Recession Risk 34/100 — August 29, 2026

Recession Risk Score: 34/100 — MODERATE (+0 vs 30 days ago)

Today’s Recession Risk Score is 34/100 (MODERATE), unchanged versus 30 days ago (start 34 → end 34). The macro picture still reads like slowing-but-expanding, with the highest-weight real-time labor triggers staying decisively benign (claims low; Sahm Rule nowhere near firing). At the same time, policy risk has risen after Fed Chair Kevin Warsh’s Jackson Hole remarks on August 28, 2026, which re-priced the odds of a September 15–16 FOMC hike and tightened interest-rate-sensitive conditions at the margin. Net: not an “imminent recession” setup, but the downside tail is asymmetric if the Fed re-tightens into already-weak housing/consumer buffers.

Score Trend — Last 30 Days

Recession risk score — last 30 days

Over the past 30 days (2026-07-30 → 2026-08-29), the score mean-reverted and stabilized, ending exactly where it started (34 → 34), with a 34–44 range and a 37 average across 31 samples. The presence of a 44 max alongside a 34 min signals episodic risk flare-ups (rate chatter, sector stress, valuation/liquidity anxiety), not a persistent deterioration in the core cycle.

The last 10 readings show a clear “sawtooth” pattern—38 spikes repeatedly punctuated by 34 resets—consistent with headline-driven risk repricing rather than a broad-based macro rollover. Importantly, the score has not built on itself: there’s no stair-step higher in the baseline, which is what you’d expect if labor was cracking or credit was widening materially.

Key Drivers

Labor market remains recession-inconsistent (real-time is green).
- Initial claims: 203K (SAFE); continuing claims: 1.778M (still tight).
- Sahm Rule: -0.03 (SAFE) — well below any recession-triggering regime shift.
  These three together remain the strongest “no recession in the next 90 days” cluster in the entire dashboard.
Forward-growth indicators are improving, not collapsing.
- Conference Board LEI: +0.2% m/m in July 2026 and the 6‑month growth rate has turned positive (per Conference Board commentary). (conference-board.org)
- ISM Manufacturing PMI: 55.6 (July 2026) — expansion; ISM explicitly links this level to solid real GDP growth in its historical mapping. (ismworld.org)
  In other words: the “3Ds” recession template (deep, diffuse, persistent deterioration) is not the current leading-indicator profile.
The yield curve is no longer screaming “recession,” but the type of steepening matters.
- 2s10s: +0.39 (WATCH) (positive/normal-ish)
- 2s30s: +0.99 (SAFE)
  A positive curve reduces classic inversion risk. But a bull steepening (growth scare) can still be recessionary if it comes from collapsing long-end yields. For now, the market move around Jackson Hole looked more like front-end repricing than a long-end growth panic.
Policy re-tightening risk increased materially after Jackson Hole.
Warsh’s August 28, 2026 Jackson Hole message emphasized inflation vigilance and that the Fed may have “work to do,” which markets interpreted as keeping hikes “live.” (axios.com) This has two recession-relevant channels:
- Housing (already weak)
- Consumer fragility (low savings; rising delinquencies)
Housing and household cushions remain the soft underbelly.
- Housing starts: 1,239K (WARNING); permits: 1,433K (WATCH)
- Personal savings rate: 3.0% (WARNING) (thin buffer)
  This is the part of the economy most likely to transmit tighter policy into real activity quickly.
“Markets are calm” is true—but valuations and liquidity are flashing amber/red.
- HY OAS: 263 bps (SAFE) and VIX: 14.5 (SAFE) suggest no acute stress.
- Yet market valuation risk is elevated (NASDAQ/GDP DANGER, S&P 500 P/E WATCH, NASDAQ P/E WATCH), meaning a policy shock can have an outsized effect on financial conditions.

Category Breakdown

Primary Indicators: 3 safe / 5 watch / 1 danger
Core macro is mixed but not breaking. The “watch” cluster (growth slowing, income trend monitoring) keeps the score in MODERATE rather than LOW.
Secondary Indicators: 2 safe / 0 watch / 1 danger
The danger signal here is consistent with the “goods side is weaker than services” narrative.
Housing & Construction: 0 safe / 1 watch / 1 danger
Housing remains the clearest cyclical weak spot; starts/permits are not confirming a re-acceleration yet.
Business Activity: 2 safe / 1 watch / 0 danger
Business-side measures lean expansionary—consistent with July’s strong ISM manufacturing print. (ismworld.org)
Consumer Credit Stress: 1 safe / 2 watch / 1 danger
Stress is building slowly rather than spiking: delinquencies/debt service are watchlist items that can turn quickly if jobs soften.
Market Signals: 7 safe / 2 watch / 5 danger
This is the most “split-brain” category: volatility/spreads say calm, but valuation ratios say late-cycle.
Liquidity: 0 safe / 1 watch / 2 danger
Liquidity is no longer being “stored” in facilities the way it was earlier; the system can be fine—until it isn’t—when an exogenous shock arrives.
Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
High-frequency signals are mixed; labor is strong but goods-flow indicators are weak.

Biggest Movers

Top 5 by absolute 7‑day % change:

NY Fed Recession Probability (4.1%): +38.9% (7D)
Confirmatory (worsening risk), but note the level is still low. It’s a “from low to less low” move—not a crisis reading.
Yield Curve (2s10s) (0.39): -35.7% (7D)
Confirmatory (worsening risk) if the move reflects a growth scare or front-end easing expectations. But today’s narrative is more about policy uncertainty than an outright growth downdraft.
ON RRP Facility ($175M): -35.1% (7D)
Confirmatory (worsening risk) from a liquidity-buffer perspective: less cash sitting idle can mean less shock absorption.
Housing Starts (1,239K): -19.7% (7D)
Confirmatory (worsening risk); reinforces housing as the fragile transmission channel for policy tightening.
Yield Curve (2s30s) (0.99): -17.0% (7D)
Mildly confirmatory (worsening risk)—a flatter long-end slope can be consistent with slower forward growth, even if the curve remains positive.

90-Day Indicator Trends

The 90‑day window shows a macro regime that is stable overall, with pockets of deterioration concentrated in housing, goods flow, and household buffers.

Labor: steady-to-improving at the margin

Initial claims drifted lower from 215K (May 31) → 229K (mid‑June peak) → 226K (June 20), and now sits at 203K (Aug 22 week, reported Aug 27). That’s a notable improvement versus early summer levels.
Sahm Rule improved from 0.13 (late May) → 0.10 (mid‑June) → -0.03 today — moving away from recession trigger territory.

Growth & activity: slow but not rolling over

Industrial Production edged up from ~102.5 (May 31) to ~102.6 (mid‑June) and is 103.0 today, a modest but positive direction of travel.
GDPNow: 1.8% has been remarkably stable across June—consistent with “below-trend growth,” not contraction.
LEI improved materially: it shows 1.7 (SAFE) in early June versus a -0.3 danger print at some timestamps in late May/early June, and the Conference Board reports July 2026 LEI up +0.2% m/m with a positive six‑month growth rate (first time in years). (conference-board.org)

Housing: the clearest downshift

Housing starts fell from 1,465K (May/early June) to 1,177K (mid‑June), and today’s 1,239K remains below trend. This is a textbook “interest-sensitive lag” area that worsens if policy re-tightens.
Permits slipped from 1,423K to 1,413K by late June—soft, but not collapsing.

Consumer/household: fragile buffers, rising sensitivity

Savings rate sits at 3.0% today and was 2.6% through much of June—still extremely thin. Even if it’s “up,” it’s up from a low base.
Credit card delinquency held around 2.9% throughout the period—elevated but not accelerating in this slice of history.

Credit/financial conditions: still easy

HY spreads tightened from 320 bps (late May) to ~263 bps (late June / today)—a meaningful improvement that argues against imminent broad credit stress.
Chicago Fed NFCI stayed around -0.51 (loose conditions), reinforcing the “financial conditions are not restrictive” read.

Market/valuation: risk-on behavior with late-cycle pricing

Equities in the history show a June drawdown and rebound; today’s levels are near highs (S&P 500 7,712; NASDAQ 26,402; DJIA 53,560).
Valuation ratios (NASDAQ/GDP, P/Es) remain elevated—more about drawdown risk than “recession signal,” but drawdowns can become recession catalysts if they tighten conditions materially.

Stock Screener Signals

Today’s quant flags cluster heavily in “value dividend” names (financials/telecom/insurers) with a couple of oversold growth flags (e.g., $CHTR with RSI 28; $TLK with RSI 30). That mix usually shows a market that is:

Leaning defensive on cash flows (dividend/value screeners)
Still hunting idiosyncratic mean reversion in beaten-down growth/communications

A second takeaway: multiple flags sit in credit-adjacent or rate-sensitive business models—BDC exposure ($ARCC) and telecom ($T, $BCE) often show up when investors want carry and non-cyclical demand, while still acknowledging that growth is not a straight line. Interpreting this alongside tight HY spreads and low VIX, the market appears positioned for a soft-landing continuation, but is selectively hedging with income-oriented exposures.

One data-quality note: several yields shown (e.g., 1002%, 654%) are not economically plausible as ordinary dividend yields and likely reflect screener formatting (annualization or special distributions). Directionally, however, the screener’s message is clear: income/value bias plus select oversold growth.

Latest Economic Developments

The last 48 hours were dominated by Jackson Hole and the Fed reaction function. On August 28, 2026, Fed Chair Kevin Warsh emphasized that inflation progress is not yet convincing and that the Fed may have “work to do,” which markets read as keeping a September hike firmly in play. (axios.com) Reporting also highlighted that the 2‑year Treasury yield rose (front-end repricing), while longer-term yields were comparatively steadier—consistent with policy-risk repricing more than a long-horizon inflation spiral. (apnews.com)

Markets digested the hawkish tone with measured equity weakness, not panic. U.S. stocks finished slightly lower on August 28 (S&P 500 down about 0.2% to ~7,711.76; Nasdaq also lower), consistent with “risk-on but not euphoric” conditions. (apnews.com) The key macro implication: financial conditions tightened a touch at the margin (rates up, equities slightly down), but credit did not flinch—a crucial distinction for recession risk.

Finally, the calendar is now the driver: the market’s next major macro waypoint is the September 15–16, 2026 FOMC meeting, which the Fed’s official calendar confirms. (federalreserve.gov) Between now and then, the biggest swing factor is whether incoming labor and inflation data give Warsh cover to stay put—or force the committee toward a hike.

Near-Term Outlook (Next 30 Days)

Baseline for the next month: score likely stays in the low-to-mid 30s unless a labor crack emerges or the Fed meaningfully re-tightens.

Key catalysts in the next 30 days:

Employment Situation (August jobs report) — September 4, 2026: the fastest path to an “elevated” score would be a downside surprise in payrolls plus unemployment drifting higher, which would start to move Sahm Rule dynamics from “safe” toward “watch.”
Inflation prints ahead of the September FOMC: if inflation comes in sticky, Warsh’s Jackson Hole posture suggests the Fed will prioritize credibility—even at the risk of leaning into housing weakness. (axios.com)
Rates and housing response: watch mortgage-rate sensitivity (starts/permits) and any knock-on effects into consumer sentiment and discretionary spending.

What would change the score quickly?

Upward shift: claims trend up materially (e.g., sustained move toward the mid‑200Ks and rising continuing claims), housing data deteriorates further, or market pricing locks in a September hike and financial conditions tighten abruptly.
Downward shift: continued LEI improvement and stable claims would likely grind the score lower, but the valuation/liquidity “overhang” caps how far risk can fall.

Long-Term Outlook (3-6 Months)

Over 3–6 months, the economy still looks like a late-cycle expansion with a policy-dependent landing. The 90‑day trend evidence is not recessionary in the traditional sense:

labor is stable (claims low; Sahm improving),
production is edging higher,
leading indicators are improving (LEI +0.2% m/m in July; positive 6‑month growth rate), (conference-board.org)
and the manufacturing survey is expansionary (ISM 55.6). (ismworld.org)

But “no recession signal” is not the same as “no recession risk.” The risk vector is that policy tightens into fragile sectors: housing is already weak, savings are low, and consumer credit stress is not benign. In this regime, recessions tend to be triggered by a catalyst (policy error, sudden financial-conditions tightening, or a credit event) rather than a slow, obvious deterioration visible months in advance.

Historical parallel (pattern, not a prediction): late-cycle expansions often end when the Fed is forced to choose between inflation credibility and growth stability. Warsh’s Jackson Hole framing leans toward credibility, which raises the probability that the cycle ends via a rates/credit/housing transmission, not via an overheating boom-bust in the real economy.

What to Watch

Hard thresholds and triggers:

Initial claims: a sustained move above ~240K–260K would be an early warning that layoffs are spreading beyond isolated sectors.
Continuing claims: persistent re-acceleration would matter more than any single weekly print.
Sahm Rule: watch for a move from -0.03 toward positive territory; the danger zone is a rapid rise, not the level today.

Policy and market conditions:

FOMC (September 15–16, 2026) — confirmed on the Fed calendar. (federalreserve.gov)
Market-implied hike odds: if pricing moves from “coin flip” toward “base case,” that’s a tightening impulse by itself. (apnews.com)
2-year yield behavior: front-end repricing is the cleanest real-time gauge of imminent policy tightening. (apnews.com)

Housing and consumer stress:

Starts/permits: if starts keep sliding while permits roll over, the housing weakness becomes self-reinforcing.
Savings rate and delinquencies: low savings + rising delinquency is the recipe for a consumption downshift even without mass layoffs.

Sources

No data available for this window.