Recession Risk 34/100 — August 23, 2026

Recession Risk Score: 34/100 — MODERATE (-4 vs 30 days ago)

Today’s Recession Risk Score is 34/100 (MODERATE), down 4 points from 30 days ago (38 → 34). The decline reflects a macro backdrop that is still late-cycle and uneven, but not yet displaying the classic “snap” signatures of an imminent recession (claims breakout, credit blowout, or a meaningfully restrictive financial-conditions regime). The big tension remains: goods-cycle and housing are soft, while labor stress and credit stress remain contained. Net: moderate risk with rising tail-risk, not a near-certain contraction.

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Score Trend — Last 30 Days

Over the last 30 days (2026-07-24 → 2026-08-23), the score fell from 38 to 34 (Δ -4). The range matters: min 34, max 44, average 37. In other words, the system briefly flirted with the upper end of “moderate” (near 44) but has mean-reverted lower.

The shape over the last 10 readings is also telling: a high-frequency sawtooth between 34 and 38 (with repeated 34 prints on 8/17, 8/19, 8/21, 8/23). That pattern is consistent with a market-and-data environment where risk is not compounding, but also not decisively clearing—i.e., stabilizing rather than accelerating toward recession.

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Key Drivers

1. Layoffs remain sparse (claims still pinned near cycle lows)

   • Initial jobless claims: 206k for week ending Aug 15, 2026, down 6k from the prior week’s revised level. (content.govdelivery.com)
   • This keeps the labor market away from the “break” zone (a sustained move above the ~190k–230k range would be the first real alarm).

2. Sahm Rule remains well below trigger

   • Sahm Rule: -0.03 (SAFE) (your tracker), reinforcing that unemployment is not accelerating at recession-consistent speed.
   • Even with the unemployment rate at 4.1% (WATCH), the rate of change still isn’t recessionary.

3. Yield curve is positive (removes a classic near-term recession catalyst)

   • 2s10s: +50 bps (SAFE) in your tracker.
   • A positive curve doesn’t guarantee expansion, but it does remove a major “classic” recession setup (persistent inversion).

4. Credit and financial conditions remain easy

   • Chicago Fed NFCI: -0.56 (SAFE) (Aug 14 reading per your tracker and FRED mirror). (fred.stlouisfed.org)
   • High-yield OAS ~273 bps (Aug 19) / ~275 bps today: still tight (risk not propagating through credit). (dollarliquidity.com)

5. Real-economy cyclicals are flashing late-cycle deterioration

   • Temporary help services: 2,505k (DANGER) — historically one of the best early warnings when firms quietly de-risk labor.
   • Freight Transportation Index: -1.3 (DANGER) — ongoing goods-cycle softness.
   • Housing starts: 1.239M SAAR (WARNING) — the housing channel remains a drag. (census.gov)

6. Consumers look fragile even as markets look calm

   • U. Michigan sentiment: 49.5 (DANGER) (June), 51.0 preliminary (Aug)—still recessionary-level psychology. (sca.isr.umich.edu)
   • Savings rate: 2.7% (DANGER) and credit card delinquencies: 2.9% (WATCH) keep downside risk alive if employment weakens.

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Category Breakdown

• Primary Indicators: 4 safe / 4 watch / 1 danger
  Mixed-but-manageable: labor level metrics are mostly fine, but several trend-sensitive labor inputs are softening.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  The “supporting cast” is not uniformly recessionary, but the one danger signal reinforces the late-cycle narrative.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing remains the clearest macro drag; July starts at 1.239M SAAR is consistent with a weak construction impulse. (census.gov)

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity isn’t collapsing; the issue is below-trend growth, not contraction.

• Consumer Credit Stress: 1 safe / 2 watch / 1 danger
  Stress is building slowly (delinquencies, debt service, savings depletion), but it hasn’t cascaded into broad credit dysfunction yet.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are pricing “soft landing / AI-led expansion” while valuation and select macro-sensitive ratios scream late-cycle excess.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a yellow-red mix; the ON RRP drawdown is a notable regime shift in money-market plumbing.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  Faster signals are split—consistent with the score’s choppy 34/38 oscillation rather than a clean trend.

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Biggest Movers

1. ON RRP Facility ($200M): -78.0% (7D) — confirmatory (worsening risk)
   Fast depletion reduces a liquidity “shock absorber.” It doesn’t cause recession by itself, but it can amplify volatility if funding stress emerges.

2. Sahm Rule (-0.03): -23.1% (7D) — contradictory (improving risk)
   Moving further away from trigger is a direct recession-risk reducer.

3. VIX (16.0): +21.0% (7D) — confirmatory (worsening risk)
   Still low in absolute terms, but the direction suggests markets are becoming more sensitive to rates/geopolitics.

4. Yield Curve 2s10s (0.50): -4.9% (7D) — mildly confirmatory (worsening risk)
   A modest flattening reduces cushion but remains firmly positive.

5. NASDAQ / GDP (0.8062): -3.5% (7D) — contradictory (improving risk)
   A pullback in extreme valuation pressure is stabilizing—though the level remains DANGER.

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90-Day Indicator Trends

Note: the provided “90-day history” block contains daily snapshots for a subset of indicators (mostly May 25–Jun 14 in your dump). Where the series is flat in that window, treat it as “no meaningful change in the available history,” not “no change in reality.”

Labor / recession triggers (still benign, but with slow erosion in labor churn):

• Initial claims in the available window moved 209k → 229k (May 25 → Jun 14), a mild drift higher but still SAFE.
• JOLTS quits slipped 2.0% → 1.9% (May 25 → Jun 14): lower quits typically indicate reduced worker bargaining power and slowing labor heat.
• Sahm Rule improved 0.13 → 0.10 in the available window, and today is -0.03—overall a de-risking impulse in the formal recession trigger.

Financial conditions / credit (still easy):

• NFCI remained easy (around -0.52 to -0.49 in the sample), consistent with today’s -0.56 reading (Aug 14). (fred.stlouisfed.org)
• High-yield spreads were essentially stable in the sample (high-200s), and as of Aug 19 remained around 273 bps—no stress regime. (dollarliquidity.com)

Housing (clear downshift):

• In the sample window, housing starts were 1.465M SAAR; by July, starts are 1.239M SAAR, a large downshift into weakness territory. (census.gov)
• Building permits hovered around the low-1.4M range (WATCH): consistent with subdued forward pipeline.

Consumer / balance-sheet fragility (the slow-burn risk):

• Personal savings rate fell from 3.6% → 2.6% in the sample window and is 2.7% today (still DANGER). This is the “no buffer” problem: if labor softens, the consumer absorbs the shock quickly.
• Real personal income in the sample moved $16.7T → $16.5T, a modest deterioration.

Market regime (complacency + valuation excess):

• Equity indexes in the sample were strong and remain near highs today; recent newsflow shows markets reacting mostly to rate volatility and geopolitics rather than a clear growth break. (apnews.com)

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Stock Screener Signals

Today’s screener is dominated by “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, BCE) plus two “oversold growth” names (CHTR, TLK) and one cyclical/EM travel name (LTM). The macro read-through: this looks like barbell positioning—investors leaning into cash-flow durability and payout stories while selectively fishing in beaten-down growth where idiosyncratic risk has already been priced.

Two interpretations matter for recession risk:

1. Defensive value/dividend bias tends to show up when markets sense late-cycle conditions (slower growth, higher dispersion, more earnings risk). That aligns with your real-economy warnings (temp help, housing, freight).
2. The presence of oversold growth flags (RSI ~28–30) suggests mean-reversion hunting, not panic. That’s consistent with the score holding in the mid-30s and with tight HY spreads—risk appetite is dented, not broken.

One caution: several listed yields are obviously data artifacts (triple-digit “yields”), so treat the style bucket (value/dividend vs oversold growth) as the signal—not the literal yield.

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Latest Economic Developments

Labor market update (last 48 hours):
The most important hard data point supporting “no imminent recession” is the weekly claims report: initial claims fell to 206,000 for the week ending Aug 15, 2026, reinforcing that layoffs remain low. (content.govdelivery.com)

Fed / policy signal:
The Fed’s July 29, 2026 decision held the target range at 3.50%–3.75% (with a dissent preferring a hike). (federalreserve.gov)
More importantly for markets this week, the minutes released Aug 19, 2026 indicated that many participants saw hikes as possible if inflation doesn’t ease, keeping a hawkish tail alive even in a late-cycle growth environment. (axios.com)

Markets / rates (risk channel):
The dominant macro transmission over the last few sessions has been Treasury yield volatility. Reports this week describe equity weakness tied to rate moves and geopolitical headlines, with the 10-year yield around the mid-4.7% area in late-week trading. (apnews.com)
This matters for recession risk because the next “break” often comes from rates staying high long enough to crack housing, capex, or refinancing—not from a single scary data print.

Consumers:
U. Michigan’s preliminary Aug 2026 sentiment index at 51.0 remains deeply depressed and is scheduled for final release Aug 28, 2026. (sca.isr.umich.edu)
Low sentiment isn’t a recession by itself, but paired with low savings and rising delinquencies it increases the odds that a modest labor shock turns into a spending shock.

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Near-Term Outlook (Next 30 Days)

Base case for the next month: continued expansion with elevated downside tails. The score is more likely to oscillate in the 30s than to trend cleanly lower unless we see:

• a claims breakout (sustained move above ~230k and accelerating), or
• a credit spread widening regime shift (HY OAS moving decisively away from the high-200s), or
• a Fed re-hawkish pivot that pushes the front end up and tightens conditions quickly.

Key scheduled catalysts:

• Aug 28, 2026: U. Michigan final sentiment release. (sca.isr.umich.edu)
• Next weekly claims release: Aug 27, 2026 (per FRED release schedule). (fred.stlouisfed.org)
• Next major macro “swing”: inflation prints feeding into the Fed narrative (markets are highly rates-sensitive right now, per this week’s trading pattern). (apnews.com)

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Long-Term Outlook (3-6 Months)

The 90-day direction-of-travel implied by your dashboard is late-cycle deterioration concentrated in cyclicals, not an economy already rolling into broad contraction. That’s an important distinction:

• If labor holds (claims stay range-bound, Sahm remains below trigger), then recession risk likely remains moderate and the economy muddles through with below-trend growth (GDPNow-style ~sub-2% vibes, weak housing, choppy goods demand).
• If labor cracks (temp help declines spill into broader payroll softness), the consumer’s thin buffer (low savings, rising delinquencies, depressed sentiment) becomes the accelerant that turns “slow growth” into “contraction.”

The Fed is the wildcard. July’s hold at 3.50%–3.75% was not a dovish “all-clear,” and the minutes’ hike-optional tone keeps the risk of a policy mistake alive if inflation re-accelerates. (axios.com)

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What to Watch

Hard thresholds (high signal):

• Initial claims: sustained break above ~230k, then ~250k = rising probability that layoffs are no longer “contained.”
• Sahm Rule: any persistent move toward 0.50 territory (trigger zone) is the single clearest recession confirmation tool.
• HY OAS: move from ~270s toward 350–400+ bps would indicate financial stress transmission beyond idiosyncratic defaults.

Macro pressure points (early warning):

• Temporary help employment: continued declines are the most credible “management de-risking” tell.
• Housing starts / permits: starts at 1.239M SAAR is already weak; further downside would reinforce the growth drag. (census.gov)
• Liquidity plumbing: continued ON RRP depletion + any funding-market stress would raise volatility risk even if growth data doesn’t collapse.

Event risk / narrative catalysts:

• Fed communications that shift from “hold” to “hike-optional” in a way markets believe (minutes already leaned that way). (axios.com)
• Consumer sentiment final release (Aug 28)—not decisive alone, but important given how low the level already is. (sca.isr.umich.edu)

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Sources

No data available for this window.