Recession Risk 38/100 — August 2, 2026

Recession Risk Score: 38/100 — MODERATE (+0 vs 30 days ago)

Today’s Recession Risk Score holds at 38/100 (MODERATE), unchanged versus 30 days ago. The macro picture remains a classic late‑cycle split: labor and financial conditions are still stabilizing, while households and goods-linked cyclicals continue to erode. The near-term recession window (next ~90 days) still looks contained unless weakness in temp staffing/freight spills into claims, payrolls, and spreads quickly.

Score Trend — Last 30 Days

Over the last 30 days (2026-07-03 → 2026-08-02), the score started at 38 and ended at 38 (Δ: +0). The range was wide—a min of 33 and a max of 44—with an average of 36 across 30 samples. That’s a meaningful spread for a “flat” month: it signals not complacency, but cross-currents that keep pulling the system back toward the mid‑to‑high 30s.

The shape is best described as mean-reverting with sharp spikes. The last 10 readings show multiple oscillations between 34 and 38, followed by a one-day jump to 44 on 2026-08-01 and then a snap-back to 38. In other words: the system is not trending into recession, but it is fragile enough that one or two data points (or a market/energy shock) can briefly push risk toward the upper end of “MODERATE.”

Key Drivers

1. Labor market recession triggers remain inactive (still the strongest stabilizer).

   • Initial claims: 197K (week ending 2026-07-25) with a 4‑week average ~202,750, which remains historically low and inconsistent with broad-based layoffs. (apnews.com)
   • Sahm Rule: 0.07 (SAFE)—far from the 0.50 trigger level.

2. The Fed stayed restrictive-but-steady, reducing “policy mistake into weakness” risk (for now).

   • The Fed held the federal funds target range at 3.50%–3.75% at the July 29, 2026 meeting, with notable internal dissent reported by major outlets. (axios.com)
   • Net effect: monetary policy is not tightening at the margin, which helps keep the near-term recession score from ratcheting higher.

3. Financial conditions remain loose and credit stress is still absent in pricing.

   • Chicago Fed NFCI: around -0.55, consistent with loose conditions. (fred.stlouisfed.org)
   • High yield spreads: your reading ~284 bps (SAFE) aligns with public series showing HY OAS in the high‑2% range during July 2026—tight by historical standards and not recessionary. (fredaccount.stlouisfed.org)
   • This is the key “why 38, not 55” argument: credit is not flashing stress.

4. Leading indicators softened but are not in a contraction regime.

   • The Conference Board LEI fell -0.2% in June 2026, but the six‑month change remained +1.1%—a positive run-rate that argues against an imminent downturn. (conference-board.org)

5. Household fundamentals look increasingly stretched (slow-burn risk).

   • Personal savings rate: 2.7% (DANGER)—a “thin buffer” setup that increases downside sensitivity to any labor shock.
   • Credit card delinquencies: 2.9% (WATCH) and debt service ratio 11.2% (WATCH)—not a crisis, but directionally consistent with stress building beneath the surface.

6. Goods-cycle deterioration is persistent and historically “early” (fast-propagation risk).

   • Temporary help services: 2,499K (DANGER)—a classic leading labor indicator that tends to weaken before broader payrolls.
   • Freight index: 0.3 (DANGER)—continued contraction in goods movement often precedes broader production/employment downdrafts.

Category Breakdown

Using the CATEGORY BREAKDOWN counts provided:

• Primary Indicators (3 safe / 4 watch / 2 danger): Mixed. The primary set is not flashing recession, but the “watch” cluster means the system is vulnerable if unemployment/real income momentum weakens further.
• Secondary Indicators (2 safe / 0 watch / 1 danger): Mostly stable; the single danger signal matters, but it isn’t dominating the composite right now.
• Housing & Construction (0 safe / 1 watch / 1 danger): Housing is not collapsing, but it’s clearly softening—consistent with a late-cycle cooling rather than an immediate recession trigger.
• Business Activity (2 safe / 1 watch / 0 danger): Still holding up; business activity is not confirming the pessimistic consumer narrative yet.
• Consumer Credit Stress (0 safe / 3 watch / 1 danger): This bucket is worsening at the margin. It’s the most likely channel for sentiment → spending weakness if labor softens.
• Market Signals (7 safe / 2 watch / 5 danger): Markets are simultaneously calm (VIX, indexes) and stretched/defensive (ratios, metals)—a classic “pricing optimism, hedging fear” split.
• Liquidity (0 safe / 1 watch / 2 danger): Liquidity is not seizing, but the distribution here says buffers are thinner; liquidity can become nonlinear if a shock hits.
• Real-Time / High-Frequency (0 safe / 1 watch / 1 danger): High-frequency is fragile—these are the first places recession risk usually shows up.

Biggest Movers

Top 5 indicators by absolute 7‑day % change (from your BIGGEST MOVERS block):

1. ON RRP Facility ($2B): +49.1% (7D) — Contradictory / mild improving
   The level is still extremely low, but the rise suggests some marginal liquidity absorption. This is not a recession signal by itself; it’s more of a “plumbing state” data point.

2. Yield Curve (2s10s) (0.47): -14.0% (7D) — Confirmatory / mildly worsening
   The curve is still positive, but the weekly move implies less steepening (or partial re-flattening). That can reflect growth/inflation repricing, but it’s not a clean positive.

3. Consumer Sentiment (UMich) (49.5): -6.6% (7D) — Confirmatory / worsening risk
   Sentiment at 49.5 is already crisis-level; further deterioration increases the odds spending weakens. The June final reading at 49.5 is confirmed by the University of Michigan. (data.sca.isr.umich.edu)

4. NY Fed Recession Probability (3.1%): +6.1% (7D) — Noise / slight worsening
   The level remains very low. Direction is worth noting, but it’s not close to signaling recession.

5. Building Permits (1374K): +5.8% (7D) — Contradictory / improving
   Permits improving week/week is a modest offset to the broader housing slowdown narrative, suggesting housing is cooling unevenly rather than rolling over universally.

90-Day Indicator Trends

Below, “90 days” refers to the history you provided (starting early May 2026). Where the series is flat in your history, the point is that trend pressure is absent, not that the economy is improving.

Labor market: stable at the headline, weakening at the margin under the surface

• Initial claims: moved from 189K (2026-05-04) to ~209K (late May) in your history, and now 197K (week ending 2026-07-25)—still low, but not getting “better,” just oscillating. The 4‑week average near 203K reinforces that layoffs remain contained. (apnews.com)
• Unemployment rate: your history shows 4.3% throughout May, while today’s reading is 4.2%. Net: no recession-style surge, but it’s in the WATCH zone because the cycle can turn quickly once it turns.
• JOLTS quits rate: 1.9% → 2.0% (May) and currently 1.9% (WARNING). This is consistent with reduced worker confidence and softer wage pressure—often late-cycle.

Goods and cyclicals: persistently weak, and that’s the main recession propagation risk

• Temporary help services: remained DANGER throughout May (~2475K–2485K in your history) and sits 2,499K today. That’s not a one-week wobble—it’s a persistent warning that firms are managing labor risk via contingent hiring.
• Freight index: flat at 1.5 (DANGER) across the May window in your history, and today reads 0.3 (DANGER)—a material deterioration in the goods-moving economy signal.

Financial conditions and credit: still clearly supportive

• Chicago Fed NFCI: around -0.52 across May history and -0.55 today, i.e., loose and stable rather than tightening into contraction. (fred.stlouisfed.org)
• High yield spreads: in your history they drifted from ~320 bps (watch) to the high‑270s (safe) by late May, and today ~284 bps is still tight. Public series confirm late‑July readings in the high‑2% range. (fredaccount.stlouisfed.org)

Households: sentiment is collapsing even if incomes aren’t

• UMich sentiment: downshifted from 53.3 (early May) to 49.8 (late May) and is now 49.5 (DANGER)—confirmed as June final 49.5 by University of Michigan releases. (data.sca.isr.umich.edu)
• Personal savings rate: your 90‑day history shows 3.6% in May; today is 2.7%—a meaningful deterioration in buffer capacity over a short span.

Growth trackers: slower but not recessionary (yet)

• GDP growth (QoQ annualized): your history shows ~2.1% → 2.0% across May; today 1.5% (WATCH).
• Atlanta Fed GDPNow: 1.8% throughout your May window and still 1.8% today. This is a “soft growth” regime, not contraction.

Stock Screener Signals

Today’s quant flags are dominated by “value dividend” profiles (ARCC, AIG, BBY, FNF, HMC, T, BCE, LTM) plus a couple “oversold growth” names (CHTR, TLK). The macro read-through is that screens are consistently finding cash-flow / yield / value rather than high-multiple cyclicality—consistent with an environment where investors want carry and defensiveness while staying invested.

Two important caveats jump out from the screener fields: the displayed dividend yields (e.g., ARCC 1002%, AIG 257%, BBY 654%) are so extreme that they likely reflect data/vendor scaling issues, special distributions, or stale denominator effects rather than actionable forward yields. The directional point still holds: the model is clustering into defensive value and mean-reversion rather than chasing high beta.

The oversold growth flags (notably CHTR with RSI ~28) are consistent with a market that is not risk-off at the index level (your S&P/Nasdaq are near highs), but is seeing rotation and dispersion beneath the surface. That combination—index strength + internal churn—often aligns with late-cycle positioning: investors keep exposure, but continually reprice segments tied to leverage, consumer sensitivity, or refinancing risk.

Latest Economic Developments

1) Fed: Hold at 3.50%–3.75% with dissent → “restrictive but steady.”
The July 29, 2026 FOMC decision to hold rates at 3.50%–3.75% reduces the immediate risk of policy overtightening into weakening data. Media coverage emphasized notable internal disagreement and sensitivity to inflation/energy dynamics. (axios.com)

2) Jobs: Claims rose to 197K (Jul 25 week), still historically low.
The Labor Department’s report showed initial jobless claims at 197,000, up 9,000, while the 4‑week moving average fell to ~202,750. That’s consistent with a labor market that is slowing at the margins but not cracking. (apnews.com)

3) Leading indicators: June LEI dipped but the six-month trend is positive.
The Conference Board reported the LEI down -0.2% in June 2026, yet +1.1% over the first half of 2026—important because recessions typically require persistent LEI deterioration, not a single-month slip. (conference-board.org)

4) Consumers: Sentiment is exceptionally weak (confirmed at 49.5).
University of Michigan’s June final sentiment reading of 49.5 confirms a household sector that feels recession-adjacent even while payroll/claims data do not. (data.sca.isr.umich.edu)

5) The immediate calendar matters: high-impact releases hit this week.
This coming week (Aug 3–7) features multiple top-tier macro releases, with the July jobs report on Friday being the anchor. (kiplinger.com) The ISM manufacturing report featuring July 2026 data is scheduled for Monday, August 3, 2026 at 10:00 a.m. ET. (ismworld.org)

Near-Term Outlook (Next 30 Days)

The next month is about confirmation. Your dashboard is already flagging late‑cycle fragility (temp help, freight, savings). For the score to move decisively higher, we likely need at least one of the following to break:

• Labor confirmation: claims pushing materially above the low‑200Ks and staying there (not just a one-week print), plus a rise in continuing claims; and/or unemployment trending higher enough to move the Sahm Rule meaningfully toward 0.50.
• Credit confirmation: HY OAS widening from ~2.8% toward the mid‑3s and beyond (a sustained move), or a noticeable tightening impulse in NFCI.
• Housing confirmation: permits/starts rolling over in a sustained way rather than oscillating.

Key scheduled catalysts:

• Aug 3, 2026: ISM Manufacturing PMI (July data). (ismworld.org)
• Aug 7, 2026: July employment report (widely previewed as the week’s “big” release). (kiplinger.com)

Base case for the next 30 days: score stays in the mid-to-high 30s unless the jobs report and subsequent claims prints weaken together.

Long-Term Outlook (3-6 Months)

Over a 3–6 month horizon, the signal hierarchy matters:

• If labor stays intact and credit stays tight (in spreads), recession risk stays capped. The combination of low claims, a non-triggered Sahm Rule, and loose NFCI is historically inconsistent with an imminent recession.
• If the goods-cycle weakness leaks into aggregate payrolls, the move can be fast. Temp-help contraction and freight weakness are not just “soft data”; they often lead the mechanical process of layoffs: fewer temps → fewer hours → slower hiring → rising claims → spread widening. Your dashboard already shows the early steps.

Structurally, the most important medium-term vulnerability in your set is the thin household buffer (very low savings rate) interacting with rising consumer credit stress. That doesn’t force a recession by itself, but it amplifies the impact of any labor shock, especially if energy/inflation volatility keeps real purchasing power constrained.

What to Watch

Labor (highest priority)

• Initial claims: watch for sustained movement >230K and especially >250K (regime shift vs “noise”).
• Unemployment + Sahm Rule: track Sahm acceleration toward 0.50 (trigger threshold).

Credit & liquidity (confirmation layer)

• HY OAS: a sustained widening from ~2.8% toward 3.5%+ would be a meaningful “risk is real” confirmation. (ycharts.com)
• NFCI: move from roughly -0.55 toward 0 would indicate tightening financial conditions. (fred.stlouisfed.org)

Consumers

• Sentiment: stabilization above ~55 would be a “pressure release”; further declines below 50 keep the downside tail fat. (data.sca.isr.umich.edu)
• Credit card delinquency & savings rate: continued deterioration raises the risk that spending cracks even without a major labor shock.

This week’s key prints

• Aug 3 (Mon): ISM Manufacturing (July). (ismworld.org)
• Aug 7 (Fri): July jobs report (payrolls, unemployment rate, hours). (kiplinger.com)

Sources

No data available for this window.