Recession Risk 38/100 — August 4, 2026

Recession Risk Score: 38/100 — MODERATE (+1 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), up 1 point from 30 days ago (July 5 → August 4, 2026). The expansion case is still intact because the labor-market recession triggers remain inactive (Sahm Rule and claims both firmly benign), and credit is not pricing stress (high-yield spreads remain tight). But the tone has shifted: consumer fragility is becoming the dominant macro vulnerability, and a “growth scare” can arrive quickly once temp-help, sentiment, and delinquencies begin feeding into layoffs. The risk score is moderate not because recession is imminent—but because the shock-absorption capacity of households looks thin.

Score Trend — Last 30 Days

The last 30 days show a slightly higher risk regime, with the score moving from 37 to 38 (+1). The distribution matters more than the endpoint: the score printed a low of 34 and a high of 44, with an average of 36 over 30 readings. This is a market-and-sentiment-driven tape: the system can swing quickly between “calm expansion” (mid-30s) and “policy/oil shock anxiety” (low-to-mid 40s).

The shape is choppy and event-sensitive, not a smooth deterioration. The late-window volatility (34 → 44 → 38 → 34 → 38 over Aug 1–4) reads like mean reversion around a mid/upper-30s baseline: financial conditions and payroll conditions are keeping the floor under the economy, while consumers and cyclicals keep pushing the ceiling higher. The implication: unless labor breaks, recession risk is more likely to grind higher than spike—yet the score remains vulnerable to sudden repricing if claims or unemployment turn.

Key Drivers

1. Labor recession triggers remain clearly inactive (still the anchor).

   • Sahm Rule: 0.07 (June 2026)—far below the 0.50 trigger and also below where it sat earlier in the 90-day window (0.20 on May 6).
   • Initial jobless claims: 197k with a ~202,750 4-week average for the week ending July 25, 2026, keeping “layoff risk” muted. (apnews.com)

2. Consumer stress is the main red flag cluster (sentiment + savings + delinquency).

   • UMich sentiment: 49.5 (DANGER)—a crisis-level reading that typically coincides with defensive household behavior.
   • Personal savings rate: 2.7% (DANGER), signaling limited buffer stock if gasoline/food or job insecurity rises. (bea.gov)
   • Credit-card delinquency: 2.9% (WATCH) adds a “slow burn” credit stress channel.

3. Manufacturing is expanding, but employment subcomponents remain a watch item.

   • ISM Manufacturing PMI: 53.3 (June 2026) still implies expansion, but the Employment Index remains in contraction territory (a recurring warning even when headline PMI is >50). (ismworld.org)

4. Financial conditions are loose; credit is not confirming recession risk.

   • Chicago Fed NFCI: -0.55 (SAFE) indicates easy conditions across risk, credit, and leverage inputs (consistent with supportive asset prices).
   • High-yield OAS: 284 bps (SAFE)—still “tight,” inconsistent with a near-term default cycle.

5. Yield curve is positive (reduces immediate recession odds), but the direction of travel needs monitoring.

   • 2s10s: +0.45 (WATCH) and steepening vs inversion regime reduces the probability of a classic policy-restriction recession, but the curve has compressed over the last week (down ~11% in the biggest movers list), which can reflect “growth fears” or flight-to-quality dynamics.

6. Geopolitics and energy are acting as the near-term volatility amplifier (macro shock channel).

   • In the last several sessions, stocks and yields have been moving with oil headlines tied to the U.S.–Iran conflict; easing oil prices helped lift equities and lower yields into August 3. (apnews.com)

Category Breakdown

• Primary Indicators: 3 safe / 4 watch / 2 danger
  The primary set is mixed: Sahm + claims remain green, but temp-help and sentiment are dragging the recession probability higher via leading behavior channels.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary indicators are mostly stable; the “danger” here is a reminder that non-labor cyclical inputs can weaken before unemployment does.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing is not collapsing, but it’s not an engine of acceleration either—permits and starts are consistent with a moderating residential cycle.

• Business Activity: 2 safe / 1 watch / 0 danger
  The business side still reads like “slow expansion,” consistent with below-trend GDP, not contraction.

• Consumer Credit Stress: 1 safe / 2 watch / 1 danger
  This is where the “growth scare” is forming: low savings + rising delinquency is the classic setup for a demand downshift if real income growth cools.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are split: indices are near highs and volatility is low, but valuation/stretch metrics and commodity fear ratios (e.g., copper/gold) are flashing caution about the durability of growth expectations.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is not breaking, but the ON RRP depletion and broader plumbing dynamics increase sensitivity to shocks.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency signals are telling you to watch the consumer and transport cycle closely; they can turn ahead of official labor data.

Biggest Movers

1. ON RRP Facility ($2B): -74.2% (7D) — Confirmatory (worsening risk via liquidity sensitivity)
   A rapid depletion in ON RRP suggests money-market liquidity conditions are changing quickly; not recessionary by itself, but it can raise fragility if coupled with funding stress.

2. NY Fed Recession Probability (4.6%): +27.3% (7D) — Confirmatory (worsening, but from a low base)
   The level is still low, yet the directional move matters: probabilities can re-rate faster than “hard data.”

3. Yield Curve (2s10s) (0.45): -11.1% (7D) — Confirmatory (worsening growth expectations)
   Flattening from a positive level usually reflects either lower growth expectations or a bid for duration safety.

4. VIX (16.0): -7.7% (7D) — Contradictory (improving / complacency)
   Falling VIX says markets are comfortable—useful as a “risk-on” read, but also consistent with late-cycle complacency.

5. Consumer Sentiment (49.5): -6.6% (7D) — Confirmatory (worsening demand risk)
   Further deterioration in already-low sentiment reinforces the idea that households are psychologically fragile.

90-Day Indicator Trends

Across the 90-day window provided (May 6 → late May readings, with “today’s” levels reflecting August 4), the dominant pattern is: labor remains stable, but leading consumer/cyclical signals deteriorate.

• Sahm Rule: 0.20 (May 6) → 0.13 (mid/late May) → 0.07 (June, current)
  Directionally, this is improving, and it is the single strongest argument that recession is not the base case. In typical cycles, the Sahm Rule does not sit near 0.07 if a recession is imminent.

• Initial claims: 189k (May 6) → 211k (mid-May) → ~197k (late July current)
  The claims series has been range-bound at a very low level; the recession playbook only activates with a persistent move higher (your stated watch threshold of 230k+ is reasonable as an early alert).

• Temporary help services: 2475k (May 6) → 2485k (late May) → 2499k (current, DANGER)
  Even if the level drift looks small in the snippet, the signal state is the key: temp-help has historically acted as an early downshift indicator. The danger flag here should be treated as a “leading edge” warning that could show up later in claims.

• Consumer sentiment: 53.3 (May) → 49.8 (late May) → 49.5 (July/current)
  A sustained slide toward/under 50 keeps pointing to a consumer-led growth scare. This is consistent with “spending holds up until it doesn’t”—especially with low savings.

• Financial conditions (NFCI): roughly stable around -0.52 in May and -0.55 now
  Conditions remain loose, limiting recession odds in the near term because tightening financial conditions are typically the transmission mechanism.

• Equities: S&P 500 ~7259 (May 6) → ~7473 (late May) → 7601 (today); Nasdaq ~25326 (May 6) → ~26656 (late May) → 25914 (today)
  The trend is broadly higher with volatility, consistent with “soft-landing pricing,” but it also sits alongside valuation danger signals (e.g., Nasdaq/GDP ratio flagged danger), which increases downside convexity if earnings expectations slip.

Net: the 90-day profile reads like late-cycle resilience with a consumer vulnerability. Your dashboard is correctly capturing the “two economies” problem—jobs OK, confidence not OK.

Stock Screener Signals

Today’s quant flags cluster into two regimes: (1) value/dividend defensives and (2) oversold growth mean reversion. The macro interpretation is not “recession is here”—it’s that the market is positioning for slower growth and higher dispersion, where investors want cash flow, balance-sheet durability, and selective rebound trades.

• The value/dividend names ($ARCC, $AIG, $BBY, $FNF, $HMC, $T, $BCE) imply a preference for carry and valuation discipline over long-duration growth. In a moderate-risk macro tape, these screens often appear when investors are uncomfortable paying peak multiples for cyclicality but are still willing to own risk with income as a cushion.

• The oversold growth flags ($CHTR, $TLK with low RSI) suggest there’s also a market cohort hunting for idiosyncratic mean reversion—not broad “risk-off,” but selective bargain hunting. That’s consistent with today’s overall score: not a recession call, but a market that is starting to demand margin of safety in certain pockets.

One caution: the displayed yields (e.g., quadruple-digit) are likely data artifacts rather than actionable dividend signals. The macro use is the clustering—income/value bias rising as consumer and fiscal risks grow.

Latest Economic Developments

Over the past several days, two macro narratives have dominated near-term recession pricing: Fed policy tension and oil/geopolitics.

• Fed: The Federal Reserve held rates steady at its late-July meeting, keeping the target range at 3.5%–3.75%, but reports highlighted internal dissent (a minority favoring a hike) and continued sensitivity to inflation—especially via energy. (axios.com)
  For recession risk, the key point is that policy is not (yet) tightening further—but the reaction function is not fully dovish, which keeps the risk of “policy staying restrictive longer than growth can handle.”

• Jobs data (high-frequency): The latest weekly claims print (week ending July 25) came in at 197,000, with the 4-week average around 202,750, underscoring that layoffs remain historically low. (apnews.com)
  This remains the strongest counterweight to the consumer-stress story.

• Markets & oil: On Monday, August 3, U.S. stocks rallied near record territory as oil prices fell and Treasury yields eased; Brent fell roughly 4.7%, and the 10-year yield moved down (reported around 4.68% from 4.75%). (apnews.com)
  The macro takeaway: the market is currently treating energy as the marginal inflation variable—and therefore as the marginal policy variable.

• Manufacturing: June’s ISM Manufacturing PMI stayed in expansion at 53.3, with commentary emphasizing that headline expansion coexists with a still-soft employment component—important because the “next turn” in recessions usually arrives through labor. (ismworld.org)

Near-Term Outlook (Next 30 Days)

The next 30 days are likely to be determined by whether consumer pessimism stays psychological—or becomes behavioral and labor-visible.

Key catalysts:

• July Employment Report (Friday, August 7, 2026): this is the single biggest macro release in your stated window. Markets will focus on unemployment rate (currently 4.2%), participation, and wage growth. (kiplinger.com)
• Claims path (weekly): a sustained move toward 230k+ would change the risk score rapidly because it would signal that temp-help weakness is “leaking” into broader layoffs.
• Energy/oil headlines: oil-driven inflation anxiety can keep long rates elevated and pressure real incomes—especially with sentiment and savings already weak.

Base case (next month): sluggish expansion with rolling pockets of weakness, risk score oscillating in the mid-to-high 30s unless claims rise or the unemployment rate starts trending up.

Long-Term Outlook (3-6 Months)

At the 3–6 month horizon, recession odds are mostly about sequence:

1. If labor holds: The economy can tolerate weak sentiment and low savings longer than bears expect—especially with easy financial conditions and tight credit spreads. In that path, the score drifts sideways (mid-30s to low-40s) and recession risk remains moderate but not acute.

2. If labor cracks: The setup is classic: temp-help down + sentiment depressed + delinquencies rising creates a high sensitivity to shocks. Once unemployment rises enough to lift the Sahm Rule meaningfully (even to the 0.2–0.3 zone), risk can jump quickly because household cash buffers are thin and spending can retrench abruptly.

Structurally, the dashboard is highlighting a U.S. economy that looks like “late-cycle without the spike in unemployment yet”: markets near highs, credit calm, but household psychology and buffers deteriorating. Historically, that combination tends to produce either:

• a soft landing if inflation/energy cool and real income stays positive, or
• a sudden demand air-pocket if a shock hits and hiring freezes become layoffs.

What to Watch

Hard thresholds (dashboard-relevant):

• Initial claims: sustained >230k (early warning), and especially acceleration toward the 250k+ zone.
• Sahm Rule: any persistent uptrend; a move from 0.07 toward 0.20+ would be an early regime change.
• Temp-help: continued declines; treat it as the “canary” for broader payroll softness.
• Consumer stress: savings rate staying near ~2–3% while delinquencies rise is the recipe for a consumption pullback.
• Credit spreads: HY OAS breaking above ~350–400 bps would be an early market confirmation of recession risk.
• Oil and inflation expectations: if energy re-accelerates, it can force tighter policy or keep long yields high—both adverse for housing and consumer credit.

Event calendar (next few weeks):

• August 7, 2026 jobs report
• Ongoing weekly claims releases
• FOMC minutes around ~August 20 (market sensitivity to dissent and inflation risks) (kiplinger.com)

Sources

• recessionpulse.com
• fred.stlouisfed.org
• conference-board.org
• bankingjournal.aba.com
• data.sca.isr.umich.edu