Recession Risk 34/100 — July 9, 2026

Recession Risk Score: 34/100 — MODERATE (-3 vs 30 days ago)

Today’s Recession Risk Score is 34/100 (MODERATE), down 3 points versus 30 days ago (from 37 on June 9, 2026 to 34 on July 9, 2026). The topline remains contained because real-time labor triggers are still quiet—initial claims are low and the Sahm Rule is far from its recession threshold. At the same time, the mix beneath the surface is getting more complicated: growth momentum is cooling, and several private-cycle leading indicators (temps, freight, sentiment, and household “buffer” metrics like saving) remain brittle. Net: no immediate 90-day recession base case, but the left-tail is fatter if labor softening broadens or credit conditions stop being “easy.”

Score Trend — Last 30 Days

Over the last 30 days (June 9 → July 9, 2026), the score drifted lower from 37 to 34 (-3), with a range of 33–44 and an average of 37. The pattern is best described as choppy mean reversion rather than a clean downtrend: the score has repeatedly snapped back toward the high-30s after brief dips, but has failed to sustain a move above 40 for long.

The last 10 readings show the “two-step” nature of this tape: 38 → 34 → 34 → 38 → 33 → 37 → 34 → 38 → 34 → 34. In practical terms, that shape implies the macro system is stable but sensitive—small shocks (a soft payroll print, a risk-off day, a hawkish Fed tone) can push the score higher quickly, but the core recession transmission channels (jobless claims breakout, widening credit spreads, tightening financial conditions) have not engaged.

Key Drivers

1. Labor-market recession triggers remain OFF (the biggest stabilizer).

   • Initial jobless claims: 215K for the week ending June 27, 2026, with the 4-week average around 222K—still consistent with a healthy labor market. (apnews.com)
   • Sahm Rule: 0.07 (SAFE) on your dashboard—well below the 0.50 trigger typically associated with recession onset.

2. The curve has re-steepened (a meaningful near-term de-risking).

   • 2s10s: +35 bps (WATCH, steepening) and 2s30s: 0.86 (SAFE). The removal of inversion reduces one of the market’s strongest “next 6–18 months” warning conditions, even if it’s not a clean growth-positive signal by itself.

3. Financial conditions remain easy (no active stress transmission).

   • Chicago Fed NFCI: -0.52 (SAFE)—still loose. (fred.stlouisfed.org)
   • High-yield OAS: ~267 bps (SAFE)—tight spreads imply limited default stress being priced.

4. Growth is cooling, not collapsing (but the direction matters).

   • Atlanta Fed GDPNow: ~1.8% (WATCH) signals a below-trend, moderating pace rather than contraction. (atlantafed.org)
   • Your dashboard’s GDP growth (QoQ annualized): 2.1% (WATCH) fits that “cooling” narrative.

5. June payrolls were a genuine softness flag—and the composition matters.

   • June 2026 nonfarm payrolls: +57,000 and unemployment rate: 4.2%. (bls.gov)
   • Importantly, participation fell in June (noted widely in coverage of the report), which can mechanically lower unemployment while underlying labor demand cools. (axios.com)

6. “Private-cycle” leading indicators remain the score’s biggest negatives.

   • Temporary Help Services: 2,499K (DANGER)—temps are often an early adjustment lever for employers.
   • Freight Transportation Index: 0.3 (DANGER)—weak goods flow tends to show up early in industrial slowdowns.
   • UMich sentiment: 44.8 (DANGER)—crisis-level pessimism is a risk to discretionary demand.
   • Personal saving rate: 3.0% (WARNING)—low shock absorption if job growth slows further.

Category Breakdown

Using your CATEGORY BREAKDOWN counts:

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Mixed but not recessionary—labor triggers are safe, but growth/labor cooling indicators keep this category from “all clear.”

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Still broadly supportive, though the “danger” print is a reminder that second-derivative signals can turn faster than headline activity.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing remains a soft pocket—starts/permits are not signaling a re-acceleration, consistent with a late-cycle slowdown impulse.

• Business Activity: 2 safe / 1 watch / 0 danger
  The economy is still producing—industrial production is safe and manufacturing surveys remain expansionary overall.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  This is an important “tail-risk” cluster: delinquencies and debt service burdens aren’t crisis levels, but they’re no longer benign.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are simultaneously calm (VIX low, equities high) and stretched (multiple valuation and ratio “danger” flags). That combination often reads as complacency risk rather than immediate recession.

• Liquidity: 0 safe / 1 watch / 2 danger
  The ON RRP depletion and other liquidity flags argue the system has less cushioning if funding stress appears unexpectedly.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  This bucket is basically the “early warning radar”—not flashing recession, but showing enough deterioration to justify the current MODERATE band.

Biggest Movers

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

1. ON RRP Facility ($3B): +640.2% (7D)
   Contradictory / ambiguous. A big % swing off a tiny base is more “plumbing” than macro. Still, the broader message is that RRP is effectively depleted, reducing a traditional liquidity buffer.

2. Freight Transportation Index (0.3): +350.0% (7D)
   Contradictory (improving) on the 7-day change, but it remains DANGER level. This reads as a dead-cat bounce risk: the level says “weak goods economy” even if the week-to-week rate improved.

3. Yield Curve (2s30s) (0.86): -81.7% (7D)
   Confirmatory (worsening risk) if the move reflects long-end rallying or short-end repricing tied to growth concerns. However, your level is still labeled SAFE/normal, so this is more about volatility than recession confirmation.

4. NY Fed Recession Probability (6.3%): -70.5% (7D)
   Contradictory (improving). A falling NY Fed model probability aligns with the re-steepening curve and the absence of acute stress.

5. Initial Jobless Claims (215K): -11.7% (7D)
   Contradictory (improving). This is the cleanest “good” mover—claims moving down is inconsistent with an imminent labor-led downturn.

90-Day Indicator Trends

Your “90-day history” window (as provided) is dominated by April–early May 2026 observations for many series, so the right way to read it is: what was the trend then, and how does today’s July 9 level compare to that spring baseline?

Labor & real-time recession triggers

• Sahm Rule: ~0.20 through April/early May (SAFE) → 0.07 today (SAFE).
  Directionally better, reinforcing the “contained” near-term recession risk.
• Initial claims: moved between ~189K–219K in spring → 215K today (SAFE).
  Net: stable range, no breakout pattern.

Household buffers & credit stress

• Personal saving rate: ~4.5% → 4.0% → 3.6% in late April/early May → 3.0% today (WARNING).
  That’s a notable deterioration in the household buffer. Even without recession, it raises sensitivity to shocks (gas, rents, job loss).
• Credit card delinquency: roughly 2.9% in spring and still 2.9% today (WATCH).
  Level is elevated enough to matter, but it’s not accelerating in your history snippet.

Financial conditions and spreads

• NFCI: ~-0.43 in early April → -0.52 by early May (looser) → -0.52 today (SAFE). (fred.stlouisfed.org)
  This is a key reason recession risk isn’t higher: conditions have not tightened.
• HY spreads: spring readings bounced around ~283–320 bps in the history table → ~267 bps today (tighter).
  Credit is effectively easing, not transmitting stress.

Growth & activity

• GDPNow: essentially flat around 1.8% in the spring sample and ~1.8% now. (atlantafed.org)
  This indicates steady sub-trend growth, not a sudden drop.
• Industrial production: ~102.6 → 101.8 in mid-April/early May, now 102.6 (SAFE) on your dashboard—suggesting stability rather than contraction.

Cyclical leading indicators (where risk is concentrated)

• Temporary help services: ~2,475K (DANGER) in April/early May → 2,499K (DANGER) today.
  Still a red flag; even if the level is marginally higher than spring, it remains structurally weak and consistent with cautious employers.
• Consumer sentiment: 56.6 → 53.3 (warning to danger) in late April/early May → 44.8 (DANGER) today.
  This is a clear downshift and one of the most recession-sensitive directional changes in your dashboard.

Bottom line from the 90-day lens: labor and credit are stable-to-better; household buffers and sentiment are worse; goods-cycle indicators remain weak. That is exactly the combination that produces a mid-30s “MODERATE” score rather than either an “all clear” or a recession call.

Stock Screener Signals

Today’s quant flags are dominated by “value dividend” screens (ARCC, AIG, BBY, FNF, HMC, T, BCE, LTM) with a smaller pocket of oversold growth (CHTR, TLK). That mix matters: when screens repeatedly surface cash-yielding value alongside select oversold growth, it often signals a market that’s not pricing recession, but is quietly demanding compensation—via yield, low P/E, or oversold technicals—for incremental macro uncertainty.

Two interpretations fit the macro tape:

• Defensive carry without panic: Names like ARCC and T showing up can reflect a preference for income and stability while equity indices stay near highs. In a “cooling but not collapsing” growth regime, that’s consistent with portfolios rotating toward quality carry rather than high beta.
• Selective cyclicals/consumer value stress: A flag like BBY at low P/E and low-ish RSI reads like investors are still discounting a scenario where consumers face pressure (consistent with low saving and weak sentiment), but not enough to force broad de-risking.

One caution: the displayed yields in your screener output (e.g., triple-digit % yields) look mechanically distorted. Treat the style tags (value dividend / oversold growth), P/E, and RSI as the informative parts, and treat the yield field as an outlier until reconciled.

Latest Economic Developments

Fed communications (past 48 hours): Minutes released on Wednesday, July 8, 2026 highlighted disagreement on the path of rates and officials emphasizing upside risks to inflation, reinforcing a “higher-for-longer vigilance” stance even as growth cools. (axios.com) For recession risk, that matters because the key failure mode from here is policy staying tighter than the economy can tolerate if inflation re-accelerates—tight credit is the classic bridge from slowdown to recession.

Labor market (last week, still the dominant macro anchor): The Department of Labor reported initial claims at 215,000 for the week ending June 27, continuing the post-pandemic pattern of 200K–250K stability. (apnews.com) Meanwhile, the official June 2026 Employment Situation showed payroll growth of just +57,000 with unemployment at 4.2%. (bls.gov) The message is “cooling, not cracking”: claims don’t corroborate recession, but payroll softness (and participation dynamics) keep the risk score from falling into the 20s.

Business cycle / leading indicators: The Conference Board reported the LEI rose +0.1% in May 2026 (second consecutive monthly increase after April’s +0.2%). (conference-board.org) That improvement is small, but it reduces the probability that the economy is already sliding into a classical, broad-based contraction.

Manufacturing: ISM’s June 2026 Manufacturing PMI was 53.3, still expansionary, though some details (notably employment near contraction) imply firms remain cautious on hiring. (ismworld.org) This aligns with your “soft hiring + weak temps” narrative: output is okay, but labor demand is cautious.

Near-Term Outlook (Next 30 Days)

The next month is primarily about whether labor softening broadens and whether markets reprice Fed reaction risk.

Base case (most likely): risk score oscillates in the low-to-high 30s.

• Claims remain rangebound (roughly ~200K–230K) and the Sahm Rule stays well below trigger.
• GDP tracking remains around ~1.5%–2.5% as incoming data alternates between “cool” and “okay.”
• HY spreads remain tight unless inflation surprises higher or earnings guidance turns sharply down.

Key catalysts that could move the score quickly:

• Another weak payroll print (especially if paired with rising unemployment and higher continuing claims).
• A hawkish inflation surprise that forces the Fed to lean tighter than markets expect—minutes already show internal debate and upside inflation concern. (axios.com)
• Credit spread widening from the mid-200s to the 350–450 bps zone (a classic early stress marker).

Long-Term Outlook (3–6 Months)

The 3–6 month horizon is where today’s cross-currents matter most. The economy is currently in a configuration that often precedes either (a) a benign soft landing, or (b) a delayed downturn: labor still fine, credit easy, but “buffers” and “belief” (saving + sentiment) deteriorating.

What the 90-day trajectory suggests:

• Stabilizers: NFCI loose; HY spreads tight; LEI modestly improving; claims not breaking out. These are the ingredients of “slowdown without recession.”
• Fragilities: Saving rate low; temps weak; freight weak; sentiment very depressed. These conditions make the economy more nonlinear—if a shock arrives (energy, geopolitics, a policy error), demand can weaken faster because households and marginal firms have less cushion.

Historical parallel (framework, not a prediction): Many pre-recession periods start with soft hiring and weak “early labor” indicators (temps/quits) before claims surge. Your dashboard is showing that early phase—but it hasn’t progressed into the claims/Sahm/credit “confirmation phase.” That’s why the score is MODERATE, not high.

What to Watch

Labor (most important):

• Initial claims: a sustained move above ~250K and especially ~275K would be a meaningful regime change.
• Unemployment rate: continued drift higher would raise the Sahm Rule; the key is whether it moves from ~0.07 toward 0.30+ (early warning) and ultimately 0.50 (trigger).

Credit & financial conditions (second most important):

• HY OAS: watch for widening above ~350 bps (early stress) and ~450 bps (material stress).
• NFCI: any move back toward 0.0 or positive territory would signal meaningful tightening.

Growth/production:

• GDPNow: if it slips materially below ~1% and stays there, the economy is moving toward stall speed. (atlantafed.org)
• ISM employment / temps: continued contraction signals employers are “right-sizing” before layoffs show up.

Household resilience:

• Saving rate: stabilization matters; further declines from 3% increase recession sensitivity.
• Sentiment: if sentiment remains near the low-40s, discretionary spending risk rises even without layoffs.

Sources

• apnews.com
• apnews.com
• axios.com
• axios.com
• bls.gov
• atlantafed.org
• conference-board.org
• ismworld.org
• fred.stlouisfed.org
• federalreserve.gov