Recession Risk 38/100 — July 27, 2026

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

Today’s Recession Risk Score is 38/100 (MODERATE), up +4 from 34 thirty days ago (June 27, 2026 → July 27, 2026). The rise is meaningful, but it’s not being driven by the classic “recession is imminent” trigger set—real-time labor stress remains notably calm. The macro picture still reads as late-cycle slowdown: growth is cooling, select leading indicators are deteriorating, yet financial conditions and layoffs data are not corroborating a near-term contraction call.

Score Trend — Last 30 Days

The score window ran 2026-06-27 → 2026-07-27, rising from 34 to 38 (+4). The path was not linear: the minimum was 33, the maximum was 44, and the average was 36 across 30 samples. That max print (44) tells you risk briefly “flared,” but it also failed to persist—important context for interpreting today’s moderate reading.

The last 10 readings show a choppy but upward-tilted consolidation: repeated dips to 34 (July 19, July 22–23) were followed by quick rebounds back to 38 (July 20–21, July 24, July 26–27). In plain English: the model is trying to re-rate risk higher, but the economy keeps delivering just enough labor-market stability and market calm to prevent a sustained escalation.

Key Drivers

1. Labor market trigger set remains “safe,” blocking an imminent-recession signal

   • Initial jobless claims: 187K for the week ending July 18, 2026, down 22K w/w—one of the lowest readings in decades and inconsistent with broad-based layoffs. (dol.gov)
   • Your Sahm Rule tracker: 0.07, still far from the 0.50 trigger level.
     Impact: This is the single biggest reason the score stays MODERATE rather than moving into “elevated.”

2. Growth is cooling but remains positive (slowdown, not stop)

   • Atlanta Fed GDPNow (Q2 2026): ~1.7% SAAR on July 16 (up from 1.3% on July 8). (atlantafed.org)
   • Your dashboard also flags GDP Growth (QoQ AR): 2.1% (WATCH) and GDPNow: 1.8% (WATCH)—both below trend but positive.
     Impact: Slower growth supports a higher risk score, but positive growth keeps the model anchored below “high risk.”

3. Yield curve re-steepening reduces “inversion panic,” but introduces late-cycle ambiguity

   • 2s10s: +0.36 (WATCH); 2s30s: +0.80 (SAFE).
     Impact: A positive curve is generally less recessionary than inversion, but steepening can occur late-cycle (rate-cut expectations, term premium shifts). Net: WATCH.

4. Leading indicators are softening modestly, not collapsing

   • Conference Board LEI: -0.2% in June 2026, after +0.1% in May. (conference-board.org)
     Impact: This adds to risk on direction of travel, but the magnitude is not yet “deep contraction.”

5. Manufacturing headline looks okay, but employment inside manufacturing remains a yellow flag

   • ISM Manufacturing PMI: 53.3 in June 2026 (expansion), yet Employment subindex: 49.7 (still contraction). (ismworld.org)
     Impact: Output can expand while hiring stalls—often a late-cycle pattern. This supports “moderate risk / rising tail risk.”

6. Fed on hold; policy stance supports deceleration rather than immediate recession

   • The Fed held the funds rate at 3.50%–3.75% at the June 17, 2026 meeting. (federalreserve.gov)
   • The July 15, 2026 Beige Book summarized activity as slight-to-moderate in most districts—slow but not recessionary. (federalreserve.gov)
     Impact: A stable policy rate and “modest growth” Beige Book tone are consistent with a soft-landing / slow-growth baseline.

Category Breakdown

Using the provided signal counts:

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Mixed. The “danger” is concentrated in forward-looking labor/real-economy leading edges (not in layoffs/claims), keeping recession odds moderate but biased higher.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Mostly stable; where secondary indicators are negative, they read more like drag than breakdown.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing is still a pressure point: permits/starts are not collapsing, but they remain below trend, consistent with tight affordability and rate sensitivity.

• Business Activity: 2 safe / 1 watch / 0 danger
  Broad activity measures still lean “okay,” aligning with the Beige Book’s modest-growth narrative.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  This is one of the more important watch areas: delinquency + debt service + low savings create fragile consumption if hiring weakens.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are simultaneously calm (indices high, volatility low, spreads tight) and stretched (valuation ratios and “fear/relative-value” signals like copper/gold). That combo often precedes regime shifts.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is not screaming crisis, but it’s not a tailwind either—less buffer if risk sentiment changes quickly.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  Real-time is split: claims are very strong, but high-frequency activity proxies (like freight) remain weak.

Biggest Movers

From your “Biggest Movers” block (7-day % change):

1. NASDAQ / GDP Ratio: +37.4% (7D) — Confirmatory (worsening risk)
   A jump of this size is a classic late-cycle/valuation stretch signal. It doesn’t “cause” recession, but it raises the probability that a shock (earnings, rates, risk premium) triggers tighter financial conditions.

2. ON RRP Facility: +173.6% (7D) — Contradictory-to-neutral
   Mechanically, flows in RRP reflect money-market plumbing more than real-economy recession risk. The move matters as a liquidity configuration change, but it’s not a direct “recession on/off” switch.

3. NY Fed Recession Probability: -33.3% (7D) — Contradictory (improving)
   A drop in model-based recession odds is consistent with today’s “moderate, not elevated” call—especially given the calm in jobless claims.

4. Yield Curve (2s10s): +6.5% (7D) — Contradictory-to-neutral
   Steeper curve is usually less recessionary than inversion, though the “why” matters (growth optimism vs. rate-cut expectations). Net: mildly supportive.

5. Building Permits: +5.8% (7D) — Contradictory (improving)
   Better permits reduce near-term housing drag risk, though the level still matters (and your dashboard keeps this in WARNING).

90-Day Indicator Trends

Your 90-day history block is partial (many series begin late April/early May), but it still provides useful direction-of-travel signals:

• Industrial Production: 101.8 → 102.5 (mid-May)
  A small step-up into SAFE suggests the goods side is not collapsing, despite weak freight signals.

• Sahm Rule: 0.20 → 0.13 (mid-May), now 0.07 (today)
  This is a notable improvement in recession-trigger proximity: risk from unemployment acceleration is moving away, not toward, the classic threshold.

• Initial Claims: 214K (Apr 28) → 189K (May 1) → ~200–211K (mid-May) → 187K (Jul 18 week)
  The trend is down/low, not up—reinforcing “no broad layoff wave.”

• Conference Board LEI: flipped between -0.3 and +1.7 in the stored history, but the official June print was -0.2% m/m
  The key point is that LEI is softening, and we should treat it as a slow bleed signal until the declines broaden or steepen. (conference-board.org)

• Financial conditions remain easy:
  NFCI ~ -0.52 across the period indicates loose conditions—supportive of continued expansion, but potentially enabling risk-taking and valuation excesses.

• Credit spreads tightened materially vs. early period:
  HY OAS ~320 bps (late Apr) → ~277–286 bps (mid/late May), consistent with benign credit pricing—not what you see ahead of recession.

• Household buffer deterioration is the slow-burn risk:
  Personal savings rate fell from 4.0% (Apr 30) to 3.6% (May onward) in the history block, while your current reading is 3.0% (WARNING)—a meaningful erosion of resilience.

Bottom line from the 90-day tape: the recession trigger indicators (claims/Sahm/credit spreads/financial conditions) are broadly not trending recessionary, while the fragility indicators (savings, sentiment, temp help, freight) remain worrying and can amplify a shock.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) plus a couple “oversold growth” names (CHTR, TLK). The macro message is less about aggressive cyclicals and more about income/defensive carry and idiosyncratic mean-reversion setups—a positioning profile that fits a slowdown-without-recession base case.

Two cautions jump out:

• The listed yields (e.g., ARCC 1002%, AIG 257%) are not economically plausible as standard dividend yields—this likely reflects a data normalization bug, special distribution artifact, or field mapping issue in the screener feed. Treat “value/dividend” as a factor label rather than trusting the yield numbers literally.

• The presence of oversold growth (CHTR RSI 28; TLK RSI 30) alongside many low-P/E value screens suggests markets may be rotating internally: select growth dislocations while investors still prefer cash-flow durability.

Interpretation: risk appetite is still present (equities near highs), but the marginal buyer looks more factor-defensive than euphoric—consistent with your score sitting in MODERATE, not “low risk.”

Latest Economic Developments

• Jobless claims remain extraordinarily low. The U.S. Department of Labor reported 187,000 initial claims for the week ending July 18, 2026, down 22,000 from the prior week—an important confirmation that the labor market is not in a broad layoffs phase. (dol.gov)

• GDP tracking remains positive, though below trend. The Atlanta Fed’s GDPNow estimate for Q2 2026 was 1.7% SAAR on July 16 (up from 1.3% on July 8), reinforcing “slowing, not contracting.” (atlantafed.org)

• The Fed’s qualitative read remains steady. The Beige Book (July 15, 2026) characterized economic activity as slight-to-moderate across most districts, a pattern generally inconsistent with an economy already tipping into recession. (federalreserve.gov)

• Soft leading indicators persist, but not a cliff. The Conference Board’s LEI fell 0.2% in June 2026 after a small increase in May—continued cooling, but not the kind of collapse that typically coincides with imminent recession. (conference-board.org)

• Manufacturing: expansion headline with employment caution. June’s ISM Manufacturing PMI was 53.3, but the Employment Index stayed in contraction at 49.7, consistent with a late-cycle “output without hiring” regime. (ismworld.org)

Near-Term Outlook (Next 30 Days)

The next month is about whether today’s fragility signals infect the labor market, because the recession call remains labor-led:

• Primary “upgrade risk” trigger: a sustained rise in initial claims toward ~230K–250K+ and/or a material acceleration in the Sahm Rule from 0.07 toward the 0.50 trigger. Claims are currently too low to support that narrative, but the turn—when it happens—can be fast.

• FOMC event risk is immediate. The economic calendar points to a July 29 FOMC decision this week; markets are highly sensitive to guidance on the path of policy, not just the hold/cut decision. (kiplinger.com)

• Data cadence: watch (1) weekly claims, (2) labor-demand proxies (JOLTS/quits), and (3) ISM employment components. If employment components weaken while claims remain low, the score likely drifts higher modestly rather than spikes.

• Market catalyst risk: with equities near highs and valuation signals flashing (NASDAQ/GDP “danger”), the fastest route to a higher risk score is a financial-conditions tightening episode (spreads widening + volatility rising), even if the real economy hasn’t rolled over yet.

Long-Term Outlook (3-6 Months)

Over the next 3–6 months, the U.S. economy looks set up for a slowdown with asymmetric downside:

• Base case: sub-trend growth persists because layoffs remain contained and credit stays available. This is consistent with (a) very low claims, (b) tight HY spreads, and (c) loose NFCI readings in your dashboard.

• Key vulnerability: household resilience is thin. A low savings rate (3.0%) plus rising consumer credit stress means that if hiring momentum cracks (even modestly), consumption can downshift quickly. That’s why the score is not “low,” even though the labor triggers are calm.

• Late-cycle signature: your dashboard’s combination—temp help in DANGER, freight in DANGER, sentiment in DANGER, but claims/Sahm/spreads still SAFE—often precedes either (1) a soft-landing continuation or (2) a sudden deterioration when the labor market finally responds. The 90-day trajectory suggests we’re still in phase (1), but drifting closer to the fork.

What to Watch

Hard thresholds (score-moving):

• Initial jobless claims: sustained move above 230K–250K (and especially if the 4-week average rises persistently).
• Sahm Rule: acceleration toward 0.30 would matter; 0.50 is the formal trigger.
• HY OAS (credit spreads): a shift from ~277 bps toward 350–400+ bps would signal genuine risk repricing.
• VIX: sustained move above ~25 would likely coincide with tighter financial conditions.

High-signal releases/events (next 30 days):

• FOMC decision and press conference (July 29, 2026) and the market-implied repricing around it. (kiplinger.com)
• Next weekly initial claims prints (trend > level). (dol.gov)
• Next GDPNow updates as new Q2/Q3 inputs arrive. (atlantafed.org)
• Next ISM Manufacturing PMI (July data) with special focus on Employment. (ismworld.org)

Sources

No data available for this window.