Buoyed by strong demand for civil aircraft, U.S. aerospace companies added 5,000 jobs this year, a result Aerospace Industries Association (AIA) President Marion Blakey says is “surprising.”

Although defense firms laid off workers, the job losses were more than offset by strong demand in the commercial sector. Industry employment had been widely expected to decline this year due to the pending cuts to the U.S. government’s budget. “We had thought 2012 would be a tougher year,” Blakey tells Aviation Week. “But this shows the intrinsic strength in the industry.”

According to AIA’s 2012 Year-End Review and Forecast, the aerospace industry in 2012 employed 629,400 workers, the bulk of which work in companies manufacturing aircraft, engines and parts.

Sales of civil aircraft this year topped $60 billion and next year are expected to grow to $67 billion.

This growth is sustainable as backlogs at civil aircraft manufacturers—which include rotorcraft and business aviation manufacturers—hold between six and seven years of production, Blakey says.

The overwhelming majority of these commercial sales are outside the U.S., and contribute most of the aerospace industry’s $63.5 billion trade balance surplus, the AIA forecast says.

The high price of fuel has been both a blessing and a curse, Blakey says, noting that it is both detrimental to airline earnings and a boon to manufacturers, as airlines replace inefficient aircraft.

Re-fleeting with efficient aircraft, along with increased use of biofuels and more effective air-traffic management are part of a basket of methods the world’s airlines should use to mitigate carbon-dioxide emissions, says Blakey. There is room for market-based measures, such as the EU’s emissions trading system, but only if applied globally through the International Civil Aviation Organization (ICAO).

The ICAO Council now is working on a market-based measure framework, but Blakey says the primary concern should be the creation of an industry-specific CO2 standard. “Market-based measures should be the last resort,” Blakey says.

The EU’s delay in applying its emissions trading system to foreign airlines is welcome, but “now the spotlight is on ICAO,” says Blakey.

Although commercial aircraft sales are surging, the civil aviation industry in the U.S. will not be safe from the looming budget cuts that may take effect Jan. 2 in a budgetary process known as “sequestration,” says Blakey.

If the U.S. government cannot reach a deal on tax increases and spending cuts, the FAA budget could take a significant hit, Blakey says. As much as $1 billion could be cut from the FAA’s budget, according to an AIA study published earlier this year, Blakey said. In the event that happens, the agency will focus on safety and the day-to-day operation of the national airspace, which could leave investment accounts vulnerable to cuts, threatening investment in the NextGen air traffic modernization program. “What’s new and coming is easier to cut,” says Blakey, adding, “This would be a crying shame.”