Recession Risk 37/100 — July 13, 2026
Recession risk over the next 90 days is MODERATE: the labor market is cooling but not breaking, and financial conditions remain loose. The Sahm Rule is still safely below trigger (your tracker: 0.07), initial claims are low at 215k for the week ending July 4, 2026, and June 2026 payroll growth was positive (+57k) with unemployment at 4.2%. The yield curve has re-steepened (2s10s about +35 bps as of July 10, 2026), reducing near-term recession odds versus an inversion regime. Offsetting these positives, several forward-looking real-economy signals (temporary help, freight weakness, very low savings rate, and depressed sentiment) point to a continued growth scare rather than an imminent recession within 90 days.
Recession Risk Score: 37/100 — MODERATE (+3 vs 30 days ago)
Today’s Recession Risk Score is 37/100 (MODERATE), up +3 points from 34/100 on June 13, 2026. The near-term recession signal set still looks more “cooling” than “breaking”: layoffs are low, the Sahm Rule remains far from trigger, and broad financial conditions are easy. The reason the score is higher versus 30 days ago is that forward-looking fragility indicators (temp help, freight, sentiment, savings cushion, and valuation excess) continue to stack up—even while the labor market holds.
Score Trend — Last 30 Days
Over the last 30 days (June 13 → July 13, 2026), the score rose from 34 to 37 (+3), with a 33–44 range and a 37 average. The distribution matters: we didn’t grind steadily higher; we spiked to 44, then mean-reverted back to the high-30s—classic “growth scare” behavior rather than an unfolding recession regime.
The last 10 readings show that choppiness clearly: a low of 33 on July 4, then quick oscillations (37 → 34 → 38 → 34), then a small re-acceleration to 38 on July 11–12, easing slightly to 37 today. This pattern implies risk is elevated but not compounding, consistent with markets pricing “soft-landing-ish” outcomes while the real economy sends mixed “late-cycle” messages.
Key Drivers
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Labor market recession triggers remain inactive (near-term positive)
- Sahm Rule: 0.07 (SAFE) — far below the 0.50 trigger in your framework.
- Initial jobless claims: 215K (week ending July 4, 2026) — still consistent with low layoff intensity; continuing claims are ~1.814M (week ending June 27) per the same release. (apnews.com)
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Yield curve normalization reduces “inversion-regime” recession odds (positive)
- 2s10s: +0.35 (WATCH) and 2s30s: 0.89 (SAFE) indicate re-steepening—usually a better macro backdrop than persistent inversion.
- The message: the curve is no longer screaming “policy too tight,” but it’s also not signaling re-acceleration—more consistent with late-cycle cooling.
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Growth tracking is sub-trend but still positive (neutral-to-slight negative)
- Your dashboard shows GDPNow: 1.8% (WATCH), but the Atlanta Fed’s July 8 commentary pins the 2026:Q2 GDPNow estimate at 1.3% (down slightly from 1.4%). That’s expansion, but not a growth cushion if labor softens. (atlantafed.org)
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Financial conditions remain easy (positive), but this can mask fragility
- Chicago Fed NFCI: -0.52 (SAFE) — loose conditions support activity and delay credit events.
- HY OAS: 270 bps (SAFE) — tight spreads imply markets are not demanding much compensation for default risk (good for growth; also a complacency tell).
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Forward-looking “fragility” is concentrated in staffing, goods, and households (negative)
- Temporary Help Services: 2499K (DANGER) — temp help is a frequent early-cycle labor canary; contraction here is a meaningful warning even when headline payrolls stay positive.
- Freight Transportation Index: 0.3 (DANGER) — persistent goods-side weakness.
- Personal savings rate: 3.0% (WARNING) — a thin buffer; it increases the probability that any labor cooling translates into consumption downdrafts.
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Risk premia and valuation excess keep tail risk non-trivial (negative)
- NASDAQ/GDP: 0.8248 (DANGER) plus S&P 500/GDP: 0.2377 (WARNING) indicates market wealth is running ahead of the macro base—fine until earnings or liquidity tightens.
- VIX: 15.8 (SAFE) + indexes near highs suggests complacency can amplify any growth/inflation surprise.
Category Breakdown
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Primary Indicators: 3 safe / 4 watch / 2 danger
Labor stress is not flashing red, but the “watch” cluster (unemployment drift, quits, income trend) says the labor market is cooling rather than re-tightening. -
Secondary Indicators: 2 safe / 0 watch / 1 danger
Secondary signals are broadly supportive, but the single danger flag reinforces that the next deterioration would likely come from leading indicators, not coincident ones. -
Housing & Construction: 0 safe / 1 watch / 1 danger
Housing is soft, consistent with late-cycle dynamics: permits/starts below trend usually lead broader slowdowns by a few quarters. -
Business Activity: 2 safe / 1 watch / 0 danger
Business activity is not recessionary, aligning with your “growth scare” base case. -
Consumer Credit Stress: 0 safe / 3 watch / 1 danger
The credit complex is tightening at the margin (delinquencies, debt service), a channel that can turn quickly if labor weakens. -
Market Signals: 7 safe / 2 watch / 5 danger
Markets are saying “risk-on,” but the danger count reveals it’s a valuation/liquidity-driven risk-on, not a cheap-cyclical recovery signal. -
Liquidity: 0 safe / 1 watch / 2 danger
Liquidity indicators are not comfortable (notably ON RRP depletion), increasing sensitivity to funding shocks. -
Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
High-frequency signals imply monitor closely: conditions can pivot fast with CPI, claims, and credit spreads.
Biggest Movers
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ON RRP Facility ($545M): +10,609.5% (7D) — Confirmatory (worsening tail risk)
Mechanically, the base effect is huge from very low levels; directionally, it underscores a liquidity regime where the RRP backstop is largely gone. -
Bank Unrealized Losses ($5155B): +931.1% (7D) — Confirmatory (worsening tail risk)
This move is too large to interpret as pure fundamentals without methodology context, but the signal intent is clear: duration/valuation sensitivity inside banks remains a fragility point. -
GDP Growth (QoQ annualized) (2.1%): +320.0% (7D) — Contradictory (improving)
This suggests some near-term growth re-acceleration in your tracker. It pushes against recession risk—but may not be durable if household buffers keep shrinking. -
NY Fed Recession Probability (5.9%): +270.4% (7D) — Confirmatory (worsening, but still low level)
The percent change is large off a small base. The level (~5.9%) still reads as low risk, but the rate-of-change is worth watching. -
Conference Board LEI (1.7): -117.4% (7D) — Confirmatory if real; otherwise likely a data artifact
Your 90-day history shows LEI flipping between +1.7 and -0.3 frequently, suggesting either revisions, a transform, or ingestion noise. Treat as “directionally supportive recently” per your narrative, but don’t overweight the day-to-day swing without confirmation.
90-Day Indicator Trends
Your 90-day history window (as provided) captures April → early May 2026 observations for many series, and today’s dashboard provides the July 13, 2026 “current” snapshot. Using both, the macro story is: labor remains okay, financial conditions eased, but household and goods-cycle buffers deteriorated.
Labor + income: cooling, not breaking
- Initial claims have remained in a tight low band in the history (e.g., 219K on Apr 14, 207K on Apr 18, 189K on May 1, 200K on May 9), and today is 215K (week ending Jul 4). That’s not a recession claims trend; it’s stable-to-slightly higher vs the very best prints. (apnews.com)
- Sahm Rule improved from 0.20 in mid-April/early May history to 0.07 today — an outright risk reduction.
- Quits rate was 1.9% (warning) in April; it briefly ticked to 2.0% in early May history, and is 1.9% today (WARNING). This fits a labor market where workers feel less confident than 2018–2019-style expansions.
Goods + production: mixed, with freight the weak link
- Industrial production index in history moved from 102.6 (Apr 14) to 101.8 (Apr 18 onward); today you report 102.6 (SAFE), implying a rebound vs 30–60 days back.
- Freight index stayed danger throughout history (e.g., -0.6 to +1.5 but still flagged danger); today it’s 0.3 (DANGER)—still a persistent warning that the goods economy is not healthy.
Housing: trend deterioration in the “lead” variables
- Building permits slid in the history from 1386K (Apr 14) to 1363K (May 8–10); today’s 1410K (WATCH) is better than the May lows but still framed as slowing.
- Housing starts were ~1502K (SAFE) in late April/early May history; today they’re 1177K (WARNING)—a material drop that keeps housing a leading drag.
Financial conditions: easier, but liquidity buffers thinner
- NFCI eased from about -0.43 (Apr 14) to -0.52 (May 1 onward); today remains -0.52, consistent with loose conditions.
- VIX drifted down through April/May history (high teens to mid/high teens); today’s 15.8 is even calmer—supportive for risk assets, but consistent with complacency risk.
Household buffer: clearly worse
- Savings rate fell from 4.0% in April history to 3.6% by early May; today it’s 3.0%—the trend is down, and that is one of the most important “recession accelerants” if unemployment rises.
Stock Screener Signals
Today’s flagged list is dominated by “value dividend” screens (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) plus a couple “oversold growth” names (CHTR, TLK). That combination typically appears when the market is still risk-on at the index level, but positioning is rotating toward carry and cash-flow durability rather than pure cyclical beta.
Two interpretive takeaways for recession risk:
- Defensive carry is still in demand. The prominence of high-yielding, value-ish names suggests investors are emphasizing income + valuation support—a common behavior in late-cycle slowdowns where rates are expected to be stable-to-lower, or where growth dispersion is widening.
- Selective oversold growth signals a barbell. CHTR (RSI 28) and TLK (RSI 30) indicate parts of growth/communications are washed out even as mega-cap tech is expensive by macro ratios. That’s consistent with your broader market read: indexes are strong, but underneath the surface the market is uneven.
One caution: the yields shown (e.g., ARCC 1002%) look mechanically distorted (likely data scaling/annualization issues). Treat the classification (value/dividend vs oversold growth) as the useful signal, not the literal yield figures.
Latest Economic Developments
- Jobless claims (latest released Thu, July 9, 2026): Initial claims fell to 215,000 for the week ending July 4, while continuing claims rose to about 1.814 million for the week ending June 27—a mix that still reads “stable labor market with slower hiring.” (apnews.com)
- Fed communication / minutes (released Wed, July 8, 2026): Reporting on the June meeting minutes indicates officials were divided on the inflation path and the appropriate rate outlook, with many seeing policy around unchanged to slightly lower by year-end—but with meaningful internal disagreement. (apnews.com)
- Policy baseline remains “hold” (June 17, 2026 FOMC): The Fed maintained the 3.50%–3.75% target range, consistent with your “3.6%” effective framing. (federalreserve.gov)
- Growth tracking: The Atlanta Fed’s GDPNow estimate for 2026:Q2 was 1.3% on July 8 (down from 1.4% on July 7), reinforcing the “sub-trend but positive” view. (atlantafed.org)
- Immediate calendar: The market’s next macro catalyst cluster is this week (July 13–17, 2026), led by CPI on Tuesday, July 14, and Fed speaker risk around those prints. (kiplinger.com)
Near-Term Outlook (Next 30 Days)
Base case for the next month: risk stays MODERATE and oscillates in the mid-to-high 30s, unless inflation surprises force the Fed to re-price hikes or unemployment accelerates. With the curve positive and claims low, it’s hard to make a 30-day recession call—but the thin household savings cushion and temp help contraction mean any labor deterioration could transmit quickly.
Catalysts most likely to move the score in the next 30 days:
- Inflation prints (starting July 14 CPI): A hotter-than-expected CPI could lift real yields, widen credit spreads, and pressure housing/consumer credit—pushing the score higher. (kiplinger.com)
- Weekly claims trend: A shift from the ~215K regime toward mid-240s+ for several weeks (and rising continuing claims) would be the cleanest early warning that labor is rolling.
- Credit spreads and bank funding: HY OAS is tight now, but it tends to reprice fast. A sustained move wider would convert today’s “fragility” into actual stress.
Long-Term Outlook (3-6 Months)
Over a 3–6 month horizon, the economy looks set up for continued sub-trend growth with asymmetric downside—i.e., a growth scare can persist without a recession, but the probability of a sharper slowdown rises if the labor market loses its footing.
Three structural points dominate:
- Labor is the anchor. As long as layoffs remain contained (claims staying near ~200–230K) and unemployment rises only gradually, recession odds remain moderate rather than high.
- Household buffers are thin. A 3.0% savings rate is a classic vulnerability: it doesn’t cause recessions by itself, but it makes consumption more sensitive to shocks (hours cuts, wage slowing, delinquency creep).
- Liquidity/valuation are the tail-risk amplifier. Easy NFCI and low VIX support the expansion, but elevated valuation ratios (especially NASDAQ/GDP) increase the chance that an earnings or policy shock becomes a risk-asset drawdown, which then feeds confidence and spending.
Historically, the “danger cluster” you have today (temp help + freight + sentiment + low savings) is consistent with late-cycle slowdown episodes that can either resolve into a soft landing or tip into recession depending on labor and credit. Right now, labor/credit are still acting as stabilizers.
What to Watch
Hard thresholds (score-up triggers):
- Sahm Rule: acceleration toward 0.50 (trigger) from 0.07.
- Initial claims: sustained break above ~240K, with continuing claims rising in tandem.
- Credit spreads: HY OAS moving persistently above ~350–400 bps would signal genuine risk repricing.
- Housing: starts staying near ~1.18M or falling further would keep housing a leading drag.
This week / next prints (July 13–17, 2026):
- CPI (Tue, July 14) and any major Fed messaging around the inflation reaction function. (kiplinger.com)
- Weekly labor-market updates (claims) for confirmation that the July 4 print wasn’t a holiday distortion.
- Market breadth vs mega-cap leadership (to test whether valuation “danger” signals are becoming macro-relevant).