U.S. economy adds jobs but braces for cuts 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 risen for 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. In some respects, the resolution of the fiscal cliff and impending sequester actually could be viewed as helping the recovery: They help remove the uncertainty over taxes and government spending that businesses say have been clouding their decisions. An index tracking that uncertainty created by economists at Stanford and the University of Chicago is at one of its lowest points since the recession ended. That means employers have the clearest picture in years of their economic environment, which should help them make critical decisions about staffing. "The perceived unpredictability of policy may now be passing, with firms getting back to hiring and investment," said Stanford economics professor Nicholas Bloom, one of the creators of the index. My guess is this is the turning point of the five-year era of roller-coaster policy, with growth finally restarting. Friday's jobs report was heralded for showing broad-based growth in the private sector. High-skilled professional jobs increased by 73,000, while the retail industry added 24,000 workers. Even Hollywood helped, boosting hiring in the information industry by 20,000.