Recession Risk 37/100 — July 17, 2026

Recession Risk Score: 37/100 — MODERATE (+0 vs 30 days ago)

Today’s Recession Risk Score is 37/100 (MODERATE), unchanged versus 30 days ago. The macro picture still reads as slow-growth-with-fragility rather than a near-term contraction trigger. Layoff-sensitive data remain calm (claims are low), and financial conditions are loose, but classic early-cycle labor and goods-economy warnings (temporary help, freight proxies, deeply depressed sentiment) keep tail risk elevated. Net: not imminent, but the economy is more shock-sensitive than markets currently price.

Score Trend — Last 30 Days

The risk score window (June 17 → July 17, 2026) shows a flat net change (37 → 37) with a wide-but-contained trading range: min 33, max 44, average 37. That’s the signature of a system that’s not breaking, but also not healing cleanly—bad micro signals flare up, then get “covered” by stable labor/markets.

In the last 10 readings, the score stabilized in the mid-30s, briefly popped to 38 on July 11–12, then returned to 34–37. The shape looks mean-reverting rather than accelerating: recession risk is being held down by labor market resilience and easy conditions, even as leading indicators (temp help / goods) prevent a durable move lower.

Key Drivers

1. Labor market remains resilient (near-term recession trigger not met)

   • Initial jobless claims: 208k (week ending July 11, reported July 16)—fewest in ~10 weeks, consistent with low layoffs. (apnews.com)
   • Your Sahm Rule: 0.07 (SAFE) — far below the recession trigger.

2. Financial conditions are still supportive, limiting near-term downside

   • Chicago Fed NFCI: -0.54 (SAFE) — loose conditions (risk assets + funding markets not signaling stress). (fred.stlouisfed.org)
   • High-yield spreads remain tight (your HY OAS 269 bps; BB HY spread around ~1.60% as of July 8). (macrotrends.net)

3. Yield curve is no longer the loud alarm it was

   • Your curve trackers are positive/steepening (2s10s ~0.41, 2s30s ~0.95). A steepening curve typically reduces near-term recession signal strength (even if it can steepen for “bad” reasons later).

4. Leading indicators are improving modestly—not consistent with a near-term break

   • Conference Board LEI: +0.1% in May 2026, second consecutive monthly rise; six-month change +0.9% (Nov 2025 → May 2026). (conference-board.org)
   • That’s not a “boom” signal, but it’s also not the classic pre-recession slide.

5. Goods/industrial warning lights remain on

   • Your Freight Transportation Index: DANGER (goods cycle weak).
   • Copper-to-gold ratio: DANGER (risk-off / industrial growth skepticism). Even if noisy day-to-day, the persistence matters.

6. Household “shock absorber” is thin

   • Consumer sentiment: 44.8 (DANGER) in May (crisis-level pessimism in your framework), and personal savings rate: 3.0% (WARNING)—low buffer if labor cools or inflation re-accelerates.

Category Breakdown

Using your signal counts:

• Primary Indicators (3 safe / 4 watch / 2 danger): Mixed but not breaking—core recession triggers (claims/Sahm) are calm while leading labor (temp help/quits) keeps risk elevated.
• Secondary Indicators (2 safe / 0 watch / 1 danger): Largely stable; the danger print here is a reminder that “secondary” often turns before the headlines.
• Housing & Construction (0 safe / 1 watch / 1 danger): Housing is still a soft spot; watch for permits/starts slipping further because housing tends to lead the cycle.
• Business Activity (2 safe / 1 watch / 0 danger): Business activity is supportive overall; manufacturing is expanding but hiring remains a weak sub-signal.
• Consumer Credit Stress (0 safe / 3 watch / 1 danger): Stress is building at the margin (delinquencies / debt service / savings), not yet systemic but moving the wrong way.
• Market Signals (6 safe / 3 watch / 5 danger): Markets are “risk-on” in levels/vol, but valuation and macro-ratio signals are flashing froth—this is contradictory (low realized risk vs higher latent macro risk).
• Liquidity (0 safe / 1 watch / 2 danger): Liquidity signals are less forgiving; the system is more vulnerable to a funding or policy surprise.
• Real-Time / High-Frequency (0 safe / 1 watch / 1 danger): High-frequency data are split—claims are fine, but goods proxies are not.

Biggest Movers

Top 5 by absolute 7-day % change (interpretation: confirmatory vs contradictory for recession risk):

1. ON RRP Facility: +7030.1% (7D)

   • Contradictory / technical more than macro: big % moves off a tiny base can exaggerate signal. Still, sharp swings in facility usage can hint at evolving reserve dynamics and collateral preference.

2. Yield Curve (2s30s): +425.0% (7D)

   • Contradictory (improving) for near-term recession odds: steepening away from inversion reduces the classic curve-based warning.

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

   • Contradictory (improving) if the decline is real and persistent—less embedded duration stress in the banking system reduces liquidity tail risk. (This series looks “lumpy” in your history, so treat as directional but verify.)

4. Sahm Rule: -35.0% (7D)

   • Contradictory (improving): moving further below trigger reduces the “recession is already here” probability.

5. US Interest Expense: +28.3% (7D)

   • Confirmatory (worsening) mainly for medium-term risk: rising interest expense tightens fiscal flexibility and can amplify the next slowdown.

90-Day Indicator Trends

Your 90-day history (where available) shows a clear story: the present is stable, but the forward-looking labor/goods complex is soft, and valuation/liquidity risks are not going away.

Labor / employment-leading

• Initial claims stayed low in the available history (~189k–214k) and your current print (208k) is consistent with that “healthy layoff” regime. The claims data reported July 16 reinforces the message that layoffs are not accelerating. (apnews.com)
• Sahm Rule drifted down in your history (0.20 → 0.13 → 0.07 today). That’s a strong “not-yet” signal.
• JOLTS quits rate has been around 1.9–2.0% in your history—soft versus the high-pressure labor market era. That’s consistent with slower wage pressure and a cooler labor market tone.

Business activity

• Industrial production (in your history) is essentially flat-to-up (~101.8 in mid-April to 102.6 now), which is consistent with continued expansion rather than contraction.
• ISM manufacturing: the current environment is expansionary but not labor-strong. June headline 53.3 with the Employment Index at 49.7 (still contracting) captures a “production without hiring” vibe. (ismworld.org)

Forward-looking composite

• Conference Board LEI: May rose +0.1% and the six-month change turned positive (+0.9%), which is inconsistent with the deep, persistent deterioration that typically precedes recessions. (conference-board.org)

Financial conditions / credit

• NFCI improved in your history (roughly -0.47 → -0.52), and the latest referenced reading around mid-July still supports “loose” conditions. (fred.stlouisfed.org)
• High-yield spreads in your history moved down from ~320 bps to high-270s/low-280s, consistent with benign credit pricing.

Housing

• Your housing series show softening (permits down in the history, starts below trend in today’s read). Housing remains one of the most plausible channels for a broader slowdown if rates back up or credit tightens.

Consumer resilience

• Real personal income (ex transfers) is roughly flat in your history (~$16.7T) while savings fell (4.0% → 3.6% → 3.0% today)—suggesting consumer spending is being sustained with less cushion. That’s not a recession trigger by itself, but it raises sensitivity to shocks.

Stock Screener Signals

Today’s quant flags cluster in two buckets: “value dividend” defensives and “oversold growth”—a combination that usually shows markets not pricing recession imminently, but increasingly selective about risk.

• The value dividend tilt (e.g., $ARCC, $AIG, $BBY, $FNF, $T, $BCE) looks like investors hunting cash flow and carry—often a late-cycle behavior when growth is slower but not collapsing. In macro terms, that aligns with MODERATE recession risk: slower nominal momentum plus a desire for yield.
• The oversold growth flags ($CHTR RSI 28; $TLK RSI 30) suggest pockets of idiosyncratic stress (rate sensitivity, leverage, competitive pressure) rather than broad-based liquidation. If recession risk were truly imminent, you’d typically see wider spread stress and volatility—not just a few oversold names while indices sit near highs.

One red flag in the screener: several printed “yields” are clearly data artifacts (triple-digit or higher). Treat the style signal (value/dividend vs oversold) as useful, but not those yield magnitudes.

Latest Economic Developments

1) Jobless claims confirm “no layoff wave.”
The Labor Department’s July 16, 2026 report showed initial claims at 208,000 for the week ending July 11, down 8,000; continued claims also fell (to roughly ~1.805 million for the week ending July 4). (apnews.com)
This keeps the near-term recession playbook constrained: recessions typically require sustained claims deterioration.

2) Fed posture: steady rates, vigilance on inflation.
At the June 17, 2026 meeting, the Fed held the federal funds target range at 3.50%–3.75%. (federalreserve.gov)
The Fed’s July 2026 Monetary Policy Report (submitted July 10) noted inflation has risen this year and remains elevated relative to 2%, with supply shocks (including energy) contributing. (federalreserve.gov)
This matters because a “re-tighten” risk (or even delayed easing) is exactly the sort of policy surprise that can turn today’s household fragility into a sharper demand slowdown.

3) Growth tracking remains positive but not exciting.
Atlanta Fed GDPNow commentary in early July showed Q2 2026 tracking around ~1.3% (July 8)—positive, but below trend. (atlantafed.org)
This matches the score’s “moderate risk” profile: growth is there, but not robust enough to comfortably absorb shocks.

4) Manufacturing: expansion continues, hiring still lags.
ISM’s June manufacturing report showed PMI 53.3 (still expansion), while the Employment Index remained below 50 (49.7)—a recurring sign that firms are cautious on hiring even as output holds up. (ismworld.org)

Near-Term Outlook (Next 30 Days)

Base case for the next month: slow growth + stable labor, with recession risk staying range-bound unless one of two things happens: (a) labor cracks, or (b) inflation forces the Fed to lean hawkish again.

Key catalysts over the next 30 days:

• High-frequency labor: another 2–4 claims prints. If initial claims begin holding above ~235k–250k (and continued claims trend higher), the score should move up quickly.
• ISM July release: the next ISM Manufacturing PMI (July data) is scheduled for 10:00 a.m. ET per ISM. (ismworld.org)
  • Watch New Orders and Employment: a drop in orders plus deeper employment contraction would be confirmatory for rising risk.
• Fed communications & inflation prints: after the July 10 MPR framing (inflation elevated), markets will be hypersensitive to any upside inflation surprise. (federalreserve.gov)
• Earnings season: with equity indices near highs in your dashboard, guidance will matter more than trailing earnings—especially for cyclicals, transport, and consumer discretionary.

Long-Term Outlook (3-6 Months)

Over a 3–6 month horizon, the setup is bifurcated:

• Soft-landing track: claims stay low, LEI remains mildly positive, and financial conditions stay loose. In this scenario, the economy continues sub-trend expansion and the score can drift down into the low/mid-30s.
• Fragility track: the economy’s “shock absorbers” (savings, sentiment, temp help) are already weak. A shock—energy price spike, credit event, inflation surprise → higher rates, or a sudden hiring freeze—could convert leading weakness into a broader slowdown.

The most important structural risk in your dashboard isn’t today’s GDPNow print; it’s the combination of:

• Depressed consumer psychology + low savings (less buffer),
• Temp help deterioration (labor leading),
• Valuation/risk-premium complacency (VIX low, equities near highs),
• Fiscal constraints (debt/interest expense).

That mix often produces nonlinear outcomes: nothing happens… until something does.

What to Watch

Triggers / thresholds that would move the score meaningfully:

• Initial claims: sustained move above ~235k–250k and/or a clear uptrend in continued claims.
• Sahm Rule: any persistent rise toward 0.50 would be a regime change.
• ISM: headline slipping toward ~50 and employment staying <50 with weakening new orders.
• Credit spreads: HY OAS widening decisively (e.g., moving from “tight” toward “stress” regimes) would be a major confirmatory signal.
• Consumer stress: further deterioration in delinquencies/debt service alongside weak sentiment—watch for a “spending snapback” lower.
• Liquidity plumbing: continued volatility in facility usage and signs of reserve scarcity.

Sources

No data available for this window.