U.S. stock markets cheered Friday’s employment report, which offered a meaningful sign that the country’s employment situation is improving at a time of great political and economic uncertainty.

One of the biggest unknowns is what effect government cutbacks will have on the broader U.S. economy. That will not be answered for some time.

On Friday, the Labor Department said that in April some 165,000 jobs were created while revisions to previous data showed there was actually more hiring during the previous months. Job creation in February, now pegged at 332,000, was the highest in more than 7 years. This strength was found in private sector hiring, notably.

Last week, the Bureau of Economic Analysis reported that government spending is taking a bite out of GDP. Defense spending, which has been waning in the months even before sequestration took effect March 1, is a meaningful part of the decline. As The Washington Post reported, this poses a political quandary because no lawmaker wants to be the author of economic decline. Yet the country is faced with unsustainable levels of spending that call for paring back.

Unfortunately, sequestration’s cuts are anything but precise. The lack of a strategic approach to cutting federal spending of all kinds undermines U.S. national security. It also hurts America’s competitive position in the world by robbing policymakers and lawmakers of the chance to take a strategic approach to reducing spending, particularly when it comes to the Defense Department’s budget. What is equally damaging is that Washington could have dodged sequestration, but instead crashed headlong into it.

This raises the stakes for taking action soon to improve American competitiveness. Such measures, whether boosting targeted education spending or getting the national debt under control, can have a positive impact on the economy and the political system at the same time by proving that change is possible.

Until those steps start to take shape, uncertainty will continue to haunt Washington – and Wall Street.

Read more about American Competitiveness below:

Harvard Business School – American Competitiveness

Harvard Business Review Special Edition 

HBS Survey on U.S. Competitiveness: Prosperity at Risk

Check out ASP’s White Paper on American Competitiveness that discusses these issues further:

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