Yellen was testifying before the Senate Banking, Housing and Urban Affairs Committee as the Federal reserve mulls the best time to increase rates that have been near zero for an extended period of time. Yellen said that the recovery "is not yet complete," but that the economy has rebounded from the sharp slowdown seen earlier this year.
"A high degree of monetary policy accommodation remains appropriate," Yellen said in testimony to the committee.
Despite the stronger jobs numbers, Yellen said that slow wage growth and low workforce participation was worrying and continued to signal "significant slack" in the job market. She added that in the past the Fed had been fooled by such signals and that this time she prefers to use a cautious approach to rate hikes.
She did say that the improving job market and better inflation numbers could accelerate the need for rate hikes.
"Too many Americans remain unemployed," Yellen said. "Inflation remains below our longer-run objective."
"We need to be careful to make sure the economy is on a solid trajectory before we consider raising interest rates," she added.
She said that the 2.9 percent contraction seen in the economy during the first quarter of this year was due to "transitory factors" and that recent numbers suggest the economy has rebounded in the second quarter.
She also noted that the housing market had shown little recent progress.
"While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year's increase in mortgage rates, and readings this year have, overall, continued to be disappointing," Yellen said.