’s Bureau of Labor Statistics, which compiles the employment report, made no mention of the work stoppage in its July strike report.

July’s payrolls could surprise in either direction. The ADP’s national employment report on Wednesday, pointed to strong private hiring last month. First-time applications for state unemployment benefits were much lower in July relative to June.