* Presidential race could hinge on Ohio

* Republican governor touts economic gains

NEW PHILADELPHIA, Ohio, Oct 27 (Reuters) - Republican vice presidential candidate Paul Ryan told an Ohio rally on Saturday about a friend’s financial hardship, but his party’s narrative that President Barack Obama has failed on the U.S. economy may be a difficult sell in the crucial battleground state.

“I’ve got a buddy who was making 25 (dollars) an hour who went to make 9 dollars an hour as a cashier at a gas station temporarily with no benefits. That’s the story of the American economy right now,” Ryan told a crowd of 1,000 people at an excavator factory.

With the tight presidential race potentially coming down to a contest over Ohio and its prize of 18 electoral votes, the question of whether the state is in good shape economically is vital.

The Midwestern manufacturing state, where latest polls show Obama holding a slim lead over Republican challenger Mitt Romney before the Nov. 6 election, has an unemployment rate of 7 percent, below the national average of 7.8 percent.

In Tuscarawas County, where New Philadelphia is located, the jobless rate in September was 5.9 percent, down two 2 points from September 2011. Obama beat Republican presidential candidate John McCain in the county four years ago.

Appearing in Zanesville on Saturday afternoon, Ryan’s argument about the sputtering economy was given a partial rebuke from a surprising source: Ohio’s Republican governor, John Kasich.

“You know the situation here in our state, as you know, we’re doing better,” Kasich said in his introduction to Ryan, at the start of a two-day, eight-stop bus tour of Ohio.

Like Florida and Virginia, Ohio is a battleground state home to a Republican governor eager to offer sunny economic news that occasionally sounds different from the picture painted by the Romney campaign.

Kasich outlined the economic success in Ohio since he took office in early 2011. Hundreds of thousands of job losses, he said, had turned into job gains, balanced budgets and a growing government surplus. Kasich said Ohio had become the No. 4 job creator in the country and led all other states in the Midwest.

“Not bad, huh?” he asked.

Kasich did join Ryan in saying the federal government under Obama had hindered, rather than helped that success. Throughout the campaign, Obama has insisted that the decision to inject taxpayer dollars to bail out General Motors and Chrysler saved jobs in Ohio where 850,000 people work in the automobile industry.

Listening to Ryan, who held a rally for 500 people at the Zanesville High School on Saturday afternoon, was Bob Kessler, 61, a small-business owner, who said he had seen those economic gains first-hand.

Kessler, who employs 60 people through his electric sign and outdoor advertising company, said business “is good because we made it good.”

“It’s better this year, a lot better. We’ve hired people,” Kessler said.

While Kessler said he had not voted for a Democratic presidential candidate since he cast a ballot in 1976 for Jimmy Carter (“the last mistake I made in politics”), the challenge for the Romney campaign as it scrambles to win Ohio is whether economic recovery in the state will work against Republicans.