The U.S. economy is creating jobs faster than expected, a sign that the recovery is taking flight just as severe government spending cuts threaten to clip its wings.
Businesses added 236,000 workers in February, according to data from the Labor Department released Friday, exceeding even the most optimistic expectations. Many of the jobs were in construction, providing further evidence of healing in the housing market. The unemployment rate also fell to 7.7 percent — the lowest level since December 2008.
The surprising strength of the labor market suggests an economy at the crossroads: Has the recovery finally generated enough momentum to clear obstacles like the across-the-board spending cuts known as the sequester? Or are the cuts coming at precisely the wrong time, knocking the economy off track again?
Thanks to the “fiscal cliff” deal passed by Congress earlier this year, taxes have risenfor all working Americans, eating into household budgets. The sequester’s spending cuts will indiscriminately ax $85 billion from the federal budget this year. Furloughs are slated to begin next month for thousands of government employees, on top of continued decline in public-sector employment in states and cities around the country. And lawmakers still must negotiate a compromise over spending to avert a federal shutdown.
Those headwinds could have thwarted the recovery already — as they did at the end of last year when economic growth came to a standstill. Instead, the jobs data are this year’s latest example of the private sector picking up steam.
Stock markets hit a record high this week.Home prices have surged by the most in six years. American households rebuilt much of the wealth lost during the recession, which in turn is helping to boost their spending.
“Washington’s antics will not derail the expansion,” said Bernard Baumohl, chief global economist of the Economic Outlook Group. “The perennial budget fights in Washington, while irksome to most Americans, have increasingly become background noise.”
