Recession Risk 34/100 — August 24, 2026

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

Today’s Recession Risk Score is 34/100 (MODERATE), down 4 points versus 30 days ago (38 → 34). The headline read is “late-cycle but not breaking”: labor-market triggers remain quiet, credit stress is contained, and leading indicators aren’t rolling over in a way that typically precedes an imminent contraction. The main tension is that the consumer looks increasingly stretched (low savings, weak sentiment, soft retail control-like momentum), while Fed communications keep the door open to renewed tightening if inflation re-accelerates—an asymmetric risk that could tighten financial conditions quickly from today’s easy baseline. (federalreserve.gov)

Score Trend — Last 30 Days

The past month has been a controlled de-risking: the score moved from 38 (July 26) to 34 (August 24), a -4 point improvement. The distribution matters as much as the endpoint: min 34, max 44, avg 37, with a pattern that looks mean-reverting rather than accelerating—risk spikes have been faded rather than compounded.

The last 10 readings show a distinct step-function alternation between 34 and 38, ending with two consecutive 34s (Aug 23–24). That’s a “stabilizing” signature: the system is repeatedly testing higher-risk states but failing to sustain them—consistent with (1) labor not cracking, (2) spreads not widening, and (3) equities staying near highs despite pockets of macro anxiety.

Key Drivers

1. Labor trigger remains firmly off (near-term recession brake)

   • Initial jobless claims: 206K (week ending Aug 15, 2026)—low and consistent with sparse layoffs. (content.govdelivery.com)
   • Sahm Rule: -0.03 (July 2026)—far from the 0.50 recession trigger, implying the unemployment-rate dynamics aren’t recessionary.

2. Consumer fragility is the clearest left-tail vulnerability

   • Retail sales: -0.6% m/m (July 2026) per Census—an immediate “growth scare” input even if partly calendar/promotional-noise driven. (census.gov)
   • Your dashboard amplifies that message: personal savings rate at 2.7% (DANGER) and UMich sentiment at 49.5 (DANGER)—a combination that often precedes consumption downshifts when credit conditions tighten.

3. Fed minutes re-open the hiking door (policy asymmetry)

   • The July meeting held at 3.50%–3.75%, but the minutes explicitly leaned conditional-hawkish: many participants judged additional tightening could be needed if inflation doesn’t decline. That matters because it raises the probability of a financial-conditions shock even without a labor-market breakdown. (federalreserve.gov)

4. Credit is still relaxed (the “no transmission” argument)

   • High-yield OAS ~275 bps (SAFE) in your read—tight spreads imply the market is not pricing a wave of defaults or a funding squeeze. That’s a major reason risk remains MODERATE rather than HIGH.

5. Housing is weakening at the margin—but not collapsing

   • Housing starts: 1,239K (WARNING) and permits: 1,443K (WATCH) point to below-trend construction momentum. Housing tends to lead the cycle, but today’s pattern looks like cooling rather than a free-fall.

6. Liquidity micro-signal: RRP is essentially gone (regime shift risk)

   • ON RRP facility: $200M (WARNING) — effectively depleted, down sharply over the last week. This is less about “recession now” and more about the system shifting from “cash parked at the Fed” to “cash needing a home,” which can create rate volatility and funding-market sensitivity if reserves become unevenly distributed.

Category Breakdown

• Primary Indicators: 4 safe / 4 watch / 1 danger
  Mixed but not recessionary: labor is safe, growth is sub-trend, and the main “danger” is concentrated in consumer/late-cycle internals.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary signals lean stable overall, but the “danger” print underscores that not all confirmatory cycle gauges are benign.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing is a net drag right now (starts weak, permits slowing), consistent with higher-for-longer sensitivity and affordability constraints.

• Business Activity: 2 safe / 1 watch / 0 danger
  This category is quietly supportive: production and broad activity are not signaling contraction.

• Consumer Credit Stress: 1 safe / 2 watch / 1 danger
  Credit is not flashing systemic stress, but the direction of travel (delinquencies, debt service) suggests household balance sheets are tightening.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are sending a split message: index levels and spreads are calm, but valuation/fear-ratio style metrics skew “late-cycle froth + hedging demand.”

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is your most fragile family: RRP depletion plus other plumbing signals imply less buffer against shocks.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  Real-time gauges are leaning cautionary—especially anything tied to goods flow.

Biggest Movers

From your 7-day change list:

1. ON RRP Facility: -59.5% (7D) — confirmatory (worsening plumbing risk)
   Not a classic recession signal, but it can increase rate volatility and reduce liquidity “shock absorbers.”

2. VIX: +26.2% (7D) — confirmatory (worsening risk tone)
   Even at 16, the jump suggests hedging demand rose and complacency is less entrenched than a month ago.

3. NY Fed recession probability: +24.5% (7D) — confirmatory (worsening model-implied risk)
   The level remains low, but the rate of change is worth tracking for trend continuation.

4. NASDAQ/GDP: -3.5% (7D) — contradictory (improving risk via de-frothing)
   Lower valuation pressure marginally improves forward returns and reduces bubble-tail risk.

5. NASDAQ Composite: -3.5% (7D) — contradictory (improving risk via tighter financial impulse)
   A mild equity pullback can actually reduce overheating; it only becomes recessionary if it feeds into credit widening and hiring cuts.

90-Day Indicator Trends

Important constraint: the “90-day history” block you provided contains daily observations from May 26 to June 15, 2026 (about ~3 weeks), not a full 90-day span. I’ll still apply your required 30/60/90-day comparison framework using the available window as the baseline, and lean on today’s readings for “now.”

Labor & income: stable-to-soft, not recessionary

• Initial claims in the historical window drifted 209K → 229K by June 15 (still “safe”); today’s 206K is back below that late-window level—consistent with labor staying resilient. (content.govdelivery.com)
• Sahm Rule improved 0.13 → 0.10 by June 15; today is -0.03, a further improvement that argues against an imminent recession call.
• Real personal income ex transfers slipped from $16.7T → $16.5T across late May/early June; today reads $16.6T, a partial rebound but still a “watch” trend.

Consumer: deteriorating resilience (the main macro concern)

• Personal savings rate fell from 3.6% → 2.6% in the historical window; today is 2.7% (DANGER)—still critically low and consistent with “buffer depletion.”
• Consumer sentiment was already depressed near 49.8 in late May/June; today is 49.5, effectively flat at crisis levels—the issue is not a fresh collapse, it’s persistent pessimism that raises sensitivity to any labor wobble.

Housing: cooling momentum

• In the historical window, housing starts sat around 1,465K; today’s 1,239K implies a meaningful downshift (a clear negative delta vs ~60–90 days earlier).
• Permits were ~1,423K; today’s 1,443K is marginally higher but still classified as slowing—suggesting a low-growth construction profile rather than a rebound.

Financial conditions & credit: supportive, but watch the plumbing

• Chicago Fed NFCI moved from about -0.52 to -0.51 (still loose); today’s -0.56 is even looser—supportive for near-term growth.
• HY OAS ranged roughly 271–280 bps in the window; today’s 275 bps is essentially unchanged and tight, inconsistent with recession-style credit transmission.
• ON RRP declined from the hundreds of millions/billions range toward sub-$1B in the historical window; today’s $200M indicates the “excess cash” era is basically over—raising the importance of funding-market monitoring.

Markets & valuations: high level, slight de-risking

• S&P 500 in the historical window was ~7,473–7,431; today’s 7,674 is higher (risk-on).
• NASDAQ was ~26.3K → 25.9K in early June; today’s 26,180 is higher than mid-June but down vs peak—net still elevated.
• Valuation ratios (e.g., NASDAQ/GDP danger, S&P/GDP warning) remain consistent with a “late-cycle easy conditions” backdrop that can mask underlying consumer fragility—until policy or earnings disappoint.

Stock Screener Signals

Today’s quant flags cluster into two macro “messages”:

1) A pronounced tilt toward value/dividend defensives Names like $ARCC, $AIG, $FNF, $T, $BCE screen as value dividend plays. Interpreting the direction matters more than the exact yields printed in the screener: this basket suggests positioning that prefers carry, cash flow, and balance-sheet durability over high-multiple growth—often a sign the market is preparing for slower nominal growth rather than a crash.

2) Select oversold growth is showing up—but in idiosyncratic pockets $CHTR (RSI 28) and $TLK (RSI 30) read as oversold growth candidates, consistent with mean-reversion hunting after a tech/communications wobble. That fits the broader market picture in your signals: indices remain near highs, but there’s under-the-surface rotation and periodic volatility spikes (VIX up sharply 7D).

Net: the screener supports a “moderate risk” call—not a broad liquidation regime, but a market that is quietly paying for protection and increasingly valuing income and resilience.

Latest Economic Developments

• Fed minutes (released Aug 19, 2026) tilted hawkish-conditional. Multiple reports highlight that many participants judged additional tightening could be warranted if inflation doesn’t fall further. That elevates recession tail risk because it increases the chance of a policy-driven tightening in financial conditions from today’s relatively loose baseline. (apnews.com)
• Labor market: claims remain low. The Department of Labor’s weekly report showed initial claims at 206K for the week ending Aug 15, reinforcing the “no labor trigger” thesis for the next 90 days unless this turns. (content.govdelivery.com)
• Consumer: July retail sales fell -0.6% m/m. Census confirmed the monthly decline; while some commentary frames it as potentially distorted by timing effects, the directional message aligns with your tracker: the consumer is less robust than markets imply. (census.gov)
• Jackson Hole is the next major macro catalyst. The Kansas City Fed lists the 2026 Jackson Hole symposium as Aug 27–29, 2026, keeping rate-path narrative and term premium in play late this week. (kansascityfed.org)

Near-Term Outlook (Next 30 Days)

Base case for the next month: slow growth, no imminent recession, with the risk score likely to oscillate in the low-to-mid 30s unless a consumer crack forces a labor response.

Key near-term catalysts:

• Jackson Hole (Aug 27–29, 2026): expect markets to trade the reaction function—specifically whether the Fed frames inflation progress as sufficient to stay on hold, or whether it reinforces the “conditional hike” message from the minutes. (kansascityfed.org)
• Weekly initial claims: the clearest real-time tripwire remains a sustained move into the ~240K–260K range (your threshold). The signal would be stronger if accompanied by rising continuing claims.
• Next retail and inflation prints: after July’s -0.6% m/m retail sales, the next set of consumption and inflation data will determine whether July was noise or the start of a downshift in real spending power. (census.gov)

Long-Term Outlook (3-6 Months)

Three-to-six months out, the economy’s direction hinges on which constraint binds first:

• If inflation remains sticky: the Fed’s minutes imply a willingness to tighten again, which could re-steepen risk via higher real rates and tighter credit—especially problematic given low household savings and already-elevated consumer credit stress signals. (federalreserve.gov)
• If inflation cools without labor damage: the economy can live in a “slow-growth, tight-spread” regime longer than bears expect—consistent with today’s tight HY OAS and loose NFCI.
• If the consumer rolls over first: the sequence typically runs (1) spending downshift, (2) revenue disappointment, (3) hiring freeze, (4) claims uptrend, (5) spreads widen. Right now, we’re mostly at step (1), with steps (3)–(5) not yet confirmatory.

Historical parallel: many late-cycle periods do not end because the labor market weakens first; they end because policy and/or profits shift quickly after a consumer slowdown. The fact that markets are near highs while sentiment and savings are at stress levels is a classic “divergence” that can persist—until it doesn’t.

What to Watch

• Initial claims: sustained > 240K–260K would be the cleanest “labor is turning” confirmation.
• Sahm Rule: a move toward 0.30+ would be the early warning; 0.50 is the recession trigger.
• Credit spreads (HY OAS): watch for a regime change from ~275 bps toward 350–450+ bps; widening would validate that stress is transmitting.
• Consumer resilience: watch savings rate (does it stabilize above ~3%?) and follow-through in retail control categories after July’s -0.6% m/m headline.
• Fed narrative at Jackson Hole (Aug 27–29): any shift from “conditional hikes” toward a firmer tightening bias could lift the score even without new data. (kansascityfed.org)
• Housing: starts and permits—continued sub-trend prints would keep housing as a persistent drag.

Sources

No data available for this window.