Jobs will be top priority, says Obama

"Jobs must be our number one focus in 2010," he said in his annual State of the Union address as US unemployment remained at a painful 10 percent and the weak economy dominated the debate before coming congressional elections in November.

Obama admitted he had made mistakes and that his first year in office had been a difficult one, but vowed not to give up in his efforts to change the way that Washington works and push through his ambitious legislative agenda.

"I don't quit," he told the U.S. Congress. "Let's seize this moment -- to start anew, to carry the dream forward, and to strengthen our union once more."

Obama pledged to slap tough new regulations on Wall Street. He said he would work to dig the country out a "massive fiscal hole" and was willing to use his presidential veto power to enforce budgetary discipline.

Still smarting from the loss by his Democratic Party of a pivotal U.S. Senate seat in Massachusetts, Obama said he would not back down from efforts to revamp the U.S. healthcare system and forge bipartisan consensus on climate change.

But he put the greatest emphasis on the need to fix the still-struggling U.S. economy and bring down the punishing unemployment rate.

"People are out of work. They are hurting. They need our help. And I want a jobs bill on my desk without delay," he said.

BUDGET CHALLENGES

Obama proposed a three-year freeze on some domestic spending programs to take aim at soaring budget deficits.

He called for the creation of a bipartisan commission to tackle long-term budget challenges, such as the Social Security retirement program and Medicare health program for older Americans.

Obama took office promising to bring wholesale change to Washington, including the push for healthcare reform and a drive to set caps on carbon emissions to fight climate change.

But the healthcare reform legislation faces possible failure now that Democrats no longer hold a "supermajority" of 60 Senate votes to overcome Republican procedural hurdles.

The climate legislation has stalled and even some of its supporters believe it may be sidelined this year.

He insisted he was not giving up on health care reform.

"By the time I'm finished speaking tonight, more Americans will have lost their health insurance. Millions will lose it this year," Obama said. "I will not walk away from these Americans. And neither should the people in this chamber."

He criticized "bad behavior" and recklessness on Wall Street and demanded Congress pass robust legislation on financial regulation.

Obama promised to push back against financial industry lobbyists who are seeking to water down or kill the proposed legislation.

"We cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back," Obama said.

Many of his Democratic allies fear they will lose their seats in November's election, but Obama highlighted economic improvements and tried to deflect criticism that the healthcare push shifted his focus.

The economy was shedding hundreds of thousands of jobs each month when Obama took office but it has begun to slowly grow again.