Dec. 7 (Bloomberg) -- President-elect Barack Obama said the economic crisis will worsen before a recovery takes hold, and the government must act swiftly to stimulate job creation.

“Things are going to get worse before they get better,” Obama said in an interview on NBC’s “Meet the Press” program broadcast today.

Obama, who takes office Jan. 20, said his advisers are still working to determine the size of the economic stimulus package needed to pull the country out of the longest recession since 1982. “But it is going to be substantial,” he said, without giving an estimate.

While calling the federal budget deficit he will inherit “enormous,” Obama said economic recovery is more important, “and that means that we can’t worry, short term, about the budget deficit.”

Obama yesterday outlined an economic program focused on spending on public projects that he said would be the biggest such investment in the nation’s infrastructure since the Eisenhower administration.

The economy has shown signs of worsening since the Nov. 4 election. The Labor Department reported Dec. 5 that employers cut 533,000 workers last month, bringing losses this year to 1.91 million. Sales at U.S. retailers probably fell in November for a fifth consecutive month, according to the median estimate of economists in a Bloomberg News survey.

Auto Aid

Obama also said General Motors Corp., Ford Motor Co. and Chrysler LLC must take steps that will make them financially viable, including investing in more fuel-efficient cars, in order to get government aid. He also said compensation for company executives is out of line.

Congress and the Bush administration are working out details of legislation to bail out the big three U.S. auto companies as they grapple with a drop in sales and the recession.

The chief executives of GM and Chrysler testified at hearings this week that they need a combined $14 billion to keep operating through March 31.

“The last thing I want to see is the auto industry disappear,” Obama said. Still, he added that any loans or assistance must be tied to restructuring of the companies.

Foreign Policy

On foreign policy, Obama said he expects his national security team -- including Hillary Clinton, whom he’s designated as secretary of state, and Robert Gates, who will remain defense chief -- to come up with a “comprehensive strategy” for dealing with the wars in Iraq and Afghanistan and the threat of terrorism.

Obama said he still wants to refocus military strategy on Afghanistan from Iraq. The U.S. should proceed with plans to draw down U.S. forces in Iraq as “quickly as we can to maintain stability in Iraq.”

“We have to have more effective military action” in Afghanistan, he said. That includes adding more U.S. troops, greater coordination with the North Atlantic Treaty Organization and more vigorous diplomacy in the region, he said.

On Iran, Obama said the U.S. must “ratchet up tough but direct diplomacy” that will make clear “that their development of nuclear weapons would be unacceptable.”

Obama also announced he will name former Army Chief of Staff Eric Shinseki to head the U.S. Department of Veterans Affairs.

“General Shinseki is exactly the right person who is going to be able to make sure that we honor our troops when they come home,” Obama said during the interview, which was recorded yesterday.

Shortly before the 2003 U.S. invasion of Iraq, Shinseki told Congress it would take several hundred thousand troops to stabilize the country after a war. The assessment was rejected by the Bush administration.

“He was right,” Obama said.

To contact the reporters on this story: Edwin Chen in Washington at Echen32@bloomberg.net.

Last Updated: December 7, 2008 10:50 EST