America’s economic recovery could be slowed by a dispute over benefits for public employees in Wisconsin and political unrest in Libya as state and federal governments cut spending, The Washington Post reported.

Though few economists believe the run-up in fuel prices and potentially significant budget cuts will drive the economy back into recession, the new risks have the potential to stunt more sustained rebound.

“We had every reason to believe the U.S. economy will do extremely well this year,” said Bernard Baumohl, chief global economist for the Economic Outlook Group. “Now we have to go back to the drawing boards.”

The stock market rose 28 percent from Sept. 1 through Feb. 18, and corporate CEOs have improved their outlooks for 2011. And an index of expected volatility in the market fell to its lowest level since 2007.

But the cost of oil, which is hovering around $100 a barrel and could rise further if production is disrupted in more countries, could hurt the financial markets.

“This is definitely a risk that we weren’t thinking about too much two months ago, but we’re thinking a lot about now,” said Joel Prakken, chairman of Macroeconomic Advisers LLC.