It all started with the first girl.
He had no reason not to love her. She was, undoubtedly, quite beautiful. She loved all sorts of fantasy stories, and had often wished to be in them. She had gained his favor quite easily.
One day, she said her wish aloud.
"I wish I could actually live out my fantasies." He had heard her, and she gladly accepted his granting of her wish, at least, until she realized that the him in her fantasies was not actually him. She didn't really love him. It was what she imagined him to be that she actually loved. He didn't quite meet her expectations.
Then she made her final wish.
"I wish I could forget all of this ever happened." In mercy, and in heartbreak, he obliged.
That left in her a full week of no memories. She had to fill that hole in some way. She ended up never wanting to let go of anything from her memories ever again, and so kept even the most insignificant of junk on her person at all times. Because of this, she became unable to function in normal society, trying to press other people's old junk on themselves, as well.
Jareth took her back to the Labyrinth out of pity, so that she may wallow in her memories forever.
Being immortal is so lonely, you know. And so Jareth kept seeking companionship, often with hopes of intimacy, and always female.
But each one ended up the same. Something had happened to make their wishes go wrong, and they no longer wanted to remember their times spent believing in them, and so wished for their memories to be taken away. Each one ended up overzealous about their leftover memories, that they too had to be taken to the Labyrinth for their own safety.
With each new girl, he tried harder and harder to meet their expectations, learning to read their body language and act accordingly. They often had preset ideas, often from their own imaginations, of what certain situations would be like, and if he didn't act the way they imagined it, then their fantasy would be broken, and they'd all end up cluttering themselves with needless memories. In the end, none of them had even made it to the center before they had wished none of it had ever happened.
Then he started what he called the "thirteen-hour rule." He had noticed that the longer they spent in the Labyrinth, the more junk they collected, and the further they went from appearing human as they used to. With only thirteen hours to erase, he reasoned, then they wouldn't become a "Junk Lady", as the citizens of the Goblin City liked to call them.
Unfortunately, it wasn't so. A thirteen hour time limit seemed to only delay the inevitable, and often they would give up before they even got to the Oubliettes. His response, in order to reduce the amount of junk piling up outside of his city, was to send them back, and believe it all to be a dream. Of course, one or two every now and again had to be taken back to the Labyrinth for the same reasons as the other Junk Ladies, but much fewer than previously.
But he was still very lonely. How would he cure this eternal loneliness, when the only ones who he could talk to could neither remember him nor speak of anything other than the cruel past?
Then he saw Sarah. She had made a wish, and even though his head had told him that she would end up just like the others, his heart told him otherwise, and he always trusted his heart over his head, even when his head was right.
But this time, his head was both gladly, and disappointingly, proven wrong.
She was the first to make it to, and past, the Oubliette. When he realized he might not be able to keep her forever, he wanted to make her stay forever, and had the dwarf give her the peach. But she broke the spell, because she had not wished for her memories to be erased. She was even able to overcome the influence of the Junk Ladies.
"Surely," his heart told him, "she must love you enough to be able to overcome such obstacles." The words his heart told him made him very happy.
"But," his head interrupted, "what if she actually loves the baby more than you?" He realized his head was right, but refused to admit it. Surely, the fact that she did not become a Junk Lady meant that she was destined to be his lover, no, his queen forever.
But her actions proved to him that it's better to listen to your head, and learn from the past, rather than to let it pile up. She made him realize, he was also keeping old junk around for a lot longer than he needed to. After all, it was his decision to put them right outside the city, where he could still watch them every day, and remember.