Recession Risk 34/100 — July 10, 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. The dashboard continues to describe an economy that is slowing but not cracking, with the highest-weight near-term labor tripwires still comfortably “off.” The key offsetting forces remain (1) soft-data stress (sentiment, some labor “quality” measures like quits and temp help) versus (2) hard-data resilience (claims still low, financial conditions loose, credit spreads tight). Net: the next-90-days recession window looks moderate—not imminent.

Score Trend — Last 30 Days

The last 30 days were a stability-with-spikes regime. The score started at 34 on 2026-06-10, ended at 34 on 2026-07-10, and posted a range of 33–44 with a 36 average across 31 samples. That distribution matters: the average drifted higher than the endpoint, which usually means “stress pockets” are appearing but failing to persist.

The shape is best described as mean-reverting with brief risk flares. The max print (44) suggests the model periodically “believed” recession odds were quickly rising—typically what you see when a cluster of market/financial signals temporarily aligns with weaker labor or activity. But the repeated returns to 34 over the final stretch (including 34 on 7/1, 7/2, 7/6, 7/8, 7/9, 7/10) indicate those flares did not convert into a durable deterioration across the higher-weight indicators (claims/Sahm/financial conditions).

In practical terms: this is not an “accelerating toward recession” tape; it’s an economy where fragile expectations and select cyclicals keep throwing warning flags, while the core recession engines (labor + credit) remain too steady to validate a near-term downturn call.

Key Drivers

1. Real-time labor stress remains muted (supports MODERATE, not ELEVATED).

   • Initial jobless claims: 215k for the week ending July 4, 2026, down 2k w/w—still consistent with historically healthy layoff conditions. (apnews.com)
   • The AP report also notes continued claims up to ~1.81 million (week ending June 27), a mild “creep” but not a break. (apnews.com)
   • Your Sahm Rule: 0.07 (SAFE) remains far from the 0.50 trigger—one of the most important reasons the model refuses to move into elevated risk.

2. The yield curve is no longer screaming “imminent recession,” but it still argues for caution.

   • Your 2s10s is +38 bps (WATCH): a re-steepened curve historically shifts the risk window outward versus the late-inversion phase, when recession odds typically rise fastest.
   • This is consistent with the “moderate/late-cycle” narrative: the curve is not a green light on growth, but it reduces the probability of a near-term (1–3 month) cliff.

3. Credit is not pricing recession—high-yield spreads remain tight.

   • HY OAS ~267–272 bps (SAFE in your system) is still a “risk-on / default-risk contained” signal. (conference-board.org)
   • Tight spreads don’t guarantee macro safety—but historically, true recession setups tend to show spread widening well before layoffs surge.

4. Financial conditions remain loose, which delays transmission of “soft data” pessimism into “hard data” contraction.

   • Your Chicago Fed NFCI: -0.52 (SAFE) indicates easy overall conditions (broadly supportive of credit creation and risk appetite).
   • With conditions loose, it typically takes a larger shock—policy, oil, credit event, or labor rollover—to flip growth negative quickly.

5. The economy is sending mixed “growth quality” labor signals: quits + temp help are weak even while claims are fine.

   • JOLTS quits rate: 1.9% (WARNING)—households appear less confident about job-to-job mobility.
   • Temporary help: 2,499k (DANGER)—a classic early-cycle-late-cycle labor canary, consistent with hiring caution.
   • This is the model’s core tension: low layoffs vs shrinking labor optionality.

6. Sentiment is “crisis-level” and persistent, but it hasn’t yet been validated by a collapse in spending/employment.

   • UMich sentiment: 44.8 (DANGER) (May), while June final rebounded to 49.5—still depressed. (sca.isr.umich.edu)
   • When sentiment is this low, recession risk can rise quickly if labor softens—but right now, that bridge hasn’t been crossed.

Category Breakdown

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Mixed but not broken: core activity and labor tripwires are mostly stable, with a couple of “quality” warnings (temp help, quits) preventing a lower score.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary signals are not corroborating imminent contraction in aggregate; they lean “late-cycle slowdown” rather than recession.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing is the clearest cyclical soft spot (starts/permits below trend), consistent with affordability constraints and late-cycle cooling.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business-side activity is holding up in the model, which aligns with the broader “slowdown, not shutdown” thesis.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  The consumer looks increasingly rate-sensitive: delinquencies and debt-service burdens are rising enough to keep this bucket lit.

• Market Signals: 6 safe / 3 watch / 5 danger
  Markets are sending a split signal: index levels and volatility say “calm,” while valuation and macro-ratio indicators say “fragile” and “overextended.”

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity looks less buffered (notably ON RRP depletion), which increases vulnerability to a funding or Treasury-volatility shock.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency signals are not broadly flashing red yet; claims are fine, but the “watch/danger” items imply sensitivity to any labor inflection.

Biggest Movers

1. Freight Transportation Index: +350.0% (7D) — confirmatory (worsening risk in interpretation)
   The magnitude is large, but the indicator remains DANGER in your system; “big % change” here is likely a normalization artifact off a depressed base rather than a clean recovery signal.

2. GDP Growth (QoQ annualized): +320.0% (7D) — contradictory (improving)
   The jump implies the nowcast/estimate moved from “near stall” toward ~2.1%, pushing against recession timing.

3. NY Fed Recession Probability: +159.7% (7D) — confirmatory (worsening)
   Even if the level remains moderate in your dashboard framing, the direction of travel says the model-based probability is rising quickly, a yellow flag for the next 1–2 data cycles.

4. ON RRP Facility: -99.2% (7D) — confirmatory (worsening liquidity buffer)
   A near depletion reduces the system’s shock absorbers, making markets more sensitive to Treasury settlement, bill supply, and funding volatility.

5. SLOOS: +52.8% (7D) — confirmatory (worsening)
   Faster tightening in senior loan officer conditions typically leads real activity by a few quarters; this is a slow-burn recession accelerant rather than a next-month catalyst.

90-Day Indicator Trends

Your 90-day history block is incomplete (many series show April–May snapshots rather than full daily continuity), but there are still clear directional stories when we compare the available points to today’s readings.

Labor: low layoffs, weaker “quality”

• Initial claims in the history range around ~189k–219k in April/May, and the latest print is 215k (week ending July 4). That’s a modest re-acceleration from the May low, but still firmly “SAFE” behavior. (apnews.com)
• Sahm Rule was shown around 0.20 in April/May; today is 0.07. Directionally, that is less recession-like—the labor market may be cooling at the margin, but the “Sahm math” isn’t close.

Activity: modest growth, not contraction

• GDP Growth in the history oscillates between 0.5% and ~2.1%; today is 2.1% (WATCH). That’s consistent with slow-but-positive output.
• Industrial production shows 101.8–102.6 in April/May and is 102.6 today (SAFE)—steady, not rolling over.

Sentiment: deeply depressed, only partially rebounding

• History shows 56.6 in mid-April, then 53.3 by late April/early May; today you cite 44.8 (DANGER) (May), while the official UMich site shows June final 49.5 (still depressed). (sca.isr.umich.edu)
• Net: sentiment has deteriorated meaningfully versus early spring, even with a June bounce—this keeps “tail risk” alive because sentiment collapses often precede consumption pullbacks when labor weakens.

Financial conditions & markets: easier, risk-on, but valuation risk rising

• NFCI moved from about -0.43 to -0.52 in the spring window—easier conditions.
• Equity indexes in your history trend higher (S&P from ~6,783 in April to >7,200 by early May; and you now show ~7,544). The macro implication is that wealth effects and risk appetite remain supportive, but it also increases air-pocket risk if earnings guidance or rates surprise.

Housing: cooling bias

• Building permits slipped from ~1,386k to ~1,372k in late April/early May; today you show 1,410k (WATCH), while housing starts: 1,177k (WARNING) signals broader weakness.
• Housing remains a drag channel, even if permits aren’t collapsing.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) and a couple oversold growth names (CHTR, TLK). In a recession-risk context, that mix is important: it suggests positioning that is less about chasing high-beta momentum and more about cash-flow, balance-sheet durability, and yield—even though broad equity indexes are near highs.

Two interpretations matter:

1. Defensive carry preference is rising under the surface.
   When screens increasingly surface financials/insurers (AIG), telecom (T), and income vehicles (ARCC), it often reflects investors seeking income + valuation support rather than pure cyclical growth. That’s consistent with a moderate risk score: not panic, but a desire to own something that works if growth slows.

2. “Oversold growth” flags can be a canary for micro-fractures.
   CHTR (RSI 28) and TLK (RSI 30) point to pockets of stress—often rate-sensitive or leverage-sensitive—despite calm index-level volatility (VIX ~16.9). That divergence aligns with your model: headline markets safe, but underlying fragility keeps the risk score from dropping.

One note: the listed dividend yields (e.g., ARCC 1002%) are clearly data-quality artifacts rather than investable realities. Treat the screen as a factor signal (value/dividend/oversold), not a literal yield list.

Latest Economic Developments

Labor market (high-frequency): Jobless claims remain low. The Labor Department report summarized by AP showed initial claims at 215,000 (week ending July 4, 2026) and continued claims around 1.81 million (week ending June 27). (apnews.com) This combination—low initial claims with slightly higher continuing claims—fits a “cooling via slower re-hiring,” not a “layoff wave.”

Fed policy and communications: The June 16–17 FOMC minutes were released July 8, 2026, and coverage emphasizes internal division: most officials still see plausible paths where inflation either cools toward 2% or stays sticky, with a few seeing a case to hike at the June meeting even though the committee held steady. (investing.com) This matters for recession odds because it keeps the near-term policy function in “wait-and-see,” lowering the chance of an immediate tightening shock—but raising the risk of a later surprise if inflation re-accelerates.

Market tone (past 48 hours): Equity markets stabilized after oil/geopolitical volatility. AP market coverage notes the S&P 500 rose ~0.8% on Thursday (July 9) and Treasury yields eased (10-year around 4.54% in that report), while oil prices gave back some prior gains. (apnews.com) In the risk model, that keeps financial conditions easy and delays recession dynamics—unless a new shock hits energy or rates.

Near-Term Outlook (Next 30 Days)

Base case for the next month: moderate risk, range-bound score, with the key swing factor being whether labor “quality” weakness turns into labor “quantity” weakness (claims, unemployment, payroll breadth).

Catalysts / calendar to watch:

• CPI (June 2026) release: Tuesday, July 14, 2026 (8:30 a.m. ET) per the BLS CPI release schedule page. (bls.gov)
• UMich preliminary July sentiment: Friday, July 17, 2026 (10 a.m. ET) per the UMich site. (sca.isr.umich.edu)
• FOMC meeting: July 28–29, 2026 per the Fed’s calendar. (federalreserve.gov)

What would push the score higher (toward 40–60 / ELEVATED):

• Initial claims sustaining above ~250k and/or continued claims accelerating materially for several weeks.
• A clear move in Sahm Rule momentum (not near today).
• HY spreads breaking out meaningfully from the ~270 bps neighborhood into a widening regime (often a “credit lead” on layoffs).

What would push it lower (toward 20–30 / LOW-MODERATE):

• Temp help stabilizing (or turning positive), quits improving, and sentiment rebounding without inflation forcing the Fed’s hand.

Long-Term Outlook (3-6 Months)

The 3–6 month window is where today’s “mixed” picture becomes more consequential. Historically, recessions tend to require a reinforcement loop: tightening credit → hiring freeze → layoffs → spending pullback → profits down → credit widens. Right now, that loop is not closed because credit and financial conditions are still easy and layoffs remain contained.

However, the longer-term risk is composition:

• Households are more rate-sensitive than the headlines imply. A 3.0% savings rate (WARNING) plus rising delinquencies (watch) means the consumer has less buffer if the labor market softens.
• Labor leading indicators are the yellow flags. Temp help in DANGER and quits in WARNING suggest firms are already “quietly defensive.” If claims turn, the transition from “slow growth” to “recession risk spike” can be fast.
• Policy risk is two-sided. Minutes coverage highlights that while many officials see room to hold or even ease modestly by year-end, others still see a case for hiking—so a hot inflation sequence could force policy tighter into a slowing economy. (investing.com)

Net for 3–6 months: recession risk is not priced as imminent, but the economy is operating with thin behavioral buffers (sentiment, savings, labor optionality). That’s the classic setup where the score can stay moderate for weeks—then jump quickly if one high-weight component (claims/spreads) breaks trend.

What to Watch

Hard thresholds (score movers):

• Initial claims: sustained >250k, then >275k as an acceleration threshold.
• Continued claims: a clean upward trend (3–6 week rise) matters more than any one print.
• HY OAS: watch for a decisive widening above the high-200s into the 350–450 bps zone (regime change).
• 2s10s curve: steepening driven by front-end cuts can be benign; steepening driven by long-end inflation/fiscal term premium can be destabilizing.

Near-term events:

• July 14 CPI (inflation surprise risk). (bls.gov)
• July 17 UMich prelim (do depressed expectations persist, or rebound?). (sca.isr.umich.edu)
• July 28–29 FOMC (policy path clarity; market reaction function). (federalreserve.gov)
• Ongoing: oil/geopolitical headlines—recent market moves show energy still has the power to swing yields and risk sentiment quickly. (apnews.com)

Sources

• apnews.com
• equibles.com
• stlouisfed.org
• sca.isr.umich.edu
• prnewswire.com
• economics.td.com
• federalreserve.gov