Obama Says 'Private Sector Doing Fine,' Calls for Aid to States

June 8, 2012— -- President Obama said today that the "private sector is doing fine" as the U.S. economy recovers from recession, but urged Congress to send more federal aid to states and localities to boost government hiring.

The comment triggered an onslaught of attacks from Republicans, who pointed to dismal job growth and an unemployment rate lingering above 8 percent as a sign Obama is out of touch.

Mitt Romney, the presumptive GOP presidential nominee running to unseat Obama, said the comment would "go down in history."

Obama later clarified his remark during an Oval Office photo op, saying "it's absolutely clear the economy is not doing fine" and that while there's "good momentum" in the private sector "there are still too many people out of work."

The president spoke at a rare White House news conference Friday morning to promote his jobs program amid fresh concerns about the durability of the U.S. economic recovery and the threat of financial shocks from Europe's debt crisis.

"We've created 4.3 million new jobs over the last 27 months, over 800,00 just this year alone. The private sector is doing fine," Obama said in the Brady Press Briefing Room.

"Where we're seeing weaknesses in our economy have to do with state and local government, oftentimes cuts initiated by, you know, governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don't have the same kind of flexibility of the federal government in dealing with fewer revenues coming in."

As part of the $447 billion American Jobs Act, first proposed late last year, Obama would allocate federal tax dollars for infrastructure and construction projects and the hiring of teachers and first responders. The White House estimates the proposal could put more than 1 million Americans back to work.

Congress has enacted parts of the plan, including a payroll tax cut extension and a measure to help military veterans find jobs. But the bulk of the bill has languished because of stiff opposition from Republicans for its price tag and proposed tax hikes to cover it.

"If Republicans want to be helpful, if they really want to move forward and put people back to work, what they should be thinking about is how do we help the state and local governments and how do we help the construction industry," Obama said, "because the recipes that they're promoting are basically the kinds of policies that would add weakness to the economy, would result in further layoffs, would not provide relief in the housing market."

The press conference was to be an opportunity for Obama to regain the upper hand in the debate over the economy which shifted against him in the past week following the release of a dismal May jobs report.

The Labor Department reported just 69,000 jobs created in May – continuing 27 months of growth, but well below economists' expectations and a smaller gain than seen in each of several months before. The national unemployment rate also ticked up to 8.2 percent last month.

The GOP was quick to scoff at Obama's comments, accusing him of trying to deflect blame for the inefficacy of his policies and insensitivity toward the millions of Americans out of work.

"Is he really that out of touch? I think he's defining what it means to be detached and out of touch with the American people," said Romney at a campaign event in Council Bluffs, Iowa.

"For the president of the United States to stand up and say the private sector is doing fine is going to go down in history," he said.

Obama today conceded that the recovery has not met anyone's expectations, but blamed partisan gridlock in Congress and economic "headwinds" from Europe as the most significant reasons why it has not progressed more quickly.

"The fact is, job growth in this recovery has been stronger than in the one following the last recession a decade ago, but the hole we have to fill is much deeper and the global aftershocks are much greater," Obama said. "And that's why we've got to keep on pressing with actions that further strengthen the economy."

Obama's press conference, his first since May 21st, comes as his re-election campaign faces a tough start to June, with polls showing a tightening race with Republican rival Mitt Romney and monthly fundraising totals showing Republicans surging ahead.

The Obama campaign is making a renewed push to promote the president's jobs plan in a new battleground state TV ad, casting blame on Republicans in Congress for undermining his efforts to put Americans back to work.

Meanwhile, the European debt crisis continues to loom over the general election race, seen by the president and his advisers as one of the most significant threats to further economic recovery and Obama's re-election.

"The good news is there is a path out of this challenge," Obama said of the financial mess, but added that "getting there is going to take some time."

The issue will take center stage at the G20 summit of global leaders in Cabo San Lucas, Mexico, later this month, when Obama is expected to attend.

ABC News' Mary Bruce contributed to this report.

Be sure to watch "This Week" Sunday morning. Our powerhouse roundtable will discuss the president's comments.