Thanks Again, Europe?

As Free Exchange noted last week, early in 2010, the recovery appeared to be gaining momentum, but something happened in the spring.  This is visible in the data on private payroll employment (I've used the private sector to avoid the effect of the winding down of census employment), where the rate of growth clearly slips after April:

Free Exchange's preferred story is that the debt crisis in Europe - remember Greece? - is to blame for the wobble in the recovery:

In late April, fears of a serious European debt crisis began to emerge. These fears sparked a mild panic and a renewal in the flight to safety. This flight manifested itself, in part, as a rush to buy American government debt. Treasury yields had been rising in the months prior to the crisis, but plunged from April through the summer. The dollar shot up; the trade-weighted dollar rose nearly 5% from late April to early June. In response to the pressure within markets, the Fed reopened currency swap lines it had used in previous stages of the crisis. It did not, however, take steps to offset the impact of the financial hiccup on growth expectations.

Markets reacted. The Dow fell over 13% from late April to early July, and was still 10% off its April peak in late August. From January to April, 10-year inflation expectations were stable at around 2%. These began falling sharply, and were down to around 1.5% by the end of the summer. Every signal available began flashing a decline in economic expectations starting in late April.

And now, just as things are starting to look better again, the Times says:

Sigh.  Stupid Euro.