Recession Risk 34/100 — July 19, 2026

Recession Risk Score: 34/100 — MODERATE (-4 vs 30 days ago)

Today’s Recession Risk Score is 34/100 (MODERATE), down 4 points from 30 days ago (38 → 34). The near-term recession trigger set remains mostly quiet, led by a still-benign layoffs picture and a Sahm Rule reading that is nowhere near its threshold. Financial conditions are loose rather than restrictive, with credit spreads tight and equity volatility subdued. The score stays moderate mainly because growth is slowing and several cyclical “early warning” series (temps, freight, sentiment) are deteriorated even as markets remain euphoric.

Score Trend — Last 30 Days

Over the last 30 days (window 2026-06-19 → 2026-07-19), the score fell from 38 to 34 (Δ -4). The path wasn’t a smooth decline: the range was wide (min 33 / max 44, avg 37)—classic “late-cycle churn,” where soft data and a few cyclicals flash stress while markets and headline labor metrics refuse to crack.

The shape looks mean-reverting rather than accelerating. Spikes toward the top end of the range appear to have been sold by improving (or at least non-worsening) high-frequency labor and financial stress indicators. The last 10 readings show a sawtooth pattern (34 ↔ 38) that ends at 34, suggesting risk is stabilizing modestly lower, not collapsing.

Key Drivers

1. Layoffs remain muted (labor market trigger not firing)

   • Initial jobless claims fell to 208k for the week ending July 11, 2026, the lowest in about 10 weeks—consistent with low layoff intensity and inconsistent with imminent recession dynamics. (apnews.com)

2. Sahm Rule is far below the 0.50pp recession trigger

   • Your dashboard shows Sahm Rule = 0.07 (SAFE) and unemployment at 4.2%. This is not the fast deterioration pattern that historically marks recession onset; it implies unemployment is not accelerating relative to its 12‑month low.

3. Financial conditions are loose, not restrictive

   • Chicago Fed NFCI ≈ -0.54 (loose conditions; negative = easier than average), which typically acts as a recession shock absorber in the near term by supporting refinancing, risk appetite, and credit creation. (convextrade.com)

4. Credit spreads are tight (default stress not priced)

   • High-yield OAS sits around 271 bps (mid‑July), which is inconsistent with a near-term credit event and tends to coincide with ongoing access to funding for marginal borrowers. (convextrade.com)

5. Growth is slowing but not collapsing (GDPNow below-trend)

   • Atlanta Fed GDPNow’s Q2 2026 estimate is ~1.7% SAAR (July 16 update), up from ~1.3% on July 8—still sub‑trend, but not a recessionary plunge. (atlantafed.org)

6. “Under the hood” cyclicals are weak: temps, freight, and sentiment

   • Temporary Help Services: 2.499M (DANGER)—a classic early-cycle employment cut lever.
   • Freight Transportation Index: DANGER—goods-side softness persists.
   • UMich Sentiment: 44.8 (DANGER)—extreme pessimism that can translate into discretionary spending restraint.

Category Breakdown

Using your CATEGORY BREAKDOWN counts:

• Primary Indicators (3 safe / 4 watch / 2 danger): Net signal is mixed-to-okay—the key point is that top-weight recession triggers (claims/Sahm) remain safe, but watches/dangers elsewhere keep risk from dropping into “LOW.”
• Secondary Indicators (2 safe / 0 watch / 1 danger): Still not confirming recession, but one danger suggests pockets of weakness.
• Housing & Construction (0 safe / 1 watch / 1 danger): Housing remains a drag, with starts/permitting not signaling a renewed boom; this is a growth headwind more than an immediate recession call.
• Business Activity (2 safe / 1 watch / 0 danger): The business cycle picture is cooling but intact, consistent with “slow, not break.”
• Consumer Credit Stress (0 safe / 3 watch / 1 danger): Households are more fragile at the margin (delinquencies, debt service, savings rate), raising downside risk if labor softens.
• Market Signals (7 safe / 2 watch / 5 danger): Markets are sending two conflicting messages: risk-on pricing (volatility low, indices near highs) alongside valuation/ratio excesses (several danger overvaluation metrics).
• Liquidity (0 safe / 1 watch / 2 danger): Liquidity is a watch zone—low RRP usage and other plumbing-type signals can amplify volatility if risk appetite changes abruptly.
• Real-Time / High-Frequency (0 safe / 1 watch / 1 danger): Near-term data is balanced: labor is fine, but some real-time cyclical proxies remain weak.

Biggest Movers

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

1. Bank Unrealized Losses ($5155B): +931.1% (7D)

   • Confirmatory (worsening risk) if real and sustained, because larger unrealized losses can reduce banks’ willingness/ability to extend credit under stress. (This magnitude also looks like a series jump/definition shift—treat as signal to verify, but directionally it raises tail risk.)

2. Yield Curve (2s30s) (0.93): +410.0% (7D)

   • Contradictory (improving near-term recession odds): re-steepening often coincides with “late-cycle normalization” and reduces the classic inversion warning for the next 90 days. Still, steepening can also happen late-cycle—timing matters more than sign.

3. ON RRP Facility ($100M): -99.2% (7D)

   • Ambiguous-to-confirmatory (liquidity fragility): collapsing RRP usage can reflect excess cash being absorbed elsewhere; it can be benign, but it also means one fewer liquidity buffer if bill supply/GC repo dynamics get choppy.

4. NY Fed Recession Probability (6.1%): -83.5% (7D)

   • Contradictory (improving): the model-implied probability fell sharply, consistent with the broader “no immediate recession” message.

5. Credit Spreads (HY OAS) (271 bps): -13.8% (7D)

   • Contradictory (improving): tightening spreads generally mean lower perceived default/funding stress, pushing the near-term recession probability down.

90-Day Indicator Trends

Your “90-day” history block (as provided) contains dense observations mostly from late April through mid‑May 2026 for many indicators, plus today’s readings. Interpreting trend direction with what’s available:

Labor & jobs: stable-to-softening under the surface

• Initial claims stayed in a low band in the sample (roughly 189k–214k in late April/early May), and the latest print you cited is 208k (week ending July 11). Net: no sustained upshift, which is why the score can fall even with weak sentiment.
• Sahm Rule in the history eased from 0.20 (late April) to 0.13 (mid‑May), and sits at 0.07 today—improving, not deteriorating.
• JOLTS quits hovered around 1.9%–2.0% in the sample and is 1.9% (WARNING) today, consistent with cooling worker bargaining power and slower wage pressure—late-cycle, but not automatically recession.

Growth nowcast: volatile but sub-trend

• GDPNow in your history is flat at ~1.8% for the April–May portion you provided; the latest official update shows ~1.7% SAAR for Q2 2026 (July 16), up from ~1.3% on July 8. (atlantafed.org)
  Net: still below-trend, but the short-run impulse is not collapsing.

Manufacturing: expansion, but cooling momentum

• ISM Manufacturing PMI in June printed 53.3, down from 54.0 in May—still expansionary but with slower momentum. (ismworld.org)
  That’s consistent with “slow growth” rather than “recession now.”

Financial conditions & credit: easing risk

• HY OAS drifted tighter in your history (e.g., low‑300s bps at points down toward high‑270s), and is now about 271 bps—a clear easing impulse. (convextrade.com)
• NFCI moved from roughly -0.47 toward -0.52/-0.54 in the sample—easier conditions, supportive on a 1–3 month horizon. (convextrade.com)

Housing: permits/starter data soft

• Building permits edged down in the sample (~1386k → ~1363k) and remain WARNING today (1367k)—housing isn’t leading the economy higher.

Consumer: stress building at the margin

• Personal savings rate in the sample fell from ~4.0% to ~3.6% and is ~3.0% today—less buffer if the job market turns.
• Consumer sentiment is at 44.8 (DANGER)—extreme pessimism (May 2026 value confirmed via UMich/FRED documentation). (fred.stlouisfed.org)
  If that pessimism persists, it can become self-fulfilling via weaker discretionary spending.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, BCE, LTM) plus a couple “oversold growth” flags (CHTR, TLK). The macro read-through is late-cycle barbell positioning: investors want cash-flow and perceived defensiveness, but they’re also sniffing around deeply sold growth for mean reversion.

Two things stand out:

1. Defensive carry / yield-chasing behavior
   The prevalence of dividend/value flags suggests markets are comfortable owning risk but prefer being paid to wait. In a true pre-recession tape you typically see credit spreads widening and volatility rising—yet today HY OAS is tight (~271 bps) and VIX is low (16.7). The “dividend tilt” looks more like rotation and valuation discipline than panic.

2. Selective distress in rate-sensitive/levered models
   Names like CHTR (RSI 28) being flagged “oversold growth” fits a world where idiosyncratic leverage and rate sensitivity matter more than broad economic collapse. That aligns with the macro dashboard: credit conditions are easy overall, but pockets of stress can still appear where balance sheets are fragile.

Latest Economic Developments

• Jobless claims (week ending July 11, 2026): 208,000
  Claims fell to 208k, reinforcing the central message that labor-market recession triggers are not firing and layoffs remain restrained. (apnews.com)

• Atlanta Fed GDPNow: Q2 2026 ~1.7% SAAR (July 16 update)
  GDPNow rose from about 1.3% (July 8) to ~1.7% (July 16). That is below-trend growth, but importantly it’s not stepping down into stall speed right now. (atlantafed.org)

• Fed communication into the July 28–29 FOMC meeting
  Public coverage of Chair Kevin Warsh’s testimony emphasized the Fed’s inflation focus and a reluctance to pre-commit on the next move ahead of the July 28–29 meeting. (apnews.com)
  Market implication: policy uncertainty remains a tail risk catalyst, but not yet a growth shock.

• ISM Manufacturing (June): 53.3, slower than May
  Manufacturing stayed in expansion, but momentum cooled—consistent with a growth downshift narrative rather than a contraction narrative. (ismworld.org)

Near-Term Outlook (Next 30 Days)

Base case for the next month: contained recession risk, rising slowdown risk.

What could push the score lower (better):

• Claims remain anchored near ~200k–230k and continuing claims don’t trend higher.
• GDP tracking stabilizes around ~1.5%–2.0% SAAR rather than falling toward zero.
• Credit spreads remain tight and NFCI stays negative (easy).

What could push the score higher (worse):

• A sustained claims upshift (your suggested >250k for multiple prints is a good operational threshold).
• Unemployment prints that move the Sahm Rule materially upward (toward 0.30+, then 0.50).
• A sudden repricing in credit (HY OAS moving from ~270 bps toward 350–450+ bps quickly).

On the calendar, investors will focus on the July 28–29 FOMC meeting and the next wave of high-frequency labor prints. (apnews.com)

Long-Term Outlook (3-6 Months)

Three forces dominate the 3–6 month horizon:

1. Labor is the “last domino”
   Right now, claims and Sahm are calm. Historically, recessions become hard to avoid once layoffs rise and unemployment accelerates—today’s data does not show that. The risk is that weak cyclicals (temps, freight, sentiment) are early tremors that later feed into payrolls.

2. Late-cycle financial conditions can turn quickly
   Easy conditions (NFCI negative, spreads tight) tend to mask fragility until something breaks. If liquidity plumbing tightens (bill supply, repo volatility, or a bank funding scare), markets can reprice fast—turning “moderate” risk into “high” risk even before labor fully rolls over.

3. Growth downshift is the main threat, not a sudden crash (yet)
   GDPNow around ~1.7% is consistent with an economy that is cooling. If that slips further and consumer balance-sheet strain rises (low savings, higher delinquencies), recession risk rises in a nonlinear way—especially if hiring slows at the same time.

Net: the 90-day direction of travel looks like “slowdown with stable labor.” That supports MODERATE risk today, with the warning that the system becomes more vulnerable as household buffers thin.

What to Watch

Hard thresholds / triggers

• Initial claims: sustained >250k (multiple weeks) = meaningful deterioration signal.
• Sahm Rule: watch for a move from 0.07 → 0.20+ (early warning), then toward 0.50 (classic trigger).
• HY OAS: a fast jump from ~270 bps toward 350+ bps would be a regime shift.
• NFCI: a move toward 0.0 and positive would indicate tightening conditions.

High-signal upcoming events

• FOMC meeting (July 28–29, 2026) and any shift in tone on inflation vs growth. (apnews.com)
• GDP tracking updates (GDPNow)—watch for a step-down sequence rather than daily noise. (atlantafed.org)
• ISM follow-through: if manufacturing stays >50 but employment components remain weak, it’s “slow growth”; if PMIs break <50 broadly, risk rises.

Sources

No data available for this window.