All that is making companies reluctant to expand and hire much.
From April through June, U.S. job growth slowed to 75,000 a month, down from a healthy 226,000 average in the first three months of the year.
"The European situation has been getting worse and is dragging down the global economy," said Sung Won Sohn, an economics professor at California State University. "And we have got the fiscal cliff to worry about in the United States."
Six of the 17 countries that use the euro currency are in recession. Growth has also weakened in powerhouse emerging markets in China, India and Brazil. With these economies slowing, so is their demand for U.S. exports.
Sohn estimates the likelihood of a U.S. recession within the next 12 months at 30 percent to 35 percent. That's up from his estimate of 20 percent six months ago.
Nariman Behravesh, chief economist at IHS Global Insight, puts the chance of a recession at 25 percent. He expects growth to increase slightly to an annual rate above 2 percent in the second half of this year.
Other economists are gloomier. They think growth will muddle along below 2 percent through 2012.
Many economists think consumers pulled back sharply on spending last quarter. Analysts at JPMorgan estimate that consumer spending grew at a scant 1 percent annual pace in the April-June period, down from a 2.5 percent annual increase in the first quarter.
"Businesses and consumers are quite worried, so they're holding back," Behravesh said. "For consumers, the worry is the jobs markets. Businesses are worried about Europe. And China is looking weaker than most of us would have thought even a few months ago."
Behravesh said even companies that think Congress will manage to reach a budget deal by year's end are too uncertain about possible tax changes to step up hiring.