Recession Risk 34/100 — July 23, 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 key takeaway is that the highest-signal labor tripwires remain benign, keeping near-term recession odds contained despite visible softening in leading and sentiment gauges. Financial conditions are still supportive and credit spreads remain tight, but pockets of “late-cycle fragility” are building—especially in soft demand, temp help, freight, and household balance-sheet cushion.

Score Trend — Last 30 Days

The last 30 days show a modest de-risking: the score fell from 38 (June 23) to 34 (July 23), for a net -4 move. Over the window the score ranged from a low of 33 to a high of 44, averaging 36 across 31 samples—a moderate band, not a panic regime.

The shape is best described as choppy mean-reversion rather than a clean trend. The score repeatedly popped into the high-30s/low-40s on growth-scare bursts, then reverted as labor and liquidity signals refused to confirm. The last 10 readings underline this pattern: repeated snaps between 34 and 38, ending with two straight 34s (July 22–23)—a sign that the market/macro complex is stabilizing, not accelerating toward contraction.

Key Drivers

1. Labor “red lights” still off (claims + Sahm benign)

   • Initial jobless claims fell to 208,000 for the week ending July 11, 2026, the lowest in roughly 10 weeks—still consistent with a labor market that is cooling but not breaking. (apnews.com)
   • Sahm Rule: 0.07 (your tracker) remains far below the 0.50 trigger—one of the strongest “no recession yet” signals in real time.

2. Yield curve has re-steepened (less near-term recession timing pressure)

   • 2s10s: +0.36% (July 22) and 2s30s: 0.87. A positive curve typically reduces imminent-recession timing risk versus an active inversion regime. This doesn’t eliminate recession odds, but it pushes the “when” out, unless labor cracks.

3. Growth is slowing but still positive

   • You’re correctly characterizing the macro pulse as deceleration, not contraction. Payroll growth at +57k (June, released July 2) points to a slowing labor engine, but not a collapse.
   • ISM Manufacturing PMI: 53.3 (June 2026) indicates continued expansion, though the internal mix is less comforting (see below). (ismworld.org)

4. Leading indicators are warning—soft demand is the risk vector

   • The Conference Board LEI fell -0.2% in June 2026 to 99.1, following a small gain in May. That’s not a crash reading, but it’s consistent with a downshift in forward momentum. (conference-board.org)

5. Sentiment is recession-like even if the economy isn’t (yet)

   • Consumer sentiment is deeply depressed in this regime (your dashboard shows 44.8 in “danger”), consistent with a consumer that is emotionally in recession even when employment is still intact. Recent Michigan survey materials show sentiment at very low levels in recent months. (fred.stlouisfed.org)

6. Risk appetite remains supportive (for now)

   • Equity indexes remain near highs even amid day-to-day volatility; notably the S&P 500 closed around 7,499 on July 22 and has been up meaningfully year-to-date. (apnews.com)
   • That resilience is consistent with your tight HY OAS reading (269 bps), and it’s a major reason the score stays in MODERATE, not ELEVATED.

Category Breakdown

Using your category counts:

• Primary Indicators (3 safe / 4 watch / 2 danger)
  Mixed but not recessionary. The “primary stack” is being pulled in two directions: claims/Sahm anchor the benign view, while temp help and other early labor demand proxies keep the caution flag up.

• Secondary Indicators (2 safe / 0 watch / 1 danger)
  Limited breadth here; the main message is that second-tier confirmations are not uniformly deteriorating, which reduces conviction in an imminent recession call.

• Housing & Construction (0 safe / 1 watch / 1 danger)
  Housing is a late-cycle amplifier: permits and starts are no longer providing a clean growth tailwind. This doesn’t guarantee recession, but it raises downside sensitivity if rates back up or labor softens.

• Business Activity (2 safe / 1 watch / 0 danger)
  Business activity remains net supportive, consistent with the ISM headline in expansion. The concern is composition—especially employment/new orders dynamics.

• Consumer Credit Stress (0 safe / 3 watch / 1 danger)
  The household is absorbing the slowdown through balance sheets: delinquency trends, debt service burdens, and low savings all increase the risk that a labor wobble turns into a demand break.

• Market Signals (6 safe / 3 watch / 5 danger)
  Markets are sending a split message: price levels and volatility suggest calm, while valuation/ratios and some macro-sensitive cross-asset indicators (e.g., copper/gold in your system) reflect growth anxiety and late-cycle risk.

• Liquidity (0 safe / 1 watch / 2 danger)
  Liquidity is not a crisis, but it is less of a backstop than it was. The drawdown in facilities you track implies less “stored liquidity” to cushion shocks.

• Real-Time / High-Frequency (0 safe / 1 watch / 1 danger)
  High-frequency signals lean cautious, but the most important real-time labor signal (claims) is still behaving.

Biggest Movers

From your top 5 |7-day % change| list:

1. Bank Unrealized Losses: +931.1% (7D) — Confirmatory (worsening risk)
   In your framework this is a major stress marker: large unrealized losses increase sensitivity to funding/liquidity shocks. Even if not immediately binding, it raises tail risk if yields move sharply or deposit betas rise.

2. Yield Curve (2s30s): +415.0% (7D) — Contradictory (improving near-term timing risk)
   A sharp steepening usually reduces “imminent recession” probability. The classic caution is that steepening can occur for “bad reasons” (front-end cuts expectations), but with claims still low, this steepening reads more like de-escalation than panic.

3. ON RRP Facility: -91.0% (7D) — Confirmatory (worsening liquidity cushion)
   Mechanically, a depleted RRP balance can signal excess cash has already been absorbed—less idle liquidity to redeploy if stress hits. In practice, interpretation depends on Treasury bill supply, money fund flows, and reserve dynamics, but directionally it’s a reduced buffer.

4. NY Fed Recession Probability: -85.0% (7D) — Contradictory (improving)
   This is a meaningful “risk-off” indicator improving quickly. In your daily score logic, it helps keep the overall reading anchored.

5. US Interest Expense: +28.3% (7D) — Confirmatory (worsening structural risk)
   Higher interest expense is not a next-quarter recession trigger by itself, but it adds to medium-term macro constraint (less fiscal space, more rate sensitivity, higher rollover risk).

90-Day Indicator Trends

Your 90-day histories show a clear macro story: real activity and markets are stable-to-firm, while forward-looking and cyclical micro signals are fraying.

Labor (high signal)

• Sahm Rule: improved from 0.20 (late April) to ~0.13 (mid-May) and now 0.07 today (per today’s reading). That’s a meaningful move away from recession trigger territory over roughly 90 days—strongly consistent with no imminent recession.
• Initial claims: ran 214k (Apr 24) → 189k (May 1) → 200–211k (mid-May) → 208k (week ending Jul 11). Net: still tight, with no trend break above the levels typically associated with broad layoffs.

Growth / activity

• Industrial production improved from ~101.8 (late April) to ~102.5 (mid-May)—small, but in the right direction.
• ISM Manufacturing headline (June): 53.3 indicates ongoing expansion, but the details matter: the employment sub-index remains sub-50 (as you noted), consistent with a goods-sector labor cool-down even while output holds up. (ismworld.org)

Leading indicators

• LEI: you report -0.2% m/m in June to 99.1, which is consistent with a softening forward path; Conference Board’s June read confirms that decline. (conference-board.org)
  The key is whether the “slow bleed” turns into a persistent 6-month downtrend and diffusion weakness—your stated 3Ds framework is the right lens: it’s the persistence and breadth that tends to matter more than one print.

Housing

• In your history, housing starts sit at 1502k across much of the April–May window, while today’s dashboard shows 1427k (WATCH) and permits 1367k (WARNING). That’s a direction-of-travel deterioration—consistent with housing no longer acting as a stabilizer.

Credit + household stress

• Personal savings rate: eased from 4.0% (late April) to 3.6% (May) and is 3.0% today—a notable cushion erosion.
• Debt service ratio: roughly 11.3% throughout the history window, with today at 11.2% (still elevated). The concern is less the level alone and more the combination: low savings + rising delinquencies + slowing payroll growth.

Markets

• S&P 500: ~7108 (Apr 24) to ~7409 (mid-May), and now ~7499—risk assets continue to signal resilience.
• VIX: drifted around the high teens and remains low (today 17.1), consistent with calm conditions.

Net: over 90 days, recession risk is not broadening through the labor channel—the typical “point of no return” for near-term recession calls. But the demand side and early-cycle labor demand proxies (temp help) argue against complacency.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags: ARCC, AIG, BBY, FNF, HMC, T, BCE—plus a couple of oversold growth names (CHTR, TLK) and a cyclical/value tilt (LTM).

Two interpretations matter for macro:

1. Market positioning is quietly defensive (quality cash flow + yield preference).
   When quant screens repeatedly surface high-yield/value profiles, it often reflects a market that still wants equity exposure but is leaning toward cash-flow durability and valuation discipline. That aligns with your macro mix: slowing growth, but no recession confirmation—an environment where investors often prefer “carry + reasonable multiples” over long-duration stories.

2. The signal set also hints at dispersion and selective stress.
   Oversold flags like CHTR (RSI 28) and TLK (RSI 30) suggest pockets of drawdown even as indexes hover near highs—consistent with the broader theme of late-cycle internal fragility beneath headline index strength.

One caution: several yields shown (e.g., four-digit yields) are likely data artifacts rather than investable reality; interpret the factor classification (value/dividend/oversold) more heavily than the literal yield figures.

Latest Economic Developments

Markets (last ~48 hours):

• On Wednesday, July 22, 2026, U.S. stocks were mixed to lower: the S&P 500 slipped ~0.1%, the Nasdaq fell ~0.6%, and the Dow was roughly flat, as investors focused on tech leadership and awaited major earnings. (apnews.com)
• Energy was a notable swing factor: news coverage highlighted oil rising and crude-related inflation sensitivity as a near-term macro variable. (apnews.com)

Policy backdrop:

• The Federal Reserve’s posted policy rate remains 3.50%–3.75%, consistent with your “hold” base case from the June 17, 2026 meeting. (federalreserve.gov)
• The June meeting minutes (released recently) emphasized evolving views on policy communication and acknowledged market moves since April and the Middle East conflict—reinforcing that the Fed is still in data-dependent hold mode, not in an urgent easing cycle. (federalreserve.gov)

Macro data pulse:

• The Conference Board confirmed LEI down -0.2% in June to 99.1, putting renewed focus on whether weakness broadens beyond a few components. (conference-board.org)
• Manufacturing remains in expansion on the headline (ISM 53.3 for June), but internal employment remains soft—consistent with a growth downshift rather than a collapse. (ismworld.org)

Near-Term Outlook (Next 30 Days)

Base case for the next month: continued deceleration with low-to-moderate recession odds, unless labor cracks.

What likely keeps risk contained:

• Claims staying near ~200–230k, and Sahm remaining far below trigger.
• Financial conditions remaining loose (your NFCI is negative/loose) and HY spreads staying tight, supporting credit creation and risk appetite.

What could push the score higher quickly:

• A shift from “slow hiring” to “rising layoffs”: even a moderate claims uptrend—especially if sustained—would matter more than any single LEI print.
• Earnings season risk: if guidance begins to emphasize demand destruction rather than margin management, markets can tighten financial conditions rapidly (credit spreads widening + equity drawdown), feeding back into real activity.

Calendar catalysts to track immediately:

• Weekly initial jobless claims (Thursdays)—especially the release covering the week ending July 18 (today’s release date is on the calendar). (kiplinger.com)
• University of Michigan sentiment (July final due July 31)—a key check on whether pessimism is stabilizing or worsening. (data.sca.isr.umich.edu)
• Ongoing major-cap tech earnings, which are currently driving index-level behavior and risk appetite. (sa.marketscreener.com)

Long-Term Outlook (3-6 Months)

The 3–6 month horizon remains a two-track macro:

• Track A (soft landing / slow growth):
  Labor stays intact (claims low, unemployment rises only gradually), the yield curve remains positive, credit spreads stay contained, and growth drifts toward trend-to-subtrend without tipping into recession. Your 90-day trend in Sahm and claims strongly supports this track.

• Track B (delayed recession via demand + credit household stress):
  The recession-adjacent warnings you highlight—temp help contraction, freight weakness, depressed sentiment, low savings, rising consumer stress—create a setup where any labor deterioration can cascade. In this track, recession doesn’t begin with markets; it begins when households retrench and firms respond with layoffs, pushing Sahm higher.

Historical parallel (mechanism, not exact match): late-cycle periods where the headline economy holds while leading indicators and sentiment deteriorate can persist for months—until labor flips. In your dashboard, the economy is still in the “watch the labor hinge” phase.

What to Watch

High-frequency thresholds (most actionable):

• Initial jobless claims: watch for a sustained move above ~250k and/or a persistent rise in the 4-week average.
• Unemployment rate: a climb that pushes the Sahm Rule toward 0.50 is the cleanest “regime change” signal.
• Credit spreads (HY OAS): a move from ~270 bps toward >400 bps would be a meaningful tightening impulse.
• LEI 3Ds framework: monitor whether diffusion falls to ≤50 and 6-month annualized LEI growth drops below your -4.3% threshold.

Event risk:

• July payroll report (early August): confirmation test for whether June’s soft +57k was a one-off or the start of a weaker run-rate.
• FOMC (late July): even on hold, language on labor-market rebalancing vs inflation persistence can shift rate expectations and financial conditions quickly.

Sources

• apnews.com
• apnews.com
• apnews.com
• conference-board.org
• conference-board.org
• federalreserve.gov
• federalreserve.gov
• federalreserve.gov
• fred.stlouisfed.org
• fred.stlouisfed.org
• ismworld.org
• kiplinger.com
• marketscreener.com
• zacks.com