"There's no question that it is difficult out there right now, but we also heard some exciting ideas and proposals for how we can spur hiring," he told business and labor leaders summoned to a White House job creation brainstorming forum.

Obama hosted the event, which critics dismissed as a publicity stunt, after U.S. unemployment hit a 26-year high of 10.2 percent in October, chipping away at his popularity and potentially shaping his political future.

"Despite the progress we've made, many businesses are still skittish about hiring," he said, acknowledging that although growth had resumed, the labor market was lagging behind.

November's unemployment report is due on Friday and a Reuters poll of analysts expect the rate to show no change.

The numbers will provide a sobering backdrop for Obama as he takes his message to Allentown, Pennsylvania, capping a crucial week for the president who also announced a major escalation in the Afghan war.

Allentown, which Obama said was the kind of place "where the rubber hits the road" in the struggles of a weak economy, is the first stop on a "White House to Main Street" tour the president will make to try to reassure Americans.

He will also deliver a speech about the economy on Tuesday at the Brookings Institution think tank in Washington, as his administration weighs its options to lift employment.

Economic anxiety as the country struggles out of the worst recession in 70 years could hurt his Democratic Party in next November congressional elections, and dim Obama's own prospects for a second term in office.

Recent opinion polls show his approval ratings have slipped to about 50 percent, partly because of the economy.

"This White House 'jobs summit' is just another example of President Obama's PR presidency, where he stages photo-ops and events to distract citizens and the media from his administration's failures," said Michael Steele, chairman of the Republican National Committee.

Tax credit

Obama does not want to add to the country's record budget deficit, effectively ruling out significantly more public spending on top of a $787 billion stimulus package he signed in February.

But he sounded open to some proposals that might come with a public price tag attached, saying tax credits to encourage hiring was "an idea I think is worthy of further consideration."

Obama also nodded to the prospect of providing additional federal aid to cash-strapped states, to help them avoid laying off public workers like teachers and firefighters in order to balance their budgets, as most are required to do by law.

"As tough as this financial crisis and recession has been on the federal budget, it has in some cases been worse on state and local budgets," Obama said.

"The last thing we would want to do in the midst of what is a weak recovery is us to essentially take more money out of the system either by raising taxes or by drastically slashing spending," he added.

Some of the proposals will yield "immediate" White House action and, potentially, legislation, he said.

House of Representatives Speaker Nancy Pelosi, a California Democrat, said separately that unspent money from a $700 billion bank bailout might be used for job creation.

But some people argue the money should be used on deficit reduction and it is not clear what the White House will decide.

Obama said he would only consider responsible ideas that took account of the country's limited resources and stressed government could only do so much for the economy.

"We don't have enough public dollars to fill the hole of private dollars that was created as a consequence of the crisis," he said, referring to the financial market meltdown last year that significantly intensified the recession.

The White House is looking at ways to encourage private money now sitting on the sidelines to commit to infrastructure projects, even if those tend to yield long-term results rather than a speedy jolt to jobs, Obama said.

He has made clear any action must not alarm investors by adding significantly to the country's $1.4 trillion deficit, from fear they start shunning dollars and force up long-term borrowing costs, which could undermine an economic recovery.

"We've got about as difficult a economic play as is possible, which is to press the accelerator in terms of job growth, but then know when to apply the brakes in the out-years and do that credibly," he said, referring to long-term U.S. budget projections.