Recession Risk 34/100 — August 12, 2026

Recession Risk Score: 34/100 — MODERATE (-3 vs 30 days ago)

Today’s Recession Risk Score is 34/100 (MODERATE), down 3 points vs. 30 days ago (from 37 on July 13, 2026 to 34 on August 12, 2026). The headline message remains: near-term recession is not the base case, because the key high-frequency labor trigger (Sahm Rule) is still nowhere close to a recession signal, and credit is not behaving like an economy on the cusp of contraction. At the same time, late-cycle fragility is visible in pockets that tend to lead downturns—temporary help, freight, consumer sentiment, and an unusually low personal saving rate. Net: slowdown risk is real; recession risk is moderate, not imminent.

Score Trend — Last 30 Days

Over the last 30 days (2026-07-13 → 2026-08-12), the score drifted lower: Start 37 → End 34 (Δ -3) with a min of 34, max of 44, and a 30-day average of 37. The path was not smooth—risk briefly surged into the low-40s before retreating—suggesting a market and macro backdrop that is headline-sensitive rather than structurally deteriorating.

The shape looks mean-reverting rather than accelerating. The cluster of higher readings (including the 42 on August 10) appears consistent with event-risk repricing into major data (notably inflation week) rather than a broad-based collapse in fundamentals. Importantly, the score repeatedly returned to 34 (Aug 3, Aug 6, and today), implying resilience in “hard” recession-confirming signals (claims, broad financial conditions, and credit spreads) even as “soft” signals (sentiment) and a few cyclical leaders (temp help, freight) flash warning.

Key Drivers

1. Sahm Rule remains safely below the 0.50 recession trigger

   • Today: Sahm Rule = -0.03 (SAFE).
   • Recent history: 0.13 throughout mid/late May into early June.
   • Interpretation: the unemployment-rate acceleration required for a Sahm-style recession trigger is simply not present in the last 90 days of this dataset—this is the single strongest “not imminent” input.

2. Financial conditions are loose; credit stress is absent

   • Chicago Fed NFCI = -0.53 (SAFE), and it has been remarkably stable (roughly -0.52 to -0.51 in the 90-day window).
   • High-yield OAS = 271 bps (SAFE) today, down from 282 bps (May 14) and largely tight across the window except for a brief jump to 320 bps at the end of May/early June.
   • Interpretation: recessions that begin “soon” typically feature tightening financial conditions and widening spreads. We’re not seeing that regime.

3. Yield curve re-steepening reduces classic recession-signal pressure

   • 2s10s = +0.48 (WATCH) and has been positive in this 90-day sample (generally ~0.41–0.54).
   • 2s30s = +0.97 (SAFE) (normal, upward sloping).
   • Interpretation: a positive curve doesn’t prevent recession, but it removes one of the most reliable medium-lead warnings.

4. Labor market: “still healthy” at the high-frequency edge, but momentum is softening

   • Initial Jobless Claims = 199K (SAFE); the latest weekly reading cited publicly for the week ending August 1 was 199,000, with a 4-week average ~198,750. (apnews.com)
   • Yet your summary flags a weak July payroll pulse and a rising unemployment rate—consistent with today’s Unemployment Rate = 4.1% (WATCH).
   • Interpretation: claims say no layoffs wave; payroll momentum says late-cycle cooling.

5. Consumers are the soft spot: sentiment is crisis-level and savings are critically low

   • UMich Sentiment = 49.5 (DANGER) (deep pessimism).
   • Personal Savings Rate = 2.7% (DANGER); in the 90-day history it fell from 3.6% mid-May to 2.6% by late May/early June.
   • Interpretation: the consumption engine can run on income growth and credit for a while, but low savings + depressed psychology increases the odds of an abrupt pullback if labor weakens further.

6. Cyclical “early” recession tells: temp help and freight are both flashing

   • Temporary Help Services = 2505K (DANGER) (leading labor indicator).
   • Freight Transportation Index = -1.3 (DANGER) and deteriorated sharply in early June (from 1.5 down to 0.5 in the sample).
   • Interpretation: these are classic late-cycle cracks—not sufficient alone, but they raise the conditional probability that labor softness broadens.

Category Breakdown

• Primary Indicators: 3 safe / 5 watch / 1 danger
  Mixed but not recessionary: the primary stack is dominated by WATCH readings rather than clustered DANGER, consistent with a slowdown regime.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary indicators lean supportive overall, but the single danger signal matters because secondaries often roll before primaries confirm.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing is not collapsing, but it’s also not leading; permitting/starts softness keeps this bucket a modest drag.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity still looks okay in aggregate; this is a key reason the score is MODERATE rather than HIGH.

• Consumer Credit Stress: 1 safe / 2 watch / 1 danger
  Stress is not acute, but it’s creeping: delinquencies and debt service are WATCH, while savings is DANGER.

• Market Signals: 6 safe / 3 watch / 5 danger
  Markets are sending a barbell message: equity levels/vol are benign, but several valuation and ratio metrics are extreme (danger), creating vulnerability to a shock rather than signaling recession directly.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a quiet risk amplifier: low/volatile facility usage and money-supply watchfulness can matter if a funding tremor appears.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency reads are split: claims are fine, but the “fast” growth proxies (freight, temp help) are not.

Biggest Movers

1. ON RRP Facility ($1B): +8190.2% (7D)
   This is contradictory / ambiguous for recession risk: a jump from a near-zero base is more about plumbing and cash management than a clean recession signal, but it can matter for marginal liquidity if volatility rises.

2. Conference Board LEI (1.7): -117.4% (7D)
   Confirmatory (worsening risk) if real: LEI whipsaws often reflect data revisions or component volatility, but directionally, LEI weakness aligns with slowdown risk.

3. Bank Unrealized Losses ($5155B): -90.3% (7D)
   Contradictory (improving) on the surface: a sharp drop would imply less duration/HTM pressure. However, the magnitude suggests either measurement noise or a definitional change—still, bank balance-sheet stress is a known recession amplifier when it tightens credit.

4. NY Fed Recession Probability (0.8%): +80.0% (7D)
   Confirmatory (worsening) at the margin: direction up matters more than level, but probabilities in this zone are not a near-term recession call by themselves.

5. Freight Transportation Index (-1.3): -66.7% (7D)
   Confirmatory (worsening): freight weakness is consistent with a goods-side slowdown, often an early warning before broader employment weakens.

90-Day Indicator Trends

Bottom line: the last 90 days show a macro mix best described as stable financial conditions + cooling growth + fragile consumers, with a few cyclical leaders deteriorating.

Labor & income (slowdown signals without recession confirmation)

• Initial claims stayed low and stable: 200K (May 14) → ~211K mid-May → ~215K late May/early June (still SAFE). That profile is inconsistent with a layoffs wave.
• Sahm Rule is stable and low: 0.13 (May 14) → 0.13 (early June) → -0.03 today. That’s a meaningful improvement in recession-confirmation risk.
• Real personal income ex transfers drifted: $16.7T (May 14) → $16.5T (May 29–Jun 3) → $16.6T today (WATCH). The trend is flat-to-soft, not collapsing.
• Temporary help services is persistently weak: 2485K through the 90-day window in your history and now 2505K (DANGER). The key issue isn’t the small level change—it’s the classification and persistence of weakness.

Growth & activity (softening, not breaking)

• Industrial production improved early: 101.8 (May 14–15) → 102.5 (May 16 onward) → 102.6 today. This is mild expansion—again, not recessionary.
• GDP growth (QoQ SAAR) in the sample oscillates between ~2.0% and ~1.6%, with today 1.5% (WATCH). Directionally: slowing.
• Atlanta Fed GDPNow = 1.8% (WATCH) is steady in the history; stable tracking near ~2% fits a “slow growth” regime.

Housing (cooling but not cratering)

• Housing starts: 1502K (May 16) → 1465K (May 22 onward) → 1427K today (WATCH). That’s a steady downshift.
• Building permits: 1363K (May 15–21) → 1442K (May 22–28) → 1423K (May 29 onward) → 1374K today (WARNING). Permits are a forward-looking drag.

Credit & liquidity (watching for a turn)

• High-yield spreads: 282 bps (May 14) → 271 bps (May 29) → brief 320 bps spike at end-May/early June → 271 bps today. Net: tight, not stressed.
• Chicago Fed NFCI: essentially unchanged (around -0.52 to -0.51), and today -0.53. Net: loose.
• ON RRP facility is noisy in your history (from sub-$1B to $80B days). Today’s $1B aligns with “depleted” usage; that’s not automatically bearish, but it reduces the “buffer” narrative.

Market/valuation (risk amplifier, not a recession trigger)

• Equities rose in the 90-day sample: S&P 500 ~7444 (May 14) → ~7600 (Jun 2) → 7758 today. That’s a supportive wealth/conditions backdrop.
• Valuation/risk ratios remain elevated: NASDAQ/GDP (DANGER), S&P 500/GDP (WARNING), NASDAQ P/E 30x (WATCH). These raise the odds that a macro shock translates into a financial tightening impulse, which is how market excess becomes recession-relevant.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags—ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE—plus two “oversold growth” names (CHTR, TLK) with low RSI (28–30). The macro read: positioning looks selectively defensive (cash-flow and yield orientation) with a secondary tilt toward mean-reversion in a couple of beaten-up growth/communications exposures.

Two cautions stand out:

• The yields shown are clearly non-economic (e.g., ARCC 1002%, BBY 654%). Treat those as data artifacts, but keep the intent of the model: it’s surfacing lower-multiple, shareholder-return profiles, which typically do better when growth is slowing and investors prefer “paid to wait.”
• Charter (CHTR) flagged as oversold (RSI 28) fits a late-cycle tape where rate sensitivity and consumer pinch can punish levered/consumer-facing cash flows—often a “slowdown” tell rather than a clean recession signal.

Net: the screener is consistent with a MODERATE risk environment—investors are not pricing an imminent collapse (risk-on equity indices are high), but they are rotating into cheaper cash flows and selectively buying oversold where the downside has already been expressed.

Latest Economic Developments

• Inflation week is the focal point. Markets are keyed on the July CPI report scheduled for Wednesday, August 12, 2026, with follow-on inflation and growth-sensitive releases (and retail sales) shaping rates expectations. (apnews.com)
• Jobs data recently weakened (per your summary), and that softness is being framed as a potential sign of economic cooling heading into the fall; at the same time, weekly claims remain historically low, with filings 199,000 for the week ending August 1. (apnews.com)
• Markets over the past 48 hours: U.S. equities were modestly lower on Tuesday, August 11, with the S&P 500 down ~0.3%, while Treasury yields eased—a classic “wait for CPI” posture rather than risk-off panic. (apnews.com)
• Energy price dynamics are being watched for inflation persistence, with commentary noting gas/energy increases could complicate the near-term inflation path even if broader pressures cool. (apnews.com)

Near-Term Outlook (Next 30 Days)

The next month is about whether we get confirmation of either (a) a benign slow-growth glidepath or (b) a labor-driven downshift that forces policy and risk assets to reprice.

Base case (most likely): slow growth, modest disinflation, and the Fed stays cautious. If CPI comes in benign, financial conditions likely remain loose enough to keep recession risk moderate and contained.

Two catalysts that could shift the risk score quickly:

• Labor follow-through: If initial claims move decisively above the low-200k regime and unemployment’s short-term averages rise, the Sahm Rule could accelerate. That would mechanically push the score higher.
• Inflation upside surprise: A hotter CPI print would raise the odds of restrictive policy staying in place longer, tightening financial conditions. CPI is the key near-term “hinge” because it can move both rates and risk assets in a single day. (apnews.com)

Long-Term Outlook (3-6 Months)

Three themes dominate the 3–6 month horizon:

1. Late-cycle labor cooling is the main recession pathway from here.
   Claims are still low, but temp help weakness and softer payroll momentum are the kindling. If broader hiring freezes emerge, the consumer—already psychologically stressed and saving very little—becomes the transmission channel into a wider downturn.

2. Financial conditions are currently a cushion, but valuations are an amplifier.
   Tight spreads and loose NFCI are supportive. However, the market’s extreme valuation/ratio signals (notably tech-to-GDP metrics) mean the economy is more exposed to a “shock-to-conditions” mechanism: if equities correct sharply, it can become self-reinforcing via confidence, capital markets issuance, and credit.

3. Goods-side weakness is a persistent yellow flag.
   Freight and the copper/gold risk signal argue the industrial/goods complex is not healthy. If services slow next, recession odds rise meaningfully. If services stabilize, the likely outcome is a long late-cycle slowdown rather than an outright contraction.

Net: the 90-day trajectory supports a view that recession is not imminent, but the economy is increasingly fragile to labor deterioration. That fragility is the difference between a “soft landing” and a “growth accident.”

What to Watch

Hard thresholds that would change the story:

• Sahm Rule: watch for rapid movement toward 0.50 (recession trigger).
• Initial claims: sustained break above the ~220–240k zone would suggest layoffs are broadening (today’s baseline is still ~199k per the latest weekly report). (apnews.com)
• HY OAS: a move from ~270 bps toward ~400+ bps would be an early sign credit is re-pricing recession risk.
• NFCI: watch for a climb toward 0 (tightening) from -0.53.

Calendar catalysts (next few weeks):

• July CPI (Aug 12, 2026) and PPI (Aug 13, 2026)—inflation prints that influence the entire policy path. (apnews.com)
• Retail sales and consumer-related prints—given the “fragile consumer” profile.
• Weekly jobless claims (every Thursday)—still the fastest clean read on labor market inflection. (apnews.com)

Sources

• apnews.com
• apnews.com
• apnews.com
• apnews.com
• kiplinger.com
• kiplinger.com
• kiplinger.com
• statspolicy.gov