In his weekly radio and Internet address, the president said the year began with "economists and business leaders saying that we are poised to grow in 2013. And there are real signs of progress: Home prices are starting to climb again. Car sales are at a five-year high. Manufacturing is roaring back. Our businesses created 2.2 million jobs last year. And we just learned that our economy created more jobs over the last few months than economists originally thought."
However, he also noted initial estimates showed a slight contraction in the economy during the fourth quarter of 2012.
"And it reminded us that bad decisions in Washington can get in the way of our economic progress," Obama said.
Economists said the main factor in the fourth-quarter slowdown was a reduction in government spending.
"In the coming weeks, we face some important decisions about how to pay down our debt in a way that grows our economy and creates good jobs -- decisions that will make a real difference in the strength and pace of our recovery," the president said.
"We all agree that it's critical to cut unnecessary spending," he said. "But we can't just cut our way to prosperity. It hasn't worked in the past, and it won't work today. It could slow down our recovery. It could weaken our economy. And it could cost us jobs -- now, and in the future."
Obama called for "a balanced approach -- an approach that says let's cut what we can't afford but let's make the investments we can't afford to live without. Investments in education and infrastructure, research and development -- the things that will help America compete for the best jobs and new industries."
The president said congressional Republicans and Democrats "have worked together to reduce our deficits by $2.5 trillion" and called that "a good start."
"2013 can be a year of solid growth, more jobs, and higher wages," he said. "But that will only happen if we put a stop to self-inflicted wounds in Washington. Everyone in Washington needs to focus not on politics but on what's right for the country; on what's right for you and your families."