Recession Risk 38/100 — August 26, 2026

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

Today’s Recession Risk Score is 38/100 (MODERATE), unchanged vs 30 days ago. The headline picture still argues against an imminent recession: the Sahm Rule is untriggered, initial claims are low, and leading activity gauges (LEI, ISM) remain constructive. The reason the score isn’t lower is that the economy is showing late-cycle fragility under the surface—notably temporary help deterioration, goods-side weakness (freight / copper-gold), and a consumer buffer problem (low savings, rising delinquency stress). Net: slow growth base case, fat left tail if labor cools even modestly.

Score Trend — Last 30 Days

Over the last 30 days (2026-07-27 → 2026-08-26), the score started at 38 and ended at 38 (Δ 0). The path was choppy with a 34–44 range and a 37 average, reflecting a market and macro tape that repeatedly toggled between “soft landing” optimism and “late-cycle cracks” anxiety.

The shape is mean-reverting rather than trending: dips to 34 were followed by quick rebounds to 38, implying that incremental positives (claims staying low, easing financial conditions, resilient equities) are being offset by persistent negatives (consumer balance-sheet thinness, temp help contraction, goods-cycle stress signals). Importantly, this is stabilization at a moderate level, not a glide path toward low risk.

In the last 10 readings, the score alternated frequently between 34 and 38, ending with two consecutive 38 prints (Aug 25–26). That pattern typically signals a regime where the next big move requires a catalyst—most likely jobs/unemployment (Sahm acceleration) or a policy re-pricing (Fed “higher for longer” or a surprise hike).

Key Drivers

1. Labor market remains a near-term stabilizer (SAFE), but sensitivity is rising

   • Initial jobless claims: 206k for the week ending Aug 15, 2026—still consistent with subdued layoffs. (content.govdelivery.com)
   • This is the key “don’t panic” input: claims at this level are not recessionary. But in a low-savings environment, claims don’t have to spike to 300k to matter—a persistent upshift in the 4-week average can change behavior quickly.

2. Sahm Rule remains clearly untriggered (SAFE)

   • Sahm Rule: -0.03 (RecessionPulse) remains well below trigger, arguing against recession inside the next ~90 days under typical historical dynamics.
   • Translation: the unemployment acceleration necessary for a near-term recession call isn’t here—yet. The risk is convexity: once unemployment starts rising, the Sahm can move quickly.

3. Leading indicators turned up: LEI and ISM manufacturing are not recession-consistent

   • Conference Board LEI +0.2% m/m in July 2026 (to 99.5), following a small June decline—constructive for the next few quarters. (conference-board.org)
   • ISM Manufacturing PMI 55.6 (July 2026)—a strong expansion reading. (ismworld.org)
   • When both LEI and PMI are improving, the classic “incoming recession” playbook usually requires a separate shock (credit event, policy mistake, energy spike, geopolitics).

4. Yield curve is positive/steepening (reduces immediate signal, but late-cycle nuance remains)

   • 2s10s: +0.47 (WATCH) and 2s30s: +0.99 (SAFE) indicate the curve is no longer inverted.
   • The near-term recession signal from inversion has faded, but late-cycle caution remains: steepening can reflect front-end rate-cut expectations or term premium/fiscal risk pushing long yields up.

5. Financial conditions and credit spreads are still easy (SAFE), limiting near-term contagion

   • Chicago Fed NFCI: -0.56 (SAFE)—loose conditions. (fred.stlouisfed.org)
   • HY OAS ~269–270 bps (SAFE)—tight spreads (carry regime intact). (api.advisorperspectives.com)
   • This matters because most fast recessions are preceded by credit deterioration; we’re not seeing that broadly yet.

6. The real risk: consumer buffer + labor leading cracks

   • Personal savings rate: 2.7% (DANGER) plus credit card delinquency: 2.9% (WATCH) implies the consumer has less shock absorption.
   • Temporary Help Services: 2505K (DANGER) is a historically important early labor-market warning. Temp help often rolls over before headline payrolls.

Category Breakdown

Using today’s CATEGORY BREAKDOWN counts:

• Primary Indicators: 3 safe / 5 watch / 1 danger
  Mixed but not recessionary: the “big triggers” are mostly stable, while watch-list items (growth cooling, curve, labor internals) keep risk elevated.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  A modest caution flag: second-tier macro is not confirming recession, but at least one measure is signaling stress that warrants monitoring for spillover.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing is a persistent soft spot—permits/stops aren’t collapsing, but they’re not providing the typical cyclical support either.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business-side activity looks surprisingly resilient, consistent with the strong July ISM print.

• Consumer Credit Stress: 1 safe / 2 watch / 1 danger
  This is a key vulnerability cluster: credit stress is not systemic, but household-level stress is rising and could amplify any labor cooling.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are split-brain: equities near highs and volatility low, yet multiple valuation/risk-premium metrics and commodity ratios are flashing late-cycle risk.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity signals are not comfortable—especially money-market plumbing indicators—raising the probability of “accident risk” even if the macro base case holds.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  Real-time reads are not screaming recession, but they’re also not giving an “all clear.” This category is often the first to swing.

Biggest Movers

Top 5 by absolute 7-day % change (and what it means for recession risk):

1. ON RRP Facility ($405M): +1308.8% (7D)
   Directionally, this is more about short-term liquidity plumbing than demand. In context, RRP being very low or near-depleted is often interpreted as reduced excess liquidity buffers—a worsening tail-risk signal if funding conditions tighten suddenly. (Confirmatory of fragility.)

2. NY Fed Recession Probability (4.8%): +49.0% (7D)
   Even after the jump, the level is still low, but the acceleration indicates term-structure expectations are shifting. This is a confirmatory “risk up at the margin” move, not a recession call by itself.

3. VIX (15.8): +14.8% (7D)
   Volatility is still low in level, but rising week-over-week suggests complacency is being priced out ahead of catalysts. Mildly confirmatory (risk rising), but not panic.

4. HY OAS (269 bps): -2.9% (7D)
   Tighter spreads are contradictory to recession risk (they imply easier financing and lower default expectations). This is a risk-off veto signal for now.

5. Chicago Fed NFCI (-0.56): -2.4% (7D)
   More negative NFCI = looser conditions, which is typically contradictory to recession risk. The macro often needs NFCI to tighten meaningfully before recession probabilities rise sharply.

90-Day Indicator Trends

Your 90-day history block is partial (mostly late May–mid June observations), but it still reveals important direction-of-travel. Where the data allow 30/60/90-day comparisons, the story is “macro OK, buffers thinning.”

Labor & real-time recession triggers

• Sahm Rule: 0.13 (May 28) → 0.10 (Jun 6–17) → -0.03 (today)
  Trend: improving (moving away from trigger), consistent with the “no imminent recession” verdict.
• Initial claims: ~209k (May 28) → 225–229k (mid-June) → 206k (Aug 15 week) (content.govdelivery.com)
  Trend: stable-to-improving into mid/late August. This offsets several under-the-hood negatives.

Financial conditions & credit

• NFCI: -0.52 (May 28) → ~ -0.49 to -0.51 (June) → -0.559 (Aug 14) (fred.stlouisfed.org)
  Trend: loose and slightly looser, supportive of growth and risk assets.
• HY spreads: roughly low-270s bps in the visible window, with brief widening episodes that faded; now ~270 bps. (api.advisorperspectives.com)
  Trend: benign—credit is not confirming recession risk.

Consumer buffer / balance-sheet stress (key fragility cluster)

• Personal savings rate: 3.6% (May 28) → 2.6% (May 29 onward in history) → 2.7% today
  Trend: structurally low—a thin cushion that makes the economy more sensitive to labor shocks and inflation surprises.
• Credit card delinquency: ~2.92% (late May through mid-June) → 2.9% today
  Trend: level remains elevated; watch is about trend acceleration, not today’s print alone.

Growth/activity and “goods economy” cross-currents

• Industrial production: 102.5 (May 28) → 102.6 (Jun 16–17) → 103.0 today
  Trend: modest expansion.
• Freight index: the history shows a step-down (1.5 → 0.5 by early June), while today’s reading is -1.3 (DANGER).
  Trend: deteriorating goods-side activity, consistent with the copper/gold “industrial fear” message.
• Yield curve (2s10s): 0.48 (May 28) → 0.38 (Jun 17) → 0.47 today
  Trend: positive but fluctuating, not a classic pre-recession inversion signal.

Markets & valuations (risk is more “drawdown/tail” than “recession tomorrow”)

• S&P 500: ~7520 (May 28) → ~7511 (Jun 17) → 7677 today (near highs) (apnews.com)
• VIX: mid-teens in the history, 15.8 today—low but not dead.
  Trend: equity strength + tight credit is not recessionary; it’s consistent with a late-cycle melt-up / valuation stretch regime.

Bottom line from the last ~90 days of available history: recession triggers (Sahm/claims/credit) are not firing, but fragility indicators are accumulating (savings, temp help, goods-side weakness, liquidity plumbing).

Stock Screener Signals

Today’s quant flags are dominated by “value dividend” names (ARCC, AIG, BBY, FNF, HMC, T, BCE) plus a couple “oversold growth” setups (CHTR, TLK) and a cyclical/EM-linked transport/travel name (LTM). The market message here is not “brace for recession”—it’s more like “prefer cash-flow and balance-sheet resilience, but keep optionality in oversold pockets.”

Two important reads:

1. Defensive carry bias: ARCC/T/BCE/AIG/FNF clustering suggests a preference for income + lower multiples—a common posture when investors think growth will be slower and rates may stay restrictive, even if a recession is not the base case.
2. Selective mean reversion: CHTR (RSI 28) and TLK (RSI 30) look like oversold candidates—often consistent with a tape that is not risk-off broadly, but is rotating and punishing crowded exposures.

One caveat: the listed dividend yields are clearly data-quality outliers (triple-digit yields), so treat the “yield” column as noisy. The signal is the factor clustering (value/dividend + oversold), which aligns with a moderate-risk, late-cycle macro regime.

Latest Economic Developments

1) Fed messaging: minutes keep the “hike risk” alive if inflation stays sticky.
Minutes released Aug 19, 2026 indicated that many officials see the possibility of higher rates in coming months if inflation does not cool. (apnews.com)
Macro implication: this is the exact setup that tends to raise recession tail risk—policy staying tight while growth is already slowing (your GDP watch signals).

2) Labor market news: claims confirm layoffs remain sparse.
The Department of Labor reported initial claims fell to 206,000 for the week ending Aug 15, 2026. (apnews.com)
Macro implication: recession is usually hard to start without labor rolling over; for now, labor is stabilizing the outlook.

3) Leading indicators: LEI improved in July.
The Conference Board reported the LEI rose 0.2% in July 2026 after a June dip. (conference-board.org)
Macro implication: this is a direct contradiction to “recession is imminent.” The LEI can still roll over later, but it’s not doing that right now.

4) Activity: manufacturing is expanding convincingly (ISM).
ISM reported July Manufacturing PMI at 55.6, consistent with expansion and a stronger goods-side pulse than most investors expected. (ismworld.org)
Macro implication: even if consumers are fragile, business production is not acting like a downturn is starting.

5) Markets (past 48 hours): equities firmed on easing oil, attention on catalysts.
On Aug 25, 2026, the S&P 500 closed at 7,677.28 (+0.3%), Dow 53,577.40, Nasdaq 26,151.30, with commentary that falling oil helped ease bond-market worries. (apnews.com)
Macro implication: financial conditions remain supportive; risk is more “repricing event” than “growth collapse” in the immediate term.

Near-Term Outlook (Next 30 Days)

Base case for the next month: slow growth, low layoffs, elevated fragility—with the score likely to stay in the mid-to-high 30s unless labor cracks.

Key catalysts that could move the score materially:

• Employment Situation (Aug jobs) on Sep 4, 2026
  Watch: unemployment rate, U-3/U-6 breadth, participation, and hours worked. A move that pushes the Sahm Rule toward trigger territory would be the fastest way to lift risk into the 45–55 range.
• FOMC decision Sep 16, 2026
  With minutes signaling conditional hike willingness, a hawkish hold (or hike) could tighten conditions quickly—especially if long yields rise at the same time.
• Credit and funding stability
  With liquidity indicators already flashing caution (RRP very low), pay attention to any sign of funding spreads widening or sudden risk-off in money markets.
• Consumer stress
  If delinquencies continue to rise while sentiment stays depressed, consumption can slow abruptly even without mass layoffs—especially discretionary retail and travel.

Long-Term Outlook (3-6 Months)

The 3–6 month outlook is best framed as a contest between (A) resilience from labor/credit and (B) vulnerability from buffers/late-cycle constraints.

Why recession is not the base case:

• Core recession triggers are still quiet: initial claims low, Sahm untriggered, credit spreads tight, financial conditions loose. (apnews.com)
• Leading activity measures improved in July: LEI +0.2%, ISM Manufacturing 55.6. (conference-board.org)

Why the left tail is fat (and why the score stays MODERATE):

• Consumer buffer is thin (savings rate danger), meaning the cycle is more sensitive to shocks.
• Labor internals (temp help) are deteriorating in a way that often precedes broader labor weakness.
• Fiscal/term premium pressures (debt/interest expense warnings in your dashboard) can keep long yields elevated, raising the probability of policy-growth tension.
• The “late cycle” pattern historically is: everything looks fine… until it doesn’t, and the turn is often driven by a modest labor deterioration that triggers broader demand pullback.

On balance: the most probable path is sub-trend growth and periodic risk scares. The recession path becomes dominant if we see a persistent upshift in claims + unemployment acceleration while the Fed remains biased to tighten (or refuses to ease) amid sticky inflation.

What to Watch

Concrete thresholds and events that would move the needle:

• Initial jobless claims (weekly): a sustained move above ~240k–260k (and rising 4-week average) would indicate layoffs are no longer “sparse.”
• Unemployment rate: a drift from ~4.1% toward 4.4%+ with weakening participation/hours would raise Sahm sensitivity.
• Sahm Rule: any move toward +0.30 to +0.50 (depending on your trigger spec) would signal regime change; it can move quickly once unemployment inflects.
• HY spreads: a break above ~300 bps would signal a shift out of the “carry/perfection” regime and into repricing.
• NFCI: a move toward 0.0 or positive would indicate meaningful tightening of financial conditions.
• Policy messaging: follow Fed communication closely into the Sep 16, 2026 meeting given the minutes’ conditional hike bias. (apnews.com)
• Market catalysts this week: equities are already focused on major events (large-cap tech earnings / Fed communication), so macro conditions could tighten quickly if yields reprice.

Sources

No data available for this window.