First, there was uncertainty over what would happen in Europe. Concern mounted that some big European banks might fail. Spain and Italy had to pay a rate higher than 7 percent to borrow money, a situation that economists said could not continue for very long. Some doomsayers thought a recession in Europe could spread to the US, which may have discouraged businesses from hiring.
“Europe was a big hurdle,” says Naroff. The Europeans have now “kicked the can down the road, pretty far down the road” with a political agreement to try to unify their budget processes, he adds.
Second, many businesses might have wanted to see how the US Supreme Court would rule on the Obama health-care law. Factory owners complained that until that issue was decided, they did not know how much it would cost them to hire new workers.
Third, the summer started off with a series of heat waves that seemed to sap consumers’ willingness to spend. Although the price of gasoline was falling, consumers may have been thinking about their electric bills as they ran their air conditioners to beat the heat.