These charts have slowdown written all over them. And you can see the trend even more clearly when you look at factory orders on a non-seasonally adjusted basis over the years since the recovery:

The slowdown is not limited to the US. Look at what is happening to China exports:

The latest quarterly edition of the China Beige Book was out yesterday. The China Beige Book is just about the only true gauge of the Chinese economy. My good friend Leland Miller’s firm surveys 2200 Chinese companies every quarter and reports on their findings. Their work is a must-read in serious economic circles. Leland, one of the savviest experts on China there is, provided me with a summary:

Led by rising layoffs at private firms, job growth dropped notably for the second consecutive quarter, sliding to a four-year low. Expectations of future hiring took a similar dive. Overall, the share of firms hiring this quarter fell to half of what we reported in 2012.

This deterioration has wide-ranging implications. Despite the economy's overall deceleration, China has been able to defy calls to be more aggressive – either via reform or stimulus – because of the remarkable stability of its labor market.

This bought time, but Beijing hasn't used it wisely. If the weakness in employment continues, the credibility of government policy will be challenged by those who matter most: not financial commentators but ordinary Chinese.

Leland went on to point out that this slowdown in hiring has been brought about by two rather uncomfortable trends: First, the multiyear slowdown in capital expenditures is continuing, and now we have seen what almost amounts to a crash as the number of companies reporting capital expenditure growth has plummeted by 40%. Reduced capital expenditures, of course, affect hiring.

And companies, particularly private companies, are borrowing less. Money is available, but they simply don’t want it. They’re trying to square up their balance sheets. Other anecdotal evidence from private sources suggests that what borrowing there is, is being used to pay off dollar-denominated debt. The debt-fueled growth that has driven China for these past seven years, sputtering on fumes now, seems headed for an abrupt end. Likewise, the shift from manufacturing to services seems to have lost momentum.

The government still reports 6.7% GDP growth, but as Leland notes, China’s weakness is not about GDP:

With perceptions about China likely to guide global markets again in 2016, it has become more important for investors to look beyond headline GDP numbers – official or private. After all, Beijing didn't seem overly concerned when many indicators signaled weakness but job growth remained steady. If the opposite combination persists, China's purported restructuring and reform could lose the faith not only of markets, but also of the masses.

I will be writing a detailed letter on Europe in the near future, and quite frankly I view the European economy to be even more problematic than China’s is.

Brazil is clearly mired in a recession, amid political turmoil. Commodity-market economies have recovered a little bit as prices have bounced off their lows. But the massive dollar-denominated debt in emerging markets is starting to come due, and most EM currencies are much weaker than they were when the debt was initially taken on. Major economic problems are brewing in a number of countries.

I know the equity markets are close to all-time highs, but I also see real interest rates negative out beyond 10 years and certainly below 1% even out to 30 years. Those are not conditions that you see in a dynamic, growing economy.

As I’ve been saying for almost two years, the admittedly weak US data still doesn’t give me any real conviction about a particular timeline for a recession in the US. But with the US economy barely growing at stall speed, an exogenous shock to the US economy could easily push us into recession. Whenever the next recession comes, it will not look like the last recession.

Never Waste a Good Crisis

In my last two letters I offered a prescription for how to avoid a recession in the United States and how to trigger a new era of growth. Doing so would allow (or perhaps force) the Federal Reserve to normalize interest rates, which would allow savers to benefit once again from their years of saving. Pension funds and insurance companies would actually regain the chance to provide the benefits they have promised.

We may not see a recession this year, and hopefully not even next year – though that’s a hope and not a prediction – but sooner or later we’re going to see one; and if we haven’t completely revamped our incentive and tax structures, allowing the Fed to normalize rates, monetary policy will be impotent during the next recession, and Congress will be facing $1.5 trillion deficits with very little room to provide any real stimulus. I know I have shown you the following chart in the last two or three letters, but I want you to burn this picture into your mind. This is what is going to happen to the federal deficit when we go into recession:

I have lived through six recessions in my business life – and that’s the point: we do live through them. This recent recovery has been the weakest we have seen in the last 40 years, and I will make you a side bet that absent any restructuring of the tax and incentive systems, the next recovery will be even weaker, with the real potential for the United States to catch “Japanese disease.”

But we will suffer the slow-growth, no-recovery symptoms of Japanese disease without the cushion that Japan’s massive savings and current account surplus provide. We won’t have 20 years to muddle through as Japan has done. Unemployment will rise to uncomfortable levels, and I fear that the Federal Reserve will begin to experiment with extreme forms of monetary policy, including negative interest rates. I acknowledge that there are very smart economists who think that negative rates can deliver positive benefits, but I simply think they are wrong. The evidence I’m looking at demonstrates that negative rates abuse savers and distort normal markets by obliterating the signals that the price of money (i.e., the interest rate) is supposed to send. The total financialization of the world’s reserve currency will not end well.