WASHINGTON - U.S. Treasury Secretary Janet Yellen told senators on Tuesday that the United States should return to full employment next year despite headwinds from the coronavirus Delta variant and again urged Congress to quickly lift the federal debt limit.

In prepared remarks to a Senate Banking Committee hearing, Yellen said the recovery from a COVID-19 pandemic-induced recession remains "fragile but rapid."

"While our economy continues to expand and recapture a substantial share of the jobs lost during 2020, significant challenges from the Delta variant continue to suppress the speed of the recovery and present substantial barriers to a vibrant economy," Yellen said.

"Still, I remain optimistic about the medium-term trajectory of our economy, and I expect we will return to full employment next year."

Yellen, who is testifying about COVID-19 relief aid efforts, said that the Emergency Rental Assistance program was scaling up quickly to prevent evictions, with 1.4 million payments made to renters and landlords.

But she added that "too much of the money remains bottlenecked at the state and local levels" and that these jurisdictions must work to remove barriers to assistance.

Yellen also repeated that a debt default triggered by Congress' failure to lift a the federal debt limit would impair the full faith and credit of the United States "and our country would likely face a financial crisis and economic recession.

She said that she still hoped that the debt limit could be raised on a bipartisan basis. U.S. Senate Republicans blocked a debt limit and government funding measure late on Monday.

(Reporting by David Lawder, Editing by Nick Zieminski) ((David.Lawder@tr.com; +1 202 354 5854; Reuters Messaging: david.lawder.thomsonreuters.com@reuters.net))