Michigan’s lifeblood manufacturing industry has historically been sensitive to higher interest rates. Higher rates can make vehicle payments and financing for other big-ticket items more expensive for consumers. University of Michigan economists projected hiring in Michigan to slow next year and the unemployment rate to edge higher, in a forecast released last month.

The Biden administration sees the state and the industrial Midwest as major beneficiaries of laws Democrats have championed. Those include the recently passed law designed to bolster the electric-vehicle industry, lower prescription-drug costs and raise taxes on large corporations. Flanked by electric pickup trucks that are in production, with Ford executives, plant workers and state and local officials looking on, Ms. Yellen also highlighted laws passed in 2021 and 2022 that provide federal funding for infrastructure projects and domestic semiconductor production.

Such policies embrace “the notion that some of the best opportunities for growth occur when we invest in people and places that have been forgotten and overlooked,” Ms. Yellen said. She noted that a disproportionate share of economic opportunity has been concentrated in major coastal cities.

Republicans, meanwhile, have argued that Democrats’ economic-policy moves early in the Biden administration fueled elevated inflation and that recent actions, including President

Biden’s

plan to forgive some student-loan debt, would add to inflationary pressures or do little to address them.

“The Biden administration’s ongoing victory lap touting its economic agenda is a slap in the face to struggling Americans,” said. Rep.

Patrick McHenry

(R., N.C.), the top Republican on the House Financial Services Committee. “Record inflation and energy prices are still clobbering families. Instead of working to address our most pressing economic issues, Democrats are doubling down on their failed tax-and-spend schemes.”

Ms. Yellen on Thursday defended the Biden administration’s early policy moves, saying the roughly $2 trillion coronavirus-aid package that Democrats passed last year had led to rapid jobs growth and allowed the economy to weather uncertainties it faced at the time.

Differing views on the direction of the economy is a point of contention between the two parties ahead of the midterm elections that will determine which party controls the House and Senate.

The U.S. economy has shown signs of slowing, with two consecutive quarters of economic contraction this year, amid inflation that has hovered near 40-year highs. Low unemployment and a healthy pace of job creation have been consistent bright spots for the economy. The number of job openings far exceeds available workers.

Ms. Yellen did say she was concerned about the global economic outlook, in response to questioning from reporters. She cited disruptions to food and energy markets caused by Russia’s invasion of Ukraine. She said the Biden administration is taking steps to aid Europe, which has been hard-hit by higher energy prices, and other allies by working to implement a price cap on Russian oil, aimed at limiting revenue the country receives from energy sales while keeping supplies available.

Ms. Yellen said a decline in gas prices from record highs earlier this summer should be an impetus for a broader deceleration in inflation. Still, she said global uncertainties remain that cloud the outlook.

“I don’t want to make a quantitative guess about where inflation is going to go over the next year,” she said.

The unemployment rate in Michigan was a historically low 4.2% in July, but the transition to making electric vehicles could be bumpy in a state that has long produced gasoline-powered cars. Last month, Ford said it is laying off roughly 3,000 white-collar and contract employees, in an effort to slash costs as it makes a longer-range transition to electric vehicles.

Michigan was hit by supply-chain disruptions that strained production at manufacturing plants.

President Biden won Michigan in 2020’s election after

Donald Trump

took the state in 2016. This fall, the state holds a closely watched governor’s race.

The visit to Michigan is the first stop in a tour Ms. Yellen is embarking on this month to explain to Americans what the administration believes is the significance of its economic agenda. Ms. Yellen toured a plant where Ford is producing its F-150 Lightning electric pickup trucks. There, she spoke with Ford executives and plant workers, and pushed a button to advance a truck in production to the next station in the assembly process.

Write to Amara Omeokwe at amara.omeokwe@wsj.com