Recession Risk 38/100 — July 18, 2026

Recession Risk Score: 38/100 — MODERATE (+4 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), up +4 points from 30 days ago. The macro picture still reads as late-cycle, below-trend expansion rather than imminent contraction, because the highest-signal labor tripwires remain untriggered—most notably initial jobless claims at 208k (week ending July 11, 2026) and a Sahm Rule reading around 0.07, far below the 0.50 recession trigger. (apnews.com) The score has risen over the past month mainly because “soft-underbelly” indicators (temp help, quits, housing pipeline) are deteriorating while several market-based “fear” ratios remain extreme.

Score Trend — Last 30 Days

Over the last 30 days (window 2026-06-18 → 2026-07-18), the score moved from 34 to 38 (+4), with a min of 33, max of 44, and average of 37. The path matters: this wasn’t a clean grind higher; it was choppy, featuring a mid-window spike toward the low-to-mid 40s and then a partial reversion back into the high 30s.

In the last 10 readings, we saw 34 → 38 (July 9–12), then a brief drift to 37, a dip back to 34 (July 15–16), and a renewed uptick to 37–38 (July 17–18). That shape is consistent with a regime where hard data (labor, credit spreads, NFCI) is holding up, but leading and distributional signals are increasingly flashing yellow/red—enough to keep the score mean-reverting upward rather than breaking decisively higher.

Key Drivers

1. Real-time labor remains the anchor (supportive / risk-containing).

   • Initial jobless claims: 208k SA for week ending July 11, 2026, down 8k, and the lowest in ~10 weeks—a strong “no-recession-now” signal. (apnews.com)
   • Sahm Rule: ~0.07, still decisively SAFE, indicating the unemployment rate has not risen enough versus its 12-month low to generate a recession impulse.

2. Inflation cooled meaningfully in the most recent prints (reduces near-term policy shock).

   • June CPI: -0.4% m/m (largest one-month decline since 2020 per reporting) and core CPI flat m/m with ~2.6% y/y core—materially lowers the odds of a near-term Fed re-tightening. (bls.gov)
   • June PPI: -0.3% m/m, with core measures modest—reinforces the disinflation pulse. (apnews.com)

3. The yield curve regime is no longer “classic inversion stress.”

   • Your dashboard notes 2s10s ~ +37 bps as of July 17, 2026 (positive slope). A positive curve does not eliminate recession risk, but it generally reduces the “imminent” signal associated with sustained inversions. (This is a timing positive more than a cycle positive.)

4. Forward growth is below-trend but still positive.

   • Atlanta Fed GDPNow: ~1.3% SAAR for 2026:Q2 as of July 8 (and your internal read shows ~1.8% WATCH). Either way, the message is consistent: not recessionary, but not robust. (atlantafed.org)
   • Conference Board LEI: +0.1% m/m in May 2026, after +0.2% in April—a stabilization that pushes back against a near-term recession call. (conference-board.org)

5. Leading labor “soft underbelly” is deteriorating (risk-building).

   • Temporary help services: DANGER (2.499M in today’s read) remains a classic early-cycle labor canary; this is a primary reason the score isn’t lower.
   • JOLTS quits rate: 1.9% WARNING—below pre-pandemic norms, consistent with reduced worker bargaining power and slowing churn (often a precondition for higher layoffs later).

6. Financial conditions are easy, but liquidity plumbing signals are less clean.

   • Chicago Fed NFCI: -0.54 SAFE (loose conditions)—still supportive for risk assets and refinancing channels. (fred.stlouisfed.org)
   • ON RRP shows extreme percent swings off a near-zero base (see Biggest Movers). Big moves here can be more about technical liquidity redistribution than macro demand, but the volatility is worth watching.

Category Breakdown

Using your CATEGORY BREAKDOWN counts:

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Mixed but not recessionary. The key is that the highest-weight real-time labor triggers (claims, Sahm) remain safe even as leading labor elements (quits, temp help) degrade.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary signals still lean supportive overall, but the presence of a danger reading keeps tail-risk alive—especially if corroborated by credit or employment deterioration.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing remains a pressure point: starts/permits softness is consistent with a policy-sensitive sector cooling that can spill into goods, construction employment, and local credit.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity isn’t flashing recession. This supports the base case of slower growth rather than contraction.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  The consumer looks strained at the margin: low savings and rising delinquencies are consistent with “quiet stress” that can amplify if hiring slows.

• Market Signals: 7 safe / 2 watch / 5 danger
  A split tape: index levels and volatility look calm, but valuation/ratio-style dangers suggest fragile pricing if macro data disappoints.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity signals lean negative—more “plumbing/structure risk” than immediate recession risk, but relevant for shock propagation.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency is mixed. Claims are fine (in your detailed indicators), but pockets like freight remain weak.

Biggest Movers

From your BIGGEST MOVERS block (top 5 by |7-day % change|):

1. ON RRP Facility ($100M): +7030.1% (7D)
   Likely technical (base effects near zero), but still confirmatory of liquidity regime changes that can matter when risk appetite turns. Treat as watchlist plumbing, not a standalone recession call.

2. Yield Curve (2s30s) (0.93): +410.0% (7D)
   A steepening move is typically contradictory to near-term recession risk (improving), consistent with your “no inversion regime” framing.

3. NY Fed Recession Probability (6.1%): +270.4% (7D)
   Directionally confirmatory (worsening), but the level is still low. Percent changes can exaggerate the signal when starting from small numbers.

4. Bank Unrealized Losses ($5155B): -90.3% (7D)
   This is contradictory (improving) if taken at face value, but the series in your 90-day history shows large jumps between ~$500B and ~$5.155T—suggesting data discontinuity or methodology shifts. Use cautiously; focus on trend coherence rather than the weekly percent move.

5. Sahm Rule (0.07): -35.0% (7D)
   Contradictory (improving) and highly supportive for the “no active recession impulse” baseline.

90-Day Indicator Trends

Your provided 90-day history is sparse for some series (many begin around mid-April and update through mid-May), but there are still meaningful trend signals:

• Industrial Production: 101.8 → 102.5 (Apr 19 to May 16), moving from WATCH to SAFE. That’s modest improvement, consistent with a manufacturing sector that is not collapsing, even if other internals cool.

• Initial jobless claims: ranged roughly 189k–214k across Apr–May snapshots (SAFE throughout), and the latest weekly print in mid-July is 208k (still low). The key macro message is that claims are not trending upward persistently, which is usually required before broader labor deterioration.

• Sahm Rule: 0.20 (Apr) → 0.13 (mid-May) → ~0.07 (now). This is a clear downtrend, strongly inconsistent with an economy already entering recession.

• JOLTS quits rate: 1.9% → 2.0% (Apr to mid-May), hovering in the low 2s/high 1s zone. Even with a slight improvement, the quits rate remains structurally soft—more consistent with late-cycle caution than re-acceleration.

• Conference Board LEI: your history shows noisy toggling, but the authoritative macro point for this cycle is May’s +0.1% m/m after +0.2%—a stabilization rather than ongoing deterioration. (conference-board.org)

• Chicago Fed NFCI: improved from about -0.47 (watch) in late April to ~ -0.52 (safe) by early/mid May in your history, consistent with loose conditions. The latest FRED update around mid-July still frames NFCI as a weekly, broad conditions gauge (and your current reading is -0.54). (fred.stlouisfed.org)

• Housing pipeline:

  • Building permits: 1386k → 1363k (Apr 22 to May 16), a gradual drift lower in WARNING, consistent with a housing sector that is cooling.
  • Housing starts: show ~1502k in late Apr/May history (SAFE then), but today you’re at 1427k WATCH, implying a step-down.

• Consumer strain:

  • Personal savings rate: 4.0% → 3.6% across the history window (watch → warning), consistent with thinning buffers.
  • Credit card delinquencies: flat in your historical snapshots at ~2.9% WATCH, suggesting stress that is persistent, not accelerating (yet).

• Sentiment: the Michigan series is important because it’s not matching the hard data. We have a clear sequence: May 2026 = 44.8, June 2026 = 49.5, and preliminary July 2026 = 54.4. That’s a rebound, but still depressed versus prior year levels. (isr.umich.edu)

Bottom line from the 90-day lens: labor-trigger indicators improved, financial conditions stayed easy, and production stabilized, but housing pipeline + leading labor + consumer buffers look like the most plausible channels for the score creeping higher.

Stock Screener Signals

Today’s screener is heavily skewed toward “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) plus a couple oversold growth names (CHTR, TLK). That factor mix usually aligns with a market posture that’s not pricing an imminent recession, but is tilting toward carry and quality cashflows—i.e., investors are more focused on income, valuation discipline, and defensiveness than pure cyclicality.

Two caveats jump out. First, the listed dividend yields are clearly data-anomalous (triple-digit yields), so interpret “value dividend” here as a style classification rather than a literal yield screen. Second, the appearance of oversold growth (CHTR with RSI ~28; TLK ~30) alongside broad index strength is consistent with narrow leadership—a common late-cycle pattern where headline indices look fine but dispersion rises beneath the surface.

Macro interpretation: the equity market is signaling “soft landing / slow growth” rather than recession, but also increasing selectivity. If recession risk were truly rising fast, you’d typically see: (1) widening credit spreads, (2) sustained volatility repricing, and (3) more systematic de-risking across cyclicals. You don’t have that broad confirmation today.

Latest Economic Developments

• Labor market: Weekly jobless claims fell to 208,000 (week ending July 11, 2026), the fewest in ~10 weeks, reinforcing that layoffs remain muted. (apnews.com) This is the single most important near-term recession off-ramp because most recessions require a sustained deterioration in claims before unemployment rises meaningfully.

• Inflation: June inflation data delivered a meaningful downside surprise. The BLS CPI release shows CPI-U down 0.4% m/m in June. (bls.gov) Reporting also highlights core CPI flat m/m and around 2.6% y/y core, while wholesale inflation PPI fell 0.3% m/m. (apnews.com) This combination reduces the probability the Fed feels compelled to re-tighten at the July meeting, which matters because housing and interest-sensitive labor tend to break when policy shock returns.

• Fed communications: Fed Chair Kevin Warsh testified on Capitol Hill (July 14–15) emphasizing commitment to price stability while offering limited forward guidance; reporting notes that cooler inflation data has reduced market-implied odds of near-term hikes, making a July hike look remote. (apnews.com) The next scheduled FOMC meeting is July 28–29, 2026. (apnews.com)

• Growth tracking: The Atlanta Fed GDPNow estimate for 2026:Q2 was ~1.3% SAAR on July 8 (down slightly from July 7). (atlantafed.org) That’s consistent with a below-trend but positive growth pulse—supporting your base case of continued expansion with rising tail risk.

• Sentiment: Michigan sentiment is improving off very depressed levels: 44.8 (May) → 49.5 (June) → 54.4 preliminary (July). (isr.umich.edu) This is a constructive direction-of-travel signal, but levels remain weak enough to keep the “confidence constraint” on consumption alive.

Near-Term Outlook (Next 30 Days)

The next 30 days are about whether labor re-accelerates downward (higher claims, higher unemployment) or whether disinflation plus steady hiring keeps the economy in a slow-growth equilibrium.

Key catalysts and what they would do to the score:

• FOMC meeting (July 28–29, 2026):

  • Dovish hold / “data-dependent” tone likely keeps the score stable-to-lower by supporting housing and easing financial conditions.
  • Any signal that the committee is considering further tightening despite cooling CPI/PPI would push risk higher quickly, because the housing pipeline is already weak.

• June PCE / core PCE (scheduled late July): markets will treat this as the “Fed’s inflation measure.” A benign print would reinforce “policy on hold.”

• Weekly claims: the threshold that matters is not one bad print—it’s persistence. A move into the mid-240k+ range for multiple weeks would likely flip several labor subcomponents from WATCH to WARNING and pull the score into the 40s.

• Housing data (permits/starts, mortgage-rate sensitivity): continued slippage would keep the “construction + durables” channel as the leading recession-adjacent risk.

Long-Term Outlook (3-6 Months)

Over 3–6 months, the macro question is whether the current configuration—soft leading labor + weak housing + depressed sentiment alongside healthy claims + loose financial conditions + tight spreads—resolves upward (re-acceleration) or downward (job losses finally arrive).

What the present trend suggests:

• Base case: a muddle-through expansion with below-trend growth. Disinflation gives the Fed room to remain patient; tight credit spreads and loose NFCI reduce the odds of a self-reinforcing financial accident; GDPNow and LEI stabilization argue against an imminent downturn. (conference-board.org)

• Main downside path: a delayed labor turn. Temp help contraction and low quits can precede rising layoffs; once claims break higher persistently, unemployment can follow, and the Sahm Rule can rise quickly from low levels. That’s why the score is MODERATE rather than low: you have credible leading signals, even if the coincident triggers are still quiet.

• Secondary downside path: a policy/commodity shock that re-ignites inflation, forcing renewed tightening into a cooling housing cycle. Recent inflation relief is meaningful, but energy can reverse quickly (and several outlets are already flagging geopolitical/oil sensitivity as a risk to the benign CPI impulse). (axios.com)

What to Watch

Labor (highest weight):

• Initial claims: watch for 4-week moving average turning up and staying up; “risk-on” line in the sand is a sustained move into 240k–260k territory.
• Unemployment rate: a climb that materially lifts the Sahm Rule toward 0.30+, then 0.50 (trigger).

Housing / real economy:

• Building permits: further declines from the ~1.36M area would confirm pipeline contraction.
• Starts: a sustained move below ~1.40M would reinforce “construction drag.”

Inflation / policy:

• Core PCE (late July): confirm whether CPI/PPI disinflation passes through to the Fed’s preferred gauge.
• FOMC (July 28–29): pay attention to the balance of risks language—labor vs inflation.

Markets / credit:

• High yield spreads (HY OAS): if spreads start widening meaningfully from tight levels, it often leads real-economy deterioration.
• NFCI: a move back toward zero (tightening) would be an early warning that liquidity is no longer cushioning risk.

Sources

• apnews.com
• apnews.com
• apnews.com
• axios.com
• axios.com
• axios.com
• atlantafed.org
• conference-board.org
• bls.gov
• fred.stlouisfed.org
• isr.umich.edu
• bankingjournal.aba.com
• tradingeconomics.com
• kiplinger.com
• cbsnews.com