He was speaking to thousands of grassroots members of his ruling party during a major political conference in the capital Pyongyang on Tuesday, the North's official Korean Central News Agency reported.
He called on the Workers' Party's cell secretaries to do their part to remedy the situation.
"Improving the people's living standards... even in the worst-ever situation in which we have to overcome unprecedentedly numerous challenges depends on the role played by the cells, the grassroots organisations of the party," he said.
As he approaches 10 years as ruler, experts say the North Korean leader is facing perhaps his toughest moment.
His remarks echo the unusual openness he showed at a party conference in January, when he admitted his plans to improve the economy weren't working.
He urged members to carry out the decisions made at that gathering - namely to bolster his nuclear deterrent in the face of US pressure and enact a new five-year national development plan.
During Tuesday's speech, he also criticised the party's grassroots units for unspecified "shortcomings" that he said should be immediately corrected to ensure the "healthy and sustainable" development of the party.
Party cells, which consist of five to 30 members, are the smallest units of party authority that oversee the works and lives at factories and other places.
The network is an important tool for the party to maintain its power. The previous conference of cell secretaries was held in 2017.
The economic setbacks have left the North Korean leader with nothing to show for his ambitious diplomacy with former President Donald Trump, which collapsed over disagreements in lifting sanctions in return for the North's denuclearisation steps.
The North has so far rejected the Biden administration's overture for talks, saying that Washington must discard its "hostile" policies first, and dialled up pressure by resuming tests of ballistic missiles last month after a year-long pause.
Also this week, North Korea said it was pulling out of the Tokyo Olympics, due to start in July, due to fears over the coronavirus pandemic.