Recession Risk 38/100 — July 24, 2026

Recession Risk Score: 38/100 — MODERATE (+0 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), unchanged versus 30 days ago (June 24, 2026 → July 24, 2026). The headline read is simple: near-term recession triggers remain inactive, particularly in high-frequency labor and credit. At the same time, late-cycle “fragility” indicators—temp help, freight, housing permits, and household buffers—continue to warn that downside tails are widening even if the baseline remains “slowing expansion,” not “imminent contraction.”

Score Trend — Last 30 Days

The score started at 38 and ends at 38 over the last 30 days (Δ 0), but the path matters: the range was wide (min 33, max 44, average 36). This is a classic mid-cycle-to-late-cycle “chop” pattern—risk flares briefly (typically on growth scares or sentiment/leading indicators), then mean-reverts when labor and credit fail to confirm.

The last 10 readings show that behavior clearly: the score toggled between the mid-30s and high-30s, with a short spike to 37–38 around July 17–18 and repeated pullbacks to 34 (July 15–16, 19, 22–23) before returning to 38 today. Net: the trend is stabilizing, not accelerating—yet the repeated rebounds from 33–34 back toward ~38 imply that underlying macro resilience is increasingly dependent on “still-OK” labor and “still-easy” financial conditions.

Key Drivers

1. Labor recession triggers remain benign (biggest stabilizer).

   • Initial jobless claims just printed 187k for the week ending July 18, 2026, with the 4-week average at 207,500—extremely low by historical standards and inconsistent with an economy rolling into recession in the next 1–3 months. (apnews.com)
   • Your Sahm Rule tracker at 0.07 remains far below the 0.50 trigger. This keeps the model’s highest-weight “real-time labor red flag” firmly OFF.

2. Credit stress is absent (the cycle’s “no-crack” signal).

   • High-yield spreads remain tight: ICE BofA Single-B HY OAS ~2.86% on July 21, 2026—a “calm credit” regime rather than an impending-default regime. (fred.stlouisfed.org)
   • The implication: even if growth is decelerating, funding markets are not rationing credit aggressively—yet.

3. Yield curve has re-steepened (reduces the classic near-term recession message).

   • With 2s10s positive (tracker +0.36) and 2s30s positive (0.87), the curve is not broadcasting the same tight-policy/inversion stress that typically precedes downturns. In practice, this dampens near-term recession probability—unless steepening is driven by a sharp front-end collapse (policy easing due to growth shock). Right now, the labor data argues that’s not the case.

4. LEI deterioration is mild, not cascading (leading data: “yellow,” not “red”).

   • The Conference Board LEI fell -0.2% in June 2026, but the six-month change is +1.1% (positive), a profile that’s not consistent with sustained broad-based leading deterioration. (conference-board.org)
   • This helps explain why the risk score won’t break higher: you have pockets of weakness, but not enough synchronized weakness across components.

5. Housing is below trend (a durable drag).

   • Building permits: 1,367,000 SAAR in June 2026—weak enough to keep the housing family signaling WARNING/DANGER in your framework. (census.gov)
   • Housing weakness matters because it often precedes broader labor softness, especially in construction, manufacturing supply chains, and local services.

6. Household “buffer” indicators are a growing tail risk.

   • Personal savings rate: 3.0% (WARNING) and rising consumer credit stress (delinquencies, debt service) mean the consumer can look “fine” right up until it doesn’t—then spending slows abruptly when job growth cools or credit tightens.

Category Breakdown

• Primary Indicators: 3 safe / 4 watch / 2 danger
  The primary set is mixed: labor triggers are green, but the presence of danger signals (notably temp help) prevents a “low-risk” score.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary signals are mostly supportive; the single danger reading is a reminder that second-tier leading signals can weaken before labor turns.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing remains a persistent drag; permits are below trend and starts are slowing, consistent with higher sensitivity to rates/affordability.

• Business Activity: 2 safe / 1 watch / 0 danger
  This category is holding up—good news for the next 90 days, but watch for spillover from goods/housing into services hiring.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  The stress is not yet systemic, but the direction of travel is unfavorable: low savings + rising delinquency risk = higher downside convexity.

• Market Signals: 6 safe / 3 watch / 5 danger
  Markets are “safe” on volatility/levels, but “danger” on valuation/cycle pricing (NASDAQ/GDP, copper/gold). This is the classic late-cycle divergence: markets buoyant while macro internals fray.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a quiet risk: depletion in facilities and fiscal/financing constraints can create nonlinear tightening episodes.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency is split: claims are strong, but freight/other real-economy pulse measures are weak.

Biggest Movers

From the top 5 |7-day % change| movers:

1. Yield Curve (2s30s) (0.87): +435.0% 7D — Contradictory (improving)
   A sharp steepening usually reduces the classic inversion recession signal. Still, monitor why it steepened (growth optimism vs. front-end easing expectations).

2. ON RRP Facility ($376M): -83.9% 7D — Confirmatory (worsening tail risk)
   A rapid drawdown can signal less “parked” liquidity and changing money-market plumbing; not a recession trigger by itself, but it can amplify volatility in a stress event.

3. NY Fed Recession Probability (0.8%): -61.9% 7D — Contradictory (improving)
   This is an outright risk-off for the recession call—model-based recession probability falling sharply supports the “not imminent” view.

4. DXY (Dollar Index) (120.5): +23.6% 7D — Mixed (often confirmatory of tightening)
   A surging dollar can tighten financial conditions and pressure manufacturing/EM; it’s not automatically recessionary, but it can become a growth headwind quickly.

5. Yield Curve (2s10s) (0.36): +12.5% 7D — Contradictory (improving)
   Reinforces the “no active inversion regime” message.

90-Day Indicator Trends

Your 90-day history snapshot (April 25 → late May observations shown) highlights a crucial point about the current regime: the economy is not “cracking” in the coincident data, but leading/labor-composition indicators are fraying.

Industrial production:

• 101.8 (Apr 25) → 102.5 (May 16+) → 102.6 (today)
  That’s a clear upshift (~+0.8 points from late April to today), consistent with your “SAFE — production expanding” label. This is a recession suppressor because recessions rarely begin with IP rising.

Initial claims (high-frequency labor):

• 214k (Apr 27) → 189k (May 1) → 211k (May 15–20) → 187k (week ending Jul 18)
  The trend is flat-to-down, not up. The latest print (187k) is especially important because it confirms that the labor market is not in a layoff acceleration regime. (apnews.com)

Financial conditions (NFCI):

• ~ -0.50 to -0.52 in late April/May (loose) and still negative today per your tracker.
  Loose conditions reduce near-term recession risk and help explain why spreads and equities remain resilient.

Credit spreads:

• ~320 bps (Apr 25) → ~275–283 bps (mid/late May) → ~2.86% (286 bps) July 21 (Single-B)
  Directionally, this is stable-to-tighter versus early in the window—again, not recession-confirming. (fred.stlouisfed.org)

Housing permits:

• Within the “soft patch” zone and now explicitly confirmed at 1.367M SAAR (June)—weak enough to keep housing a drag and a potential transmission channel into jobs. (census.gov)

Consumer sentiment:

• The 44.8 reading is extreme pessimism (crisis-level in your framework). FRED confirms May 2026: 44.8; UMich’s ISR commentary indicates sentiment rebounded in June, but your framework is flagging the extreme low as a tail-risk marker for spending behavior if labor softens. (fred.stlouisfed.org)

Bottom line over 90 days: coincident production + credit say “expansion,” while housing/consumer psychology + temp help/freight say “late-cycle fragility.” That mix is exactly what produces a Moderate score that refuses to break higher—until labor or spreads confirm.

Stock Screener Signals

Today’s quant flags cluster into two buckets: (1) “value dividend” defensives/financials and (2) “oversold growth” mean-reversion candidates. That combination is consistent with a market that is not pricing recession imminently, but is quietly rotating toward cash-flow durability and selective distress.

On the value dividend side (e.g., ARCC, AIG, BBY, FNF, HMC, T, BCE), the common theme is low P/E and a “carry” mindset: investors hunt for income + valuation support rather than pure multiple expansion. In a true pre-recession tape, you’d typically see broader credit-sensitive names screened out and a heavier tilt toward staples/utilities; here, the presence of credit-exposed yield (e.g., BDC exposure via ARCC) aligns with your macro read that HY spreads are tight and funding stress is absent.

On the oversold growth side (CHTR RSI 28, TLK RSI 30), the signal is more tactical: investors are still willing to buy idiosyncratic weakness rather than hiding wholesale. That behavior usually coexists with low VIX and “loose enough” financial conditions—exactly what your market/liquidity indicators suggest.

One caveat: several listed “yields” look mechanically incorrect (triple/quadruple-digit percentages). Treat the factor tags (value dividend, oversold growth) as the real signal, not the raw yield field.

Latest Economic Developments

1) Claims shockingly low—labor is not rolling over.
The most important development in the last 48 hours is the weekly initial claims report (July 23, 2026 release) showing 187,000 claims for the week ending July 18, and a 207,500 four-week average. (apnews.com)
That print directly supports your thesis: no active labor-market recession trigger.

2) LEI cooled slightly but the six-month trend is positive.
The Conference Board reported the LEI declined -0.2% in June 2026 to 99.1, but emphasized the six-month change was +1.1%—a notably non-recessionary profile for a leading index. (conference-board.org)
This matters because the “leading data” argument for recession is currently not broad and persistent enough.

3) Housing permits confirmed below-trend levels (June).
The Census Bureau’s June release puts permits at 1,367,000 SAAR. (census.gov)
This is consistent with your housing warning signals and supports a slowdown in interest-sensitive sectors, even if the aggregate economy stays out of recession.

Near-Term Outlook (Next 30 Days)

The next month is about one question: does weakness spread from rate-sensitive and goods channels into broad employment? As of July 24, 2026, the answer remains “not yet,” but the setup is late-cycle enough that a single catalyst (policy tone, spread widening, layoffs) could reprice risk quickly.

Key catalysts:

• FOMC meeting: July 28–29, 2026.
  Markets have recently leaned toward the Fed holding steady, with attention on forward guidance and the balance of inflation vs. growth risks. Any shift toward renewed restriction (hawkish signaling) would be a risk-score positive (worse) via housing/credit channels.
• Weekly claims (every Thursday):
  The threshold to watch is not one print, but a persistent uptrend—especially if the 4-week average starts rising meaningfully from ~207.5k toward the mid-200s.
• Earnings + guidance:
  With equity indices near highs in your tracker, the market is not positioned for a recession. The risk is that profit guidance turns into capex and hiring restraint—showing up first in temp help and quits.

Base case for the next 30 days: score stays in the mid/high-30s, with spikes toward low-40s only if we see spread widening or a clear claims uptrend.

Long-Term Outlook (3-6 Months)

Over a 3–6 month horizon, the economy looks less like “recession now” and more like a slowing expansion with rising left-tail risk. The reason is structural: several indicators imply reduced shock-absorption capacity (low savings, rising credit stress, late-cycle labor composition weakness like temp help). That’s how you get an economy that can keep growing—until a modest adverse shock forces households and firms to synchronize their pullback.

Three macro regimes to consider:

• Soft landing / glide path (most consistent with today): labor stays intact, spreads stay tight, housing stabilizes at a low level. Risk score oscillates 30s–low 40s.
• Fragility unwind: temp help declines bleed into broader payrolls; quits stay low; delinquencies rise; credit spreads widen from tight levels. Risk score grinds 40s → 50s.
• Policy/financial accident: liquidity plumbing or a fast dollar move tightens conditions quickly. This is lower probability but higher impact.

Your 90-day trend mix (production/credit ok; housing/sentiment/temp help weak) argues the long-term risk is not linear—it’s conditional on whether labor and credit lose their current resilience.

What to Watch

Concrete thresholds and events that would move the needle:

• Initial claims:
  • Watch for the 4-week average to break higher persistently from 207,500 (current) toward >235k and rising. (apnews.com)
• Sahm Rule:
  • Any move that pushes the tracker meaningfully toward 0.50 would be a major regime shift (labor-trigger activation).
• HY spreads (OAS):
  • From ~2.86% (July 21), watch for a sustained widening toward >3.5% (early stress) or >4.5% (material stress). (fred.stlouisfed.org)
• Housing permits:
  • Continued erosion from 1.367M SAAR would reinforce the “rate-sensitive contraction” channel. (census.gov)
• FOMC (July 28–29, 2026):
  • Any guidance that implies renewed tightening or delayed easing could amplify housing and credit stress.
• Temp help + freight:
  • These are your “canaries.” If they remain in danger and claims start to rise, the model will likely re-rate risk quickly.

Sources

No data available for this window.