Treasury Secretary Henry Paulson on Friday said he was not totally surprised about the decline in jobs in August given housing troubles and less government hiring, but he still sees the U.S. economy as healthy.

I've been saying that the housing decline -- and we've been seeing a housing decline for some time -- is going to extract a penalty on growth and what we're going through in the credit markets is very apt to extract a penalty on growth, but the economy is going to continue to grow in the second half of the year, Paulson told Bloomberg television.

Paulson reiterated previous statements that he believed it would take some time to work through problems in housing and the credit markets, but the backdrop of a strong U.S. economy, aided by good wage growth and strong export demand, would help.

Paulson said he met Federal Reserve Chairman Ben Bernanke for breakfast on Friday -- a meeting scheduled prior to the release of the weakest monthly payrolls data in four years, a decline of 4,000 non-farm jobs. Economists had forecast a gain of 110,000 jobs.

The Treasury secretary declined to discuss Bernanke's reaction to the jobs data but added that he has great confidence in what's going on at the Fed.

Paulson, a Wall Street investment banker for 32 years, said he is now spending a lot of time talking with market participants to try to find ways to help capital markets function properly after the U.S. subprime mortgage crisis sparked a broad pullback in lending.

I'm focused on the asset-backed paper market, some of the more complex products, those parts of the credit markets and the capital markets that aren't functioning as normal, and we're vigilant there. Paulson said.

He said he has seen some modest improvement in these markets but it would take time for the problems to be worked out.

Ben Bernanke