Recession Risk 38/100 — August 9, 2026

Recession Risk Score: 38/100 — MODERATE (+4 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), up +4 points versus 30 days ago (34/100 on July 10, 2026). The score is not signaling an imminent recession, but it is consistent with a late-cycle slowdown where risk can reprice quickly if labor-market weakness persists. The “hard” recession-confirmation triggers (e.g., Sahm Rule) remain well below threshold, while credit and broad financial conditions are still supportive. The tension is clear: markets are behaving like a soft landing, but several forward-looking labor and goods indicators are behaving like a rollover.

Score Trend — Last 30 Days

The 30-day window (July 10 → August 9, 2026) shows a move from 34 → 38 (+4), with a min of 34, max of 44, and average of 37. The shape is choppy but upward-biased, indicating the model is reacting to episodic “risk pulses” rather than a steady deterioration.

The notable feature is the spike to 44 on August 1, followed by a quick mean reversion back to the high-30s (38 on Aug 2; 34 on Aug 3; 38 on Aug 4–5; 34 on Aug 6; then 37–38 into Aug 9). This pattern usually implies: (1) no persistent stress in liquidity/credit, but (2) a growing sensitivity to labor/growth surprises. In other words, the system is behaving like a market that’s willing to “look through” weak prints—until it can’t.

Key Drivers

1. Labor market cooling is now visible in headline payrolls

   • The economy lost 23,000 jobs in July 2026, with large downward revisions to prior months, while the unemployment rate fell to 4.1% in part due to a shrinking labor force. (axios.com)
   • This combination (negative payrolls + lower unemployment via participation) is a classic late-cycle “false comfort” setup: the unemployment rate looks fine while employment momentum quietly breaks.

2. High-frequency layoffs remain tame (for now), limiting near-term recession odds

   • Initial jobless claims: 199k for the week ending Aug 1, 2026 (up 1k), with the 4-week average ~198,750—still historically low and consistent with only mild labor stress. (apnews.com)
   • This is the biggest “brake” on the risk score: recessions typically require a sustained claims uptrend, not a single weak payroll print.

3. Leading indicators are softening again

   • The Conference Board LEI fell -0.2% in June 2026 to 99.1, following a +0.1% gain in May; the Board notes the first-half decline is mild but directionally negative. (conference-board.org)
   • In our framework, LEI’s message is: forward momentum is fragile, and the economy is more exposed to a hiring shock.

4. Credit is still “too tight to panic”

   • High-yield spreads (HY OAS) remain tight around ~270–280 bps in mid/late July 2026—levels that usually correspond to low immediate default/recession stress. (ycharts.com)
   • This matters because recessions almost always come with widening credit spreads as financing conditions bite.

5. Financial conditions remain loose, supporting risk assets

   • Chicago Fed NFCI is roughly -0.55 (loose) in mid-July 2026, aligning with your “benign conditions” read. (fred.stlouisfed.org)
   • Loose conditions reduce the odds that a slowdown turns into a contraction—unless labor cracks accelerate.

Category Breakdown

Using the provided counts:

• Primary Indicators: 3 safe / 5 watch / 1 danger
  Primary is mixed: recession-confirmation triggers are not firing, but the “watch” cluster is large enough that another labor/growth disappointment could shift the center of gravity.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary reads as mostly stable, with one meaningful stress point contributing to the MODERATE score rather than ELEVATED.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing remains a pressure point: permits/starts are not collapsing, but the signal set is soft enough to matter if rates drift higher or credit tightens.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity is still holding, implying we’re closer to “slow growth” than “broad contraction.”

• Consumer Credit Stress: 1 safe / 2 watch / 1 danger
  This is an important slow-burn risk category: rising delinquency stress often shows up before the macro data fully rolls.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are sending a bifurcated message: indices/vol are calm (safe), but valuation/cyclical-ratio style signals are flashing late-cycle risk.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a non-trivial tail risk bucket—especially with ON RRP effectively depleted—though the real-world impact depends on funding-market behavior.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency is balanced but tense: claims look fine, but other real-time proxies are warning that momentum is weakening.

Biggest Movers

From the provided 7-day movers list:

1. ON RRP Facility ($1B): +2338.3% (7D)

   • Interpretation: Mechanical volatility off a tiny base; not a clean recession signal by itself.
   • Score impact: Mildly confirmatory (liquidity regime change raises fragility), but noisy.

2. Conference Board LEI (1.7): -117.4% (7D)

   • Interpretation: This looks like a data/normalization artifact (a level can’t “fall -117%” in a straightforward way). Directionally, LEI is softening, which is confirmatory for higher risk.
   • Score impact: Confirmatory (worsening).

3. Bank Unrealized Losses ($5155B): -90.3% (7D)

   • Interpretation: Also likely a series reset/measurement jump (your 90-day history shows intermittent prints like $500B vs $5155B). Treat as data noise unless corroborated.
   • Score impact: Contradictory if taken literally (improving), but low confidence.

4. Yield Curve (2s30s) (0.97): -81.3% (7D)

   • Interpretation: A sharp curve move can reflect growth/inflation repricing; however, with 2s10s still positive in your dashboard, the curve is not in classic inversion-warning mode.
   • Score impact: Slightly confirmatory (worsening if steepening is driven by front-end cuts/growth fear), but ambiguous.

5. NY Fed Recession Probability (4.8%): +45.7% (7D)

   • Interpretation: A relative jump off a low base; still low absolute risk, but trend is up.
   • Score impact: Confirmatory (worsening at the margin).

90-Day Indicator Trends

Your 90-day history (mostly May 11 → June 1 snapshots plus “today” readings) points to a familiar late-cycle profile: markets/financial conditions supportive, labor cooling, consumer constrained, and housing subdued.

Labor & recession triggers

• Sahm Rule: stable and low in the history (~0.13 through late May/early June) and SAFE today (-0.03)—nowhere near the 0.50 trigger.

  • Trend: improving vs early window (0.13 → -0.03).
  • Implication: recession is not confirmed by the unemployment-gap mechanism.

• Initial claims: drifted from ~200k → ~215k by late May/early June in your history; 199k today.

  • Trend: flat-to-better over ~60–90 days.
  • Implication: layoffs remain contained—the biggest reason the score isn’t higher.

• Unemployment rate: the 90-day block shows 4.3% in May; your “today” reading is 4.1% (but your narrative attributes part of the decline to labor-force shrinkage). (apnews.com)

  • Trend: slightly better on the surface; quality is mixed.

• Temporary help services: deeply negative in your system (~2485k in the window; 2505k today flagged DANGER).

  • Trend: still depressed; temp jobs are a classic early warning that hiring appetite is fading.

Growth, leading indicators, and income

• Conference Board LEI: your time series shows a stable ~1.7 then a sharp -0.3 print (late May/June), while the official June release is 99.1 level, -0.2% m/m. (conference-board.org)

  • Trend: “less bad” than 2025, but no longer reliably improving—consistent with MODERATE risk.

• Real personal income ex transfers: $16.7T → $16.5T in late May/early June history.

  • Trend: down modestly; not collapse, but deteriorating buffer.

• GDP growth (QoQ SAAR): ~2.1% → ~1.6% by late May in your history; 1.5% today (WATCH).

  • Trend: gradual deceleration (a classic late-cycle glide path).

Financial conditions, liquidity, and credit

• NFCI: around -0.51 to -0.52 in the window; -0.53 today. (fred.stlouisfed.org)

  • Trend: stable/loose.

• HY OAS: mostly high-270s in the window, tight today (271 bps SAFE). (ycharts.com)

  • Trend: stable tight spreads = no credit stress.

• ON RRP: collapsing toward effectively zero in your dashboard (and volatile in the history).

  • Trend: ongoing regime change; not automatically recessionary, but increases sensitivity to funding shocks.

Consumers and confidence

• UMich sentiment: fell from ~53 → ~49.8 in late May/June window; 49.5 today (DANGER). (data.sca.isr.umich.edu)

  • Trend: worsening into “crisis” territory—an important demand-side fragility signal.

• Personal savings rate: dropped from 3.6% → 2.6% in the window; 2.7% today (DANGER).

  • Trend: still dangerously low—implies consumers have limited shock absorption.

Markets/valuations

• S&P 500: ~7399 → ~7580 by late May; 7758 today (SAFE).
• Nasdaq: ~26247 → ~26973; 26691 today (SAFE).
• VIX: eased from ~18s → ~15.7; 15.2 today (SAFE).
  • Trend: risk appetite remains strong, which often delays recession but can also hide underlying deterioration until it breaks.

Stock Screener Signals

Today’s screener output is dominated by “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) with a couple of oversold growth names (CHTR, TLK). The mix suggests the market is simultaneously (1) hunting for yield/value in mature cash-flow businesses and financials, and (2) selectively buying beat-up growth where positioning looks washed out.

Two important takeaways:

• Defensive-carry preference is creeping in. Even though the broad indices are near highs, the screener’s emphasis on dividend/value looks like portfolio barbell behavior: investors keep exposure to risk-on equities, but they want income and lower multiples as insurance. That’s consistent with a MODERATE recession-risk tape—“soft landing base case, but hedged.”

• Some flags look mechanically extreme (yields). Several listed yields (e.g., ARCC 1002%, BBY 654%) are not plausible as standard trailing dividend yields, implying the screener’s yield field may be capturing special distributions, annualization quirks, or data issues. Treat the style signal (value/dividend, low P/E, mid RSI) as more reliable than the specific yield number.

Latest Economic Developments

Over the past 48 hours, the macro narrative has been dominated by labor-market downside surprise:

• July 2026 payrolls came in at -23k, the first negative monthly print since February, accompanied by meaningful downward revisions to prior months. (axios.com)
• The unemployment rate fell to 4.1%, but reporting emphasized that part of the improvement reflected a drop in labor-force participation / fewer people counted as unemployed. (apnews.com)

In contrast, the highest-frequency labor “tripwire” remains calm:

• Initial jobless claims are 199k for the week ending Aug 1, with the 4-week average just under 199k—still consistent with limited layoffs. (apnews.com)

This split matters for recession risk. Payrolls can be noisy month-to-month; claims typically confirm whether weakness is broad-based. For now, claims are telling us the negative payroll print is more likely hiring freeze / churn / measurement + revisions than an outright layoff wave.

On the leading/forward side:

• The Conference Board reported the LEI down -0.2% in June to 99.1, flagging some loss of forward momentum (even as the pace of contraction is milder than late 2025). (conference-board.org)

Near-Term Outlook (Next 30 Days)

Base case for the next month: MODERATE risk holds (mid-to-high 30s), with the balance of risks skewed upward if labor data follow-through appears.

Key catalysts likely to move the score:

• Weekly initial claims (every Thursday): the cleanest early warning. A sustained move away from ~200k toward the mid-200s would be a regime shift.
• Continuing claims / insured unemployment: if hiring slows, continuing claims usually trend higher even before initial claims spike.
• Next BLS employment report (August 2026 payrolls, released in early September): after a -23k July, a second weak print (or another heavy revision) would likely push the model toward ELEVATED quickly.
• Financial conditions/credit: watch whether HY OAS can stay pinned near ~270 bps. A break above ~350–400 bps would be a meaningful tightening signal.

Long-Term Outlook (3-6 Months)

The 3–6 month setup is best described as late-cycle asymmetry: the economy can keep expanding if layoffs remain contained, but the downside tail is growing because buffers are thinning and hiring momentum is weakening.

Structurally, three forces matter most:

1. Labor is the swing variable. With sentiment depressed and savings low, consumers need job stability more than ever. If labor goes from “cooling” to “cracking,” consumption can roll quickly.

2. Credit is the current shock absorber. Tight spreads and loose NFCI buy time. The risk is that a labor rollover triggers spread widening, which then feeds back into tighter lending and weaker capex/hiring.

3. Valuations leave less margin for error. With equity markets near highs and several valuation-style indicators flashing, a growth scare can transmit faster through wealth effects and confidence—even if the banking system is not in immediate distress.

Historical parallel (pattern, not prophecy): many pre-recession periods look like this—soft leading indicators + calm credit + complacent volatility—until a labor/credit inflection forces repricing.

What to Watch

Hard thresholds (model-relevant):

• Sahm Rule: watch for acceleration toward 0.50 (still far away today).
• Initial claims: sustained break above ~230k–250k would be a meaningful deterioration signal.
• HY OAS: sustained widening above ~350 bps would indicate credit stress is arriving.
• LEI: continued negative monthly prints would increase the probability that “slow growth” becomes “negative growth.”

Event calendar (next month):

• Weekly jobless claims (every Thursday)
• Next monthly jobs report (early September, covering August payrolls)
• Ongoing Fed communication and rate expectations shifts driven by labor/inflation surprises

Sources

No data available for this window.