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Uncertainties throttle companies' hiring

Business has picked up. Yet American companies are too nervous to step up hiring.

The economy seems so gripped by uncertainties that many employers have decided to manage with the staff they have. They aren't convinced their customer demand will keep growing. Or they worry that Europe's festering debt crisis could infect the global economy. Or they aren't sure what Congress will do, if anything, about taxes and spending in coming months.

All that helps explain why U.S. employers added just 69,000 jobs in May, the fewest in a year and the third straight month of weak job growth.

"If you're anxious, you sit on your hands," said Chad Moutray, chief economist at the National Association of Manufacturers.

The U.S. government is also nearing its debt ceiling, and businesses fear a repeat of last summer when a bickering Congress rattled markets by nearly allowing the government to default on its debt, resulting in a downgrading of the U.S. credit rating.

State and local spending levels are uncertain or shrinking as governments try to shrink their own debts. The result is smaller budgets for schools, transportation projects and services.

Companies also complain that changes in environmental regulations and business subsidies are too hard to predict and plan for.

Meanwhile, President Obama in his weekly radio and Internet address Saturday urged Congress to act on bills he says will accelerate the economy. He said the country has responsibilities that are "bigger than an election."

He said Congress could pass legislation to help states prevent more layoffs, put construction workers on the job and help small-business owners hire workers.

In the Republican address, Sen. John Cornyn of Texas said Democrats are promoting "gimmicks" and warned that unless Congress and Obama act on extending the Bush tax cuts due to expire at the end of this year, Americans will deal with a tax increase of nearly $500 billion. He said the tax increase could push the U.S. back into recession.

For many companies that build highways, hiring plans are on hold while Congress debates long-term plans to pay for construction projects.

"I've got paving crews that are ready, willing to go to work next week, but I don't have contracts that I can have them go to work on," said Ed Dalrymple, vice president of Chemung Contracting Corp. in Elmira, N.Y.

Jason Speer, a vice president of Quality Float Works of Schaumberg, Ill., which makes devices to monitor fluid levels in tanks, is nervously watching Congress and possible tax changes as the Bush-era income tax cuts near expiration.

Speer said he'd feel a lot better about hiring later this year if it weren't for the uncertainty about federal taxes. Unable to anticipate his company's costs, he said he can't make decisions about growth and hiring.

"We don't know if there's something around the corner that's going to hurt our business," he said.

The company's sales in the United States, the Middle East and South Asia have been strong, he said, and the company expects to grow 15 percent this year. But Europe has been a drag: Sales to the region are down 50 to 60 percent this year.

John Hensley employs nine people at Lark Cake Shop, a specialty bakery in Los Angeles. Sales are up over last year, but Hensley doesn't feel comfortable hiring.

He's worried the economy may be staring at another slowdown. And he's uneasy over whether Congress will renew Social Security tax cuts.

"It definitely doesn't put you in the frame of mind to want to hire," Hensley said.

The prospect of a worsening European debt crisis that could hurt U.S. banks, the stock market and consumer confidence is a concern for him, too.

"If people feel like everything is going badly, then they're not going to be in the mood to spend money," he said. "There just seems to be so much uncertainty out there."

NRG Systems, a Hinesburg, Vt., maker of sensors to measure wind speeds for the energy industry, announced the first layoffs in its 30-year history in mid-May.

The U.S. wind industry is in the doldrums, because a key renewable-energy subsidy is set to expire later this year, electricity demand is weak and electricity prices are low because of lower natural gas prices.

"This is the worst it's ever been," said Abby White, a company manager. "The U.S. market has pretty much dried up."

White said the main problem is the future is too cloudy. Without knowing what federal policy will be in place, companies can't plan.

"The lowest-risk thing to do is to stop altogether," he said.