Recession Risk 37/100 — July 14, 2026

Recession Risk Score: 37/100 — MODERATE (+3 vs 30 days ago)

Today’s Recession Risk Score is 37/100, keeping risk in the MODERATE band. The score has risen by +3 points over the past 30 days (from 34 to 37), reflecting a steady accumulation of late-cycle “cooling” signals rather than an outright break in labor or credit. The core takeaway: the near-term recession trigger framework is still not firing, but the economy is operating with less margin for error as hiring slows, sentiment remains depressed, and goods-side activity looks soft.

Score Trend — Last 30 Days

The last 30 days show a moderate upward drift in risk: Start 34 → End 37 (+3), with a minimum of 33 and a maximum of 44 (average 37 across 31 readings). That distribution matters: the system has flirted with “risk spikes” (up to 44), but has repeatedly mean-reverted back into the mid-to-high 30s, consistent with a late-cycle slowdown that isn’t yet self-reinforcing.

The shape of the path is best described as spiky-but-stabilizing. The last 10 readings oscillated between 34 and 38, ending the window at 37—a sign the model is seeing persistent softening, but not the kind of broad-based deterioration (claims surge, spreads blow out, conditions tighten) that typically pushes the score sustainably above the 40s.

Key Drivers

1. Labor-market triggers remain “safe,” even as hiring cools

   • Initial claims: 215k (week ending July 4, 2026)—still historically low and not consistent with a separations-led downturn. (apnews.com)
   • June payrolls: +57k, with unemployment rate 4.2%—clear cooling on hiring, but not a layoff shock. (bls.gov)
   • Sahm Rule: 0.07 (SAFE)—nowhere near a recession tripwire.

2. The yield curve is no longer inverted (reducing near-term recession odds)

   • Your 2s10s = +0.36 (positive slope), consistent with a post-inversion re-steepening regime that historically correlates with lower imminent (next-90-day) recession probabilities than deep inversion periods. The FRED T10Y2Y spread has been positive around 0.35 in early July. (fred.stlouisfed.org)

3. Credit stress is not being priced (benign default expectations)

   • High-yield OAS ~2.7% (≈270 bps) in early July is tight, signaling a market that is not preparing for a default wave. Recent FRED readings show HY OAS near 2.70 on July 8. (fred.stlouisfed.org)

4. Growth momentum is decelerating toward “below-trend expansion”

   • Atlanta Fed GDPNow (Q2 2026): 1.3% on July 8—a downshift from stronger trendlike growth rates and consistent with a late-cycle cooling phase. (atlantafed.org)
   • This is the main reason the score holds in MODERATE instead of drifting back toward the low 30s.

5. Financial conditions remain loose, offsetting slowdown risk

   • Chicago Fed NFCI ~ -0.52 implies easy/loose conditions—supportive for risk assets and refinancing capacity even if the real economy softens. (fred.stlouisfed.org)

6. Soft/leading household signals are fragile (tails rising)

   • The May final UMich sentiment at 44.8 is a true “demand fragility” reading (even though June rebounded to 49.5). Low sentiment is not a recession by itself, but it increases sensitivity to shocks (energy, credit tightening, labor). (data.sca.isr.umich.edu)
   • Personal savings rate: 3.0% (WARNING) and credit card delinquency: 2.9% (WATCH) reinforce the “low cushion” theme.

Category Breakdown

Using your CATEGORY BREAKDOWN counts:

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Mixed: labor triggers are mostly stable, but growth and confidence components keep this bucket from clearing.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Limited breadth of warning here; the macro “second derivatives” are not collapsing yet.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing remains a soft patch—not necessarily a crash, but weak enough to drag cyclicals.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity is cooling but not contracting in aggregate; deterioration is not yet broad-based.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  This is a key late-cycle fault line: stress is building slowly, not snapping, but cushions are thin.

• Market Signals: 6 safe / 3 watch / 5 danger
  Risk assets look fine on the surface (indexes near highs, VIX low), but valuation/ratio warnings are accumulating.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a silent amplifier: it won’t cause recession alone, but it can worsen a shock’s transmission.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency signals flag cooling, but they’re not uniformly deteriorating.

Biggest Movers

From your BIGGEST MOVERS list (|7-day % change|):

1. ON RRP Facility ($795M): +868.4% (7D)
   Contradictory / mixed. Mechanically “bigger,” but at very low absolute levels this can be noise—still, it’s a reminder that short-rate plumbing can move quickly.

2. NY Fed Recession Probability (0.7%): +250.9% (7D)
   Confirmatory (worsening risk) in direction, but interpret carefully: the level is still low, and the NY Fed framework is fundamentally yield-curve-driven (typically 10y–3m). (newyorkfed.org)

3. Bank Unrealized Losses ($5155B): -90.3% (7D)
   Contradictory (improving) if taken literally, but the series looks “lumpy” in your data. Treat as data-quality/measurement volatility, not a real macro swing.

4. Yield Curve (2s30s) (0.85): -81.1% (7D)
   Confirmatory (worsening risk) in principle (flattening), but the level is still positive; it’s not inversion stress.

5. Sahm Rule (0.07): -35.0% (7D)
   Contradictory (improving) and important: it reinforces that labor deterioration is not separations-led yet.

90-Day Indicator Trends

Your 90-day history window is partial for several series (many timestamps cluster in April–May), but the direction of travel is still informative—especially when combined with “today” readings.

Labor: stable separations, weaker worker confidence

• Initial claims in the historical sample moved from 219k (Apr 15) down to ~200k (May 9–11), and today you report 215k (Jul 4 week)—still low/contained with no persistent uptrend. (haver.com)
• Sahm Rule improved from 0.20 (mid-April) to 0.13 (May 11) to 0.07 today—a meaningful “distance from trigger” widening.
• JOLTS quits prints at 1.9–2.0% in the window, consistent with softer worker bargaining power (late-cycle), but not a recession trigger on its own.

Interpretation: the labor market signal is “slow hiring” rather than “mass layoffs.” For next-90-day recession odds, this distinction is decisive.

Growth: downshift, not collapse

• GDPNow sits at 1.3% (Jul 8)—below trend and consistent with cooling. (atlantafed.org)
• Your GDP growth (QoQ annualized): 2.1% (WATCH) underscores “still expanding, but slowing.”

Interpretation: the model is correctly pricing late-cycle deceleration. The recession path requires either (a) labor separations acceleration or (b) a tightening shock in credit/conditions.

Financial conditions and credit: still supportive

• NFCI improved from about -0.43 (Apr 15) to ~ -0.52 (May 1) and remains loose. (fred.stlouisfed.org)
• HY OAS readings in the sample drifted from roughly 2.94% (Apr 15) toward the 2.7% range by early July—markets remain calm and liquidity is available for most issuers. (fred.stlouisfed.org)
• 2s10s spread stayed positive in your history (roughly 0.27–0.53), consistent with a non-inversion regime. (fred.stlouisfed.org)

Interpretation: if recession happens from here, it likely won’t be because credit “saw it coming” early. Tight spreads can be a late-cycle mirage—but for now they suppress near-term recession probability.

Housing and household resilience: the weak link

• Building permits slid from 1386k (Apr 15) to 1363k (May 8–11), while today you show 1410k (WATCH)—a modest bounce but still not a strong expansion signal.
• Personal savings rate fell from 4.0% (Apr) to 3.6% (May) and is 3.0% today (WARNING)—less buffer if unemployment rises.
• UMich sentiment: your dashboard’s 44.8 is the May final, which was exceptionally weak; the official June final rebounded to 49.5, but remains depressed versus history. (data.sca.isr.umich.edu)

Interpretation: recession risk is “tail-driven” through the household channel: if labor cracks, the low savings cushion accelerates the downshift in consumption.

Stock Screener Signals

Today’s screener is heavily tilted toward “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) with a smaller pocket of oversold growth (CHTR, TLK). In macro terms, this mix usually appears when markets are:

• rotating toward cash-flow durability and valuation discipline, and
• selectively hunting oversold idiosyncratic growth rather than bidding up broad cyclicality.

Two important read-throughs:

1. Defensive carry is being rewarded (or at least screened)

   • Names like telecom (T, BCE) and financial/insurance (AIG) screening as value/dividend signals suggests positioning that is more consistent with late-cycle preference for carry than early-cycle beta chasing.
   • ARCC (BDC exposure) screening is especially noteworthy because BDCs are highly sensitive to credit conditions. Its presence alongside tight HY spreads is consistent with the “credit calm” regime—but it’s also a reminder that credit-sensitive equities can reprice quickly if delinquencies rise.

2. Oversold growth flags look idiosyncratic, not systemic

   • CHTR (RSI 28) indicates deep oversold conditions in a specific name/sector rather than a broad risk-off tape (which you’d typically see reflected in higher VIX and widening spreads—neither is happening in your dashboard).

Bottom line: equity positioning implied by the screener looks like late-cycle barbell (carry + selective oversold), not a market bracing for immediate recession.

Latest Economic Developments

• Jobless claims remain low: Weekly initial claims were 215,000 for the week ending July 4, 2026, down slightly from the prior week, reinforcing “contained layoffs.” (apnews.com)
• June jobs report confirmed hiring slowdown: Payrolls +57,000 and unemployment rate 4.2% (released July 2, 2026) point to a cooling labor market primarily through weaker hiring rather than rising separations. (bls.gov)
• GDPNow marked down: Atlanta Fed GDPNow pegged Q2 2026 real GDP at 1.3% on July 8, consistent with below-trend growth. (atlantafed.org)
• Fed communications are not uniformly dovish: The June FOMC minutes (released July 8) described meaningful disagreement on the path of inflation and rates, including some officials seeing a case for a hike at the June meeting even though the policy rate stayed at 3.6%. (apnews.com)
• Fed rhetoric remains inflation-sensitive: Governor Waller’s July 13 speech emphasized avoiding a repeat of 2021-style delayed response and reiterated that with inflation above target and labor near full employment, policy rules can argue for tighter stance. (federalreserve.gov)
• CPI is the immediate catalyst: BLS noted June CPI is scheduled for release on July 14 at 8:30 a.m. ET—a key near-term driver for yields, financial conditions, and risk assets. (bls.gov)
• NY Fed President Williams sounded cautious on energy inflation persistence: Reuters coverage indicates Williams did not expect a sustained rise in energy prices for the rest of the year and avoided pre-committing on the late-July policy decision. (marketscreener.com)

Near-Term Outlook (Next 30 Days)

Base case for the next month: slowdown without a break—meaning the score likely oscillates in the mid-to-high 30s unless labor or inflation forces a regime shift.

Key catalysts in the next 30 days:

• Inflation (CPI, July 14): a hot core print risks pushing yields higher and tightening conditions quickly; a benign print supports the “soft-landing slowdown” path. (bls.gov)
• FOMC meeting (July 28–29, 2026): the current Fed communications backdrop is internally divided, raising the odds of market volatility around guidance—even if the policy rate is unchanged. (apnews.com)
• High-frequency labor: weekly initial/continuing claims remain the cleanest “tripwire.” If initial claims start printing persistently above the low-200k range and continuing claims trend higher, recession odds can rise quickly even with tight spreads.

Expected score behavior:

• Most likely: 33–41 range (mean-reverting around high-30s).
• Upside risk (worse): a CPI surprise + hawkish Fed guidance that tightens conditions and hits hiring.
• Downside risk (better): softer inflation + stable claims + continued tight HY spreads.

Long-Term Outlook (3-6 Months)

Over the next 3–6 months, the macro picture looks like a late-cycle deceleration with two competing forces:

1. Stabilizers (reduce recession odds)

   • Loose financial conditions (NFCI negative) and tight HY spreads (~2.7%) indicate the financial system is not currently rationing capital broadly. (fred.stlouisfed.org)
   • A positively sloped yield curve is historically more consistent with continued expansion than an inversion regime. (fred.stlouisfed.org)

2. Fragilities (increase tail risk)

   • Household buffers (savings) are thin, and confidence readings remain depressed—conditions that can turn a labor cooling into a spending contraction if unemployment rises.
   • The Fed is not clearly pivoting; rather, official communications show persistent concern about inflation upside risks. (apnews.com)

The 90-day trajectory implied by your dashboard is consistent with “slowdown first, recession only if labor breaks.” Historically, recessions tend to require a propagation mechanism—either (a) layoffs leading consumption down, (b) a credit shock, or (c) an exogenous shock that forces rapid tightening. In today’s configuration, the propagation mechanism is not yet active, but the system’s shock absorbers (sentiment, savings) look weaker than normal.

What to Watch

Hard thresholds and event-driven triggers:

• Initial claims: watch for a sustained move from ~215k toward the mid-200s and higher (not one week—several). (apnews.com)
• Continuing claims: trend matters more than the level; persistent rises often precede broader labor weakness. (apnews.com)
• Sahm Rule: the key “labor tripwire.” A fast rise (even from low levels) is the cleanest recession-warning transition.
• HY OAS: if HY spreads move from ~2.7% toward 4%+, recession risk typically re-prices quickly. (fred.stlouisfed.org)
• NFCI: a move upward toward zero (tightening) would confirm transmission from policy/inflation into real activity. (fred.stlouisfed.org)
• CPI (July 14) and Fed (July 28–29): the near-term “policy/conditions” shock window. (bls.gov)
• GDPNow: continued downgrades below ~1.5% strengthen the “below-trend” narrative; a re-acceleration would reduce risk. (atlantafed.org)

Sources

No data available for this window.