Recession Risk 38/100 — July 11, 2026
Recession risk over the next 90 days is MODERATE, not elevated, because the highest-weight real-time triggers are not flashing: the Sahm Rule remains well below threshold and layoffs are still low (initial claims 215k for week ended July 4, 2026). The yield curve has re-steepened into positive territory (your 2s10s ~+0.38), consistent with late-cycle cooling but not an imminent contraction signal by itself. Growth is slowing at the margin: June payrolls were only +57k with unemployment at 4.2% (July 2, 2026 BLS), and Atlanta Fed GDPNow for 2026:Q2 fell to ~1.2–1.3% in early July (down sharply from ~2.5% late June). Offsetting that, leading indicators are not deteriorating broadly (Conference Board LEI +0.1% in May; six‑month change +0.9%), credit remains calm (HY OAS ~2.72% as of July 6, 2026), and the Fed is on hold at 3.50%–3.75% (June 17, 2026), keeping near-term policy shock risk contained.
Recession Risk Score: 38/100 — MODERATE (+4 vs 30 days ago)
Today’s Recession Risk Score is 38/100 (MODERATE), up +4 points vs 30 days ago (34 → 38). The score is rising modestly, but it is not being driven by the high-conviction “real-time” recession triggers (notably layoffs and the Sahm Rule), which remain benign. Instead, risk is being pulled higher by a mix of late-cycle labor cooling, pockets of cyclicality stress (temp help + freight), and market/valuation excess that raises fragility even if the macro baseline stays intact.
Score Trend — Last 30 Days
The last 30 days show a net grind higher: Start 34 → End 38 (+4), with a min of 33, max of 44, and avg 37 (31 samples). The shape is best described as range-bound with brief spikes rather than a smooth uptrend—consistent with a market and data backdrop where recession odds are debated, but not compounding relentlessly.
The max reading (44) matters: it signals that the system is capable of “jumping” when a handful of fast-moving indicators deteriorate together (usually some combination of growth nowcasts, labor breadth, and market stress proxies). But the last 10 readings show mean reversion back into the mid/upper-30s (multiple 34 prints), followed by today’s return to 38—more consistent with late-cycle wobble than an imminent contraction.
Key Drivers
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Labor market is cooling—but layoffs are still not rising
- June payrolls: +57k; unemployment: 4.2% (BLS release dated July 2, 2026). (bls.gov)
- Initial jobless claims: 215k (week ended July 4, 2026)—still low, consistent with contained layoff intensity. (apnews.com)
Interpretation: Hiring is slowing, but the labor market is not yet behaving like a recession prelude because separations remain restrained.
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Sahm Rule remains far from trigger
- Sahm Rule: 0.07 (SAFE) vs the typical 0.50 recession threshold (your framework).
Interpretation: This is the single most important “near-term recession” guardrail in the model today—still firmly non-signaling.
- Sahm Rule: 0.07 (SAFE) vs the typical 0.50 recession threshold (your framework).
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Growth nowcasts have downshifted sharply from late June
- Atlanta Fed GDPNow estimates for 2026:Q2 fell to about 1.2% on July 1 from ~2.5% on June 25. (atlantafed.org)
Interpretation: This is a meaningful “direction of travel” change—less about recession, more about late-cycle deceleration becoming the base case.
- Atlanta Fed GDPNow estimates for 2026:Q2 fell to about 1.2% on July 1 from ~2.5% on June 25. (atlantafed.org)
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Yield curve is no longer warning the way it does in inversion regimes
- 2s10s ~ +0.38 (WATCH) and 2s30s 0.85 (SAFE) in your dashboard.
Interpretation: A positive curve reduces immediate recession odds versus inversion periods—but the steepening can also reflect cooling growth expectations and potential policy easing expectations later.
- 2s10s ~ +0.38 (WATCH) and 2s30s 0.85 (SAFE) in your dashboard.
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Credit is calm—spreads do not corroborate recession stress
- HY OAS ~270 bps (SAFE) in your readings; FRED prints show HY OAS around ~2.7% in recent data. (fred.stlouisfed.org)
Interpretation: Tight spreads argue against a near-term funding shock, and historically you usually need spread breakouts to validate recession calls.
- HY OAS ~270 bps (SAFE) in your readings; FRED prints show HY OAS around ~2.7% in recent data. (fred.stlouisfed.org)
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Late-cycle cyclicals are flashing: temp help + freight
- Temporary Help Services: 2,499K (DANGER)
- Freight Transportation Index: 0.3 (DANGER)
Interpretation: These are classic early-warning lenses. They don’t “cause” recession, but they often detect it early—so the model has to respect them.
Category Breakdown
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Primary Indicators: 3 safe / 4 watch / 2 danger
Mixed. The system is essentially saying: baseline macro is okay, but the trend is deteriorating at the margins. -
Secondary Indicators: 2 safe / 0 watch / 1 danger
Secondary signals are not broad-based weak, but the presence of a danger print suggests pockets of deterioration that could spread if labor worsens. -
Housing & Construction: 0 safe / 1 watch / 1 danger
Housing is a clear soft spot: permits WATCH and starts WARNING/DANGER imply a sector that can drag on growth if it rolls over further. -
Business Activity: 2 safe / 1 watch / 0 danger
Business activity is holding up better than the labor rate-of-change story implies—consistent with slowdown, not contraction. -
Consumer Credit Stress: 0 safe / 3 watch / 1 danger
Stress is building at the household margin (delinquencies/DSR/savings). This is not yet acute, but it is a plausible transmission channel. -
Market Signals: 7 safe / 2 watch / 5 danger
Markets are simultaneously “calm” (low VIX, highs in indexes) and “fragile” (valuation/GDP ratios, copper-gold). This is classic late-cycle behavior. -
Liquidity: 0 safe / 1 watch / 2 danger
Liquidity is a risk amplifier. The RRP depletion story matters because it can change the plumbing even when growth is merely slowing. -
Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
Real-time remains mixed: low claims help a lot, but any sustained climb in claims would re-price risk quickly.
Biggest Movers
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ON RRP Facility ($545M): +21938.6% (7D)
Confirmatory (worsening fragility): depletion/volatility in overnight liquidity buffers increases the probability of funding “surprises,” even if it doesn’t guarantee them. -
Conference Board LEI (1.7): +673.3% (7D)
Contradictory (improving): mechanically huge % change signals a base/scale effect. Directionally, LEI is not deteriorating broadly; the May print was +0.1% and the 6-month change +0.9%. (conference-board.org) -
SLOOS Lending Standards (8.1%): +52.8% (7D)
Confirmatory (worsening): tightening is modest but trending the wrong way—relevant because credit tightening typically hits SMEs and cyclicals first. -
NASDAQ / GDP Ratio (0.8248): +32.5% (7D)
Confirmatory (worsening fragility): valuation extremes increase downside convexity if earnings expectations reset in a slower-growth regime. -
NY Fed Recession Probability (5.9%): -29.9% (7D)
Contradictory (improving): this is a meaningful offset—probability measures are not corroborating imminent recession.
90-Day Indicator Trends
Your 90-day history window shows a consistent theme: the “hard recession” triggers are not trending worse, while late-cycle and market-fragility indicators are elevated and sticky.
Labor + real-time recession triggers
- Initial claims stayed low in the historical snapshots (e.g., ~219k mid-April and ~189k in early May within the history), and today you cite 215k for week ended July 4. That’s consistent with “no layoff wave.” (apnews.com)
- Sahm Rule in the provided history is ~0.20 in April/early May, and today it’s 0.07—an improvement versus the earlier window (less recession pressure).
Trend call: Labor is cooling via hiring (payrolls) more than firing (claims). That typically supports slowdown-without-recession until the firing margin turns.
Growth
- GDPNow is the cleanest inflection: ~2.5 (June 25) → 1.2 (July 1) for 2026:Q2. (atlantafed.org)
Trend call: Downshift is sharp enough that if it persists, it will likely show up in earnings guidance and capex sensitivity—even without recession.
Credit & financial conditions
- HY OAS has been hovering around the high-200s bp range (your 270 bps), consistent with risk appetite and easy refinancing conditions for most issuers. (fred.stlouisfed.org)
- Chicago Fed NFCI is -0.52 (SAFE), signaling loose conditions.
Trend call: Credit is not confirming recession risk—this is a major reason the overall score stays “moderate,” not “elevated.”
Housing
- Building permits (WATCH ~1.41M) and housing starts (WARNING ~1.18M) are pointing to soft construction momentum.
Trend call: Housing is not collapsing, but it’s weak enough that it can be a drag—especially if labor income growth cools further.
Markets: calm surface, fragile internals
- VIX 15.8 (SAFE) says “calm,” while NASDAQ/GDP (DANGER) and copper-to-gold (DANGER) say “pricing is stretched / cyclicals are fearful.”
Trend call: This divergence often precedes volatility spikes when macro disappoints, even if recession never arrives.
Stock Screener Signals
Today’s quant flags are dominated by “value dividend” exposures: ARCC, AIG, BBY, FNF, HMC, T, BCE, plus a couple oversold growth names (CHTR, TLK). The message is less about exuberant risk-on and more about cash-flow preference: investors screen into lower P/E, income-linked equities when growth uncertainty rises but credit spreads remain contained.
Two important nuances:
- Several listed yields are clearly data-artifact-level extreme (e.g., ARCC “1002%”, AIG “257%”). Treat these as signal-classification cues (income/value bias) rather than literal yield expectations.
- The presence of oversold growth flags (CHTR RSI 28; TLK RSI 30) suggests selective drawdowns under the surface—even while major indexes are near highs. That aligns with a “narrow leadership / valuation fragility” regime consistent with your market-signal dangers.
Latest Economic Developments
Fed policy narrative (last 48 hours): the key fresh macro development is the July 8 release of FOMC minutes from the June meeting. Reporting highlights indicate officials were divided on the inflation outlook and the future rate path, with emphasis on upside inflation risks and willingness to keep policy restrictive (or hike if inflation stays too high). (investing.com)
Macro implication: “On hold” does not mean “done.” A minutes-driven repricing risk remains: if upcoming inflation prints re-accelerate, markets may pull forward hikes—tightening financial conditions without the Fed moving today.
Labor market (recent week): jobless claims for the week ended July 4 were reported at 215,000—still historically healthy and consistent with low layoffs. (apnews.com)
Macro implication: absent a sustained claims uptrend, recession probability in the next 90 days is typically capped.
Markets (July 9–10): U.S. equities have been resilient and volatile around geopolitical headlines; AP’s market wrap notes the S&P 500 up 0.4% on Friday (July 10) and closing a strong week, while Treasury yields ticked higher and oil eased. (apnews.com)
Macro implication: risk assets are not pricing an imminent recession; instead they’re pricing growth slowdown with policy optionality—but that can flip quickly if earnings guidance follows GDPNow lower.
Near-Term Outlook (Next 30 Days)
Base case for the next month: slowdown continues, recession risk stays MODERATE, and the score likely trades mid-30s to low-40s unless labor cracks or credit reprices.
Key catalysts likely to move the score:
- Weekly initial claims: a shift from ~215k toward sustained 240k–260k+ would be an early “crack” signal (especially if continuing claims also climb).
- July 20, 2026 Conference Board LEI release (next scheduled release). (conference-board.org)
- Inflation prints: given the Fed-minutes emphasis on upside inflation risks, CPI/PCE surprises could tighten conditions via rates even without an FOMC move. (investing.com)
- Earnings season: watch for guidance that explicitly references slowing demand, rising delinquencies, or capex pauses—this is where the “GDPNow downshift” can become micro-confirmation.
Long-Term Outlook (3-6 Months)
Over a 3–6 month horizon, today’s dashboard composition argues for a two-track regime:
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Soft-landing track (still plausible):
- Low claims, low Sahm Rule, loose financial conditions, and tight HY spreads are the usual ingredients for “slowdown without contraction.”
- If inflation cools enough to keep the Fed on hold (or gently easing later), the economy can glide through with below-trend growth.
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Late-cycle rollover track (non-trivial):
- Temp help + freight in DANGER, weak sentiment, and household buffer erosion (low savings rate; rising delinquencies/DSR) are classic recession staging signals.
- In this track, recession doesn’t begin because GDPNow is 1.2%—it begins because labor demand breadth breaks, unemployment rises enough to move Sahm materially, and credit spreads gap wider.
Historically, the “tell” is whether the layoff margin turns. Right now, it hasn’t. That’s why the score is 38 (moderate), not 60+ (elevated/high).
What to Watch
Triggers (if these happen, expect the score to rise quickly):
- Initial claims: sustained move above ~250k and accelerating
- Sahm Rule: rising toward 0.30+ (and especially toward 0.50)
- HY OAS: breakout above ~350–400 bps (from ~270 bps today)
- Housing: starts/permits rolling lower for multiple releases (not one-off)
- Liquidity plumbing: renewed instability around short-term funding indicators as RRP remains effectively depleted
Scheduled / known events:
- Conference Board LEI — next release Monday, July 20, 2026 (10:00 a.m. ET) (conference-board.org)
- Ongoing: weekly claims every Thursday, plus the next major inflation and jobs releases that will shape the Fed reaction function implied by the July 8 minutes. (investing.com)