Recession Risk 42/100 — August 10, 2026
US recession risk over the next 90 days is ELEVATED but not high: the labor market is flashing the first meaningful warning as July payrolls contracted by 23,000 while the unemployment rate held at 4.1% (with a notable labor-force drop-out dynamic). ([axios.com](https://www.axios.com/2026/08/07/july-jobs-report-employment-losses?utm_source=openai)) The Fed held policy steady on July 29, 2026 at 3.50%–3.75%, so the near-term macro path hinges on whether weak employment prints propagate into consumption and credit rather than being a one-off soft patch. ([federalreserve.gov](https://www.federalreserve.gov/newsevents/pressreleases/monetary20260729a.htm?utm_source=openai)) Forward-looking composite signals are mixed: the Conference Board LEI fell 0.2% in June (a modest negative), while manufacturing activity has remained in expansion based on the June ISM PMI print (53.3). ([conference-board.org](https://www.conference-board.org/topics/us-leading-indicators/index.cfm?gad_campaignid=22631709008&gad_source=1&gbraid=0AAAAADpIWamZCEvN_A9-o24fpg2_bUtNf&hsa_acc=7966952753&hsa_cam=22625443146&hsa_net=adwords&hsa_src=x&hsa_ver=3&utm_source=openai)) Financial conditions and credit are not yet consistent with imminent recession—high-yield OAS remains relatively tight and Chicago Fed NFCI is loose—so the base case is “slowdown with rising tail risk,” not an immediate recession call. ([fred.stlouisfed.org](https://fred.stlouisfed.org/data/BAMLH0A0HYM2?utm_source=openai))
Recession Risk Score: 42/100 — ELEVATED (+4 vs 30 days ago)
Today’s Recession Risk Score is 42/100, placing the U.S. in the ELEVATED band, with risk up +4 points versus 30 days ago (from 38 to 42). The key story is a labor-market wobble that is no longer hypothetical—July payrolls fell by 23,000, and the “improvement” in unemployment to 4.1% was flattered by a labor-force participation drop. (axios.com) The economy is not yet pricing “imminent recession” through credit (spreads are still tight and financial conditions are loose), but the tail risk is rising because weak hiring tends to propagate into consumption with a lag. (federalreserve.gov)
Score Trend — Last 30 Days
Over the last 30 days (2026-07-11 → 2026-08-10), the score moved from 38 to 42 (+4), with a min of 34, max of 44, and average of 37. The path matters as much as the endpoint: we saw multiple sharp dips to 34 (Aug 3 and Aug 6), followed by a quick rebound, culminating in today’s jump back to 42.
The shape looks choppy but upward-tilted—more like a market that keeps trying to “mean-revert” to calm, but repeatedly gets pulled back toward higher risk by labor and demand warnings. The 44 peak on Aug 1 suggests the system is sensitive to incremental bad news; the fact that we couldn’t sustain the lows implies stabilization is not yet convincing.
Key Drivers
Here are the most important forces pushing today’s 42/100 reading:
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Labor market: payroll contraction + participation-driven unemployment “optics”
- July payrolls: -23,000 (first negative month since February per Axios), and revisions to May/June were materially lower. (axios.com)
- Unemployment rate: 4.1%, but participation fell (Kiplinger notes participation 61.4%), consistent with “dropout improvement,” not hiring strength. (kiplinger.com)
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High-frequency labor remains OK—for now
- Initial jobless claims: 199K (week ending Aug 1), still historically low and not recession-consistent by itself. (apnews.com)
- This is the “brake pad” preventing the score from moving into high-risk territory.
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Fed policy steady, but internal hawkish pressure remains
- The Fed held the target range at 3.50%–3.75% on July 29, 2026, citing solid expansion but “inflation elevated.” (federalreserve.gov)
- Notably, three dissents (preferring a hike) keep “higher-for-longer” risk alive even as employment cools. (federalreserve.gov)
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Leading indicators: modest deterioration, not collapse
- Conference Board LEI: -0.2% m/m in June 2026 (to 99.1), after +0.1% in May—softening trend, not a free-fall. (conference-board.org)
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Financial conditions still supportive, muting near-term recession odds
- Equity markets are near highs; AP notes the S&P 500 set/approached all-time highs around the weak jobs print as yields fell. (apnews.com)
- This is consistent with your indicators: tight HY OAS and loose Chicago Fed NFCI (risk-on plumbing still intact). (fred.stlouisfed.org)
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Consumer demand vulnerability: savings and sentiment flashing red
- Personal savings rate: 2.7% (DANGER) and UMich sentiment: 49.5 (DANGER) create a fragile consumption backdrop if job losses persist.
Category Breakdown
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Primary Indicators: 3 safe / 5 watch / 1 danger
Labor is the swing factor: payroll weakness and “quality” of the unemployment rate are pulling this family toward risk while Sahm and claims still resist. -
Secondary Indicators: 2 safe / 0 watch / 1 danger
Mixed but leaning cautious; secondary metrics aren’t confirming recession broadly yet. -
Housing & Construction: 0 safe / 1 watch / 1 danger
Housing remains a slow-growth zone; permits/starts softness keeps this family recession-sensitive if rates re-tighten or employment weakens. -
Business Activity: 2 safe / 1 watch / 0 danger
Still more expansionary than contractionary—helps explain why credit hasn’t cracked. -
Consumer Credit Stress: 1 safe / 2 watch / 1 danger
Delinquencies + low savings imply consumers have less shock absorption if labor continues to deteriorate. -
Market Signals: 7 safe / 2 watch / 5 danger
A classic split: index levels and volatility look calm, while valuation and macro-ratio extremes (and some commodity signals) scream late-cycle fragility. -
Liquidity: 0 safe / 1 watch / 2 danger
Liquidity is a sleeper risk: the system can look fine until it doesn’t, especially with RRP essentially depleted. -
Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
Claims are fine, but freight and temp help are warning that the “real economy” is losing momentum underneath the surface.
Biggest Movers
Top 5 indicators by absolute 7-day % change:
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ON RRP Facility ($1B): +8190.2% (7D)
Contradictory/neutral for recession, but important for liquidity: this looks like operational volatility around a depleted facility, not “growth strength.” It raises plumbing risk more than demand risk. -
Conference Board LEI (1.7): -117.4% (7D)
Confirmatory (worsening risk) if real: LEI is supposed to be relatively stable month-to-month; a move this large usually indicates data normalization or series handling, but directionally it aligns with “slowdown.” -
NY Fed Recession Probability (4.8%): +80.0% (7D)
Confirmatory (worsening risk) in direction, though the level remains low. It’s a reminder that even “low probability” models can re-rate quickly when curves and labor shift. -
Personal Savings Rate (2.7%): -27.8% (7D)
Confirmatory (worsening risk): consumers are increasingly tapped out, so payroll softness has a cleaner path into spending cuts. -
Credit Spreads (HY OAS) (271 bps): +15.1% (7D)
Confirmatory (worsening risk) (mildly): spreads are still tight in absolute terms, but direction matters—spread widening often leads broader risk-off once it persists.
90-Day Indicator Trends
The 90-day history you provided shows two distinct macro regimes:
1) “Labor cooling” signals are leading the move up in risk
- Sahm Rule: steady at 0.13 through mid-May/early June in your history, now -0.03 today. That’s still SAFE, and it argues against an already-confirmed labor recession.
- Unemployment rate in the history block is 4.3% for late May/early June, while today’s reading is 4.1% (WATCH)—but that improvement is likely composition/participation-driven, consistent with reporting that people left the labor force. (apnews.com)
- JOLTS quits: 2.0% (WATCH) flat in the history—consistent with a labor market that is less confident than in an expansion surge.
2) “Real economy” is decelerating unevenly, not collapsing
- Industrial production: moved from about 101.8 → 102.5 by mid-May, and today is 102.6 (SAFE). That’s modest improvement—hard to square with imminent recession by itself.
- GDP growth (QoQ annualized): drifted from ~2.0% to 1.6% late May in the history, and today prints 1.5% (WATCH)—slowdown narrative intact.
3) Credit/financial conditions still look like a slowdown, not a credit event
- Chicago Fed NFCI in the history stays around -0.52 to -0.51 (SAFE); today it’s -0.53 (SAFE)—still loose. (fred.stlouisfed.org)
- HY OAS: history shows high-200s for much of May, with occasional jumps; today is 271 bps (SAFE)—still complacent compared with recession stress regimes, even if the 7-day change widened.
4) Consumers: the fragile underbelly is getting more fragile
- Personal savings rate: fell sharply in your history from 3.6% (WARNING) down to 2.6% (DANGER) by late May/early June; today it’s 2.7% (DANGER)—still very low, meaning households have little buffer.
- Consumer sentiment: slid from 53.3 → 49.8 in late May in your history; today is 49.5, still crisis-level pessimism. Persistent pessimism doesn’t cause recession alone, but it amplifies labor shocks into spending pullbacks.
Bottom line from the 90-day tape: the “hard activity” series (production) is fine, but the employment impulse is weakening and consumer resilience (savings, sentiment) is poor—an unstable combination that can turn quickly if claims begin trending higher.
Stock Screener Signals
Today’s quant list is dominated by “value dividend” flags: ARCC, AIG, BBY, FNF, HMC, T, BCE—plus a couple of oversold growth names (CHTR, TLK) with low RSI. That mix looks like late-cycle positioning: investors are hunting for cash-flow yield and “cheapness” while selectively bottom-fishing in bruised growth.
Two important interpretations for recession risk:
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Defensive carry is being prioritized.
The clustering in higher-yield, lower-P/E names suggests a market that wants income and perceived margin of safety. That’s consistent with your macro tape: equities are near highs, but underlying economic confidence is low and labor is wobbling—so investors “barbell” into carry. -
Oversold growth flags hint at dispersion, not broad panic.
If recession were imminent and obvious, you’d usually see a more uniform risk-off regime (credit spreads blowing out, VIX spiking). Instead, you’re getting selective dislocation (e.g., CHTR RSI 28) alongside index strength—often a sign of rotation and narrowing leadership, not collapse.
A quick caution: several yields in the screener are clearly data-quality outliers (triple-digit yields). Treat that as a feed artifact rather than a literal distribution signal.
Latest Economic Developments
Labor data remains the headline macro catalyst. The July employment report showed -23,000 jobs, with the unemployment rate at 4.1% but influenced by a participation decline. (axios.com) Markets interpreted the weak payroll print as “more time” for the Fed to stay on hold; AP reported stocks rose and 10-year Treasury yields fell to ~4.64% around the release window. (apnews.com)
The Fed is officially steady—but not unanimously dovish. In the July 29, 2026 FOMC statement, the Committee kept rates at 3.50%–3.75%, described activity as expanding at a solid pace, but emphasized inflation still elevated and included three dissents for a hike. (federalreserve.gov) The practical takeaway: if CPI/PPI re-accelerate, the “higher-for-longer” tail can come back fast, which would pressure housing and credit-sensitive consumption.
This week’s macro focus is inflation and consumption. Multiple outlets highlight the near-term calendar: July CPI and July PPI are key, along with retail sales and updated consumer sentiment reads. (apnews.com) This is the exact setup that can swing your risk score quickly: a hot inflation print can re-tighten financial conditions; a weak retail sales print can validate that payroll softness is already hitting demand.
Near-Term Outlook (Next 30 Days)
The next month is about confirmation vs. mean reversion:
- If July payroll weakness is a one-off: you should see claims stay ~200K-ish, quits stabilize, and August payrolls return positive. In that scenario, recession risk likely drifts back toward the high-30s, especially if inflation continues to cool.
- If July is the first shoe: watch for a trend—claims grinding higher for several weeks, temp help staying in decline, and retail sales missing expectations. That’s how “ELEVATED” becomes “HIGH” in a hurry.
Key catalysts this week (Aug 10–14 window):
- CPI and PPI: inflation surprise risk is high-leverage for both Fed expectations and real incomes. (kiplinger.com)
- Retail sales + sentiment: tells you whether labor softness is already translating into a demand air pocket. (apnews.com)
Long-Term Outlook (3-6 Months)
The 3–6 month picture is still best described as: slowdown with rising tail risk.
Why the base case isn’t “recession now”:
- Financial conditions remain loose and spreads remain relatively tight (your NFCI and HY OAS readings), which typically does not coincide with an imminent contraction.
- Activity indicators like industrial production remain okay.
Why tail risk is rising anyway:
- Labor is the key transmission mechanism: once payroll growth turns negative and participation drops, the risk is not the current unemployment level—it’s the possibility that income growth and confidence deteriorate together.
- Consumers appear thinly buffered (low savings rate + very low sentiment). That combination makes consumption more sensitive to any labor or credit shock.
Historical parallel (framework, not a claim of identical conditions): many recessions start not with a dramatic blow-up, but with a quiet labor inflection that later shows up in spending and delinquency data. Your dashboard already contains the prerequisite ingredients: temp help weakness, freight softness, and low savings—now we watch whether claims and spreads confirm.
What to Watch
High-frequency thresholds (weekly):
- Initial claims: a sustained move from ~200K toward the 230K–250K zone would be an early confirmation that layoffs are rising (trend matters more than a single print). (apnews.com)
- Continuing claims: acceleration is often more recession-informative than initial claims alone (track direction).
Monthly confirmation points:
- August & September payrolls: do we get a quick rebound, or a second weak print?
- JOLTS: continued decline in openings and quits would confirm reduced labor-market dynamism.
Macro catalysts:
- July CPI / July PPI: hot prints raise the probability the Fed has to lean hawkish again; cool prints extend the runway for a soft landing. (apnews.com)
- Retail sales: soft demand would validate the “propagation” channel from labor to consumption. (apnews.com)
Market plumbing / liquidity:
- RRP depletion dynamics: not inherently recessionary, but relevant for liquidity shocks—especially alongside large bank unrealized losses on your dashboard.