Recession Risk 38/100 — June 30, 2026

Recession Risk Score: 38/100 — MODERATE (-6 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), down 6 points versus 30 days ago (44 → 38). The headline message is deceleration without a labor-break: the highest-weight real-time recession triggers (Sahm Rule and initial claims) remain benign, while financial conditions and credit pricing still look supportive. Offsetting that, several classic leading/cyclical “early-warning” series (temporary help, freight/goods, and housing pipeline) are deteriorating and keep downside risk convex. Net: recession risk isn’t “imminent within 90 days,” but the economy is increasingly dependent on the labor market staying stable.

Score Trend — Last 30 Days

Over the last 30 days (window 2026-05-31 → 2026-06-30), the score fell from 44 to 38 (Δ -6), with a min of 34, max of 44, and average of 38 across 31 samples. That is a meaningful improvement in headline risk—but not a clean “all-clear.”

The shape is best described as mean-reverting with intermittent spikes rather than a steady glide path. In the last 10 readings we saw repeated whipsaws between 34 and 44 (e.g., 34 on 6/21, 44 on 6/22, 34 on 6/27, 44 on 6/28, then 37–38 into 6/30). That pattern typically appears when market/financial inputs are calming (holding the baseline down), while a few macro-leading series intermittently flash (kicking the score higher on certain days).

Interpretation: near-term recession timing risk is lower than it was a month ago, but the system is not “stable-good.” It’s closer to “stable-fragile”—the sort of regime where labor can look fine until it suddenly doesn’t, and the score can jump quickly.

Key Drivers

1. Labor-break triggers remain quiet

   • Sahm Rule: 0.10 (SAFE) — well below the typical recession trigger threshold.
   • Initial Jobless Claims: ~215K (SAFE) — still consistent with a low-layoff environment; the latest reported week ending June 20, 2026 printed 215,000. (apnews.com)
     Why it matters: In most modern cycles, a true “recession probable in 90 days” setup usually requires clear deterioration in claims and unemployment momentum—not present yet.

2. Yield curve re-steepening reduces immediate recession timing risk

   • 2s10s: +0.28 (WATCH) — positive in your tracker, i.e., the curve has moved away from inversion dynamics.
   • 2s30s: +0.80 (SAFE) — broadly normal.
     Why it matters: A re-steepening curve doesn’t guarantee safety, but it often implies less near-term recession timing pressure than during persistent inversions.

3. Financial conditions remain loose; credit spreads stay tight

   • Chicago Fed NFCI: -0.52 (SAFE) as of June 19, 2026. (convextrade.com)
   • High-yield OAS: ~283 bps (SAFE) — still “risk-on” pricing for credit (no broad stress premium).
     Why it matters: Recessions rarely arrive without either labor deterioration or financial tightening (or both). Right now, the NFCI is telling you financial conditions are not tight.

4. Conference Board LEI is not confirming recession

   • The Conference Board LEI rose +0.1% in May 2026 to 99.3 (following +0.2% in April). (conference-board.org)
     Why it matters: LEI positive prints don’t eliminate recession risk, but they reduce confidence in a near-term contraction narrative—especially when labor indicators are also stable.

5. Leading real-economy cracks: temp help + freight + housing pipeline

   • Temporary Help Services: 2,490K (DANGER) — sharp decline, historically one of the more reliable early labor-market leading signals.
   • Freight Transportation Index: 0.5 (DANGER) — goods economy weakening.
   • Housing Starts: 1,177K (WARNING) and Building Permits: 1,410K (WATCH) — rate-sensitive channel is soft.
     Why it matters: These are pre-layoff type indicators. They often roll over before unemployment meaningfully rises—creating “quiet until it isn’t” risk.

6. Household buffers look thin

   • Personal Savings Rate: 3.0% (WARNING) — very low cushion.
   • Credit Card Delinquency: 2.9% (WATCH) and Debt Service Ratio: 11.2% (WATCH) — creeping strain.
     Why it matters: A low savings rate doesn’t cause a recession by itself, but it increases shock sensitivity if hiring cools or inflation stays sticky.

Category Breakdown

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Mixed. The “core” macro picture is not recessionary, but there are enough WATCH/DANGER signals (notably labor-leading and sentiment) to keep risk in MODERATE.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Mostly stable with one notable red flag—suggesting slower growth, not an outright contraction signal set.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing remains a consistent weak spot (permits/starts soft), keeping the cyclical slowdown narrative alive.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity is holding up better than sentiment-based narratives imply; this reduces near-term recession odds.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  This is a slow-burn problem: not acute stress pricing yet, but the household balance sheet is less able to absorb shocks.

• Market Signals: 7 safe / 2 watch / 5 danger
  Risk assets are “fine” (indices high, volatility low), but valuation/fear-style ratios (e.g., copper/gold, tech-to-GDP) are flashing late-cycle fragility.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a structural vulnerability bucket (e.g., RRP depletion), more relevant for “tail risk” than baseline recession.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  Real-time signals are not uniformly bad; the key is whether claims/unemployment accelerate.

Biggest Movers

Using the top 5 by |7-day % change|:

1. GDP Growth (QoQ Annualized) (2.1%): +320.0% (7D)
   Contradictory (improving). A jump to ~2.1% (from a much lower base in the series) argues against immediate recession.

2. NY Fed Recession Probability (10.6%): +138.1% (7D)
   Confirmatory (worsening). Still low in absolute terms, but the direction suggests bond-curve-based models have become more cautious.

3. Conference Board LEI (1.7): -117.4% (7D)
   Confirmatory (worsening) on the week-over-week move, though note this looks like a series-level jump rather than a smooth economic deterioration (and your “today” LEI state is SAFE).

4. Bank Unrealized Losses ($5155B): -90.3% (7D)
   Contradictory (improving) mechanically, but this series is clearly exhibiting data discontinuities in the 90-day history (large toggles). Treat as a risk backdrop, not a precise weekly signal.

5. ON RRP Facility ($4B): -73.2% (7D)
   Confirmatory (worsening) for liquidity buffer. As RRP approaches depletion, marginal liquidity shocks can transmit faster through funding markets.

90-Day Indicator Trends

Where the 90-day history is available in your block (note: many series shown only cover April observations, so trend analysis is “partial-window” for some indicators), the dominant theme is macro stability + cyclical leading deterioration + market/valuation fragility.

Labor & labor-leading

• Sahm Rule: moved from ~0.27 (2026-04-01) to ~0.20 (mid/late April readings) and stands at 0.10 today → improving over the full window, and still far from a trigger.
• Initial claims: ranged ~202K–219K in April; today is ~215K → essentially sideways in a low band, consistent with “low firing.”
• Unemployment rate: prints show 4.4% early April and 4.3% through later April; today is 4.3% (WATCH) → stable-to-slightly-firmer, not a break.

Takeaway: the labor market is not confirming recession timing risk.

Financial conditions & credit

• NFCI: around -0.48 to -0.43 early April, drifting to ~ -0.47 later April; today -0.52 → looser than earlier in the window (risk-reducing).
• HY spreads: in April, the series moved from ~320–328 bps down to ~284–294 bps at points → a tightening trend (supportive). Today’s ~283 bps fits that supportive regime.

Takeaway: recession risk is capped as long as credit refuses to price stress.

Housing & rate-sensitive growth

• Housing starts: 1,487K (early April) in the history block vs 1,177K today → down roughly 310K over the broader window (clear deterioration).
• Building permits: 1,386K (April) vs 1,410K today → slightly higher than the specific April reading shown, but still in a slowing regime.

Takeaway: housing remains a cyclical drag and a plausible channel for broader slowdown if it bleeds into employment.

Household buffers / credit stress

• Personal savings rate: 4.5% early April → 4.0% mid/late April in the history; today 3.0% → persistent erosion, increasing vulnerability.
• Credit card delinquency: sits around 2.94% in April and remains 2.9% today → elevated and not improving.

Takeaway: consumer resilience is increasingly income-and-jobs dependent.

Markets: calm surface, fragile understructure

• VIX: declined sharply from ~30.6 (Apr 1) toward ~18 later in the April history; today 18.4 → complacent volatility regime.
• Equities: S&P 500 and NASDAQ rose through April in the history block, and today remain “near highs.”
• Copper-to-gold ratio: pinned at 0.00077 (DANGER) throughout April history and still DANGER today → persistent industrial-growth pessimism.

Takeaway: markets are sending mixed signals—price indices strong, macro-sensitive ratios weak.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags: ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE, with two oversold growth names (CHTR, TLK) driven by low RSI.

This mix usually maps to a market posture of:

• Preference for cash flow and valuation support (financials/insurance, telecom, credit vehicles like BDCs), and
• Selective mean reversion in beaten-down growth where the market believes downside is priced.

Two caveats stand out:

• Several listed “yields” (e.g., ARCC 1002%, AIG 257%) look like data artifacts rather than investable forward yields. Treat the screener signal as factor exposure (value/dividend/oversold), not as literal payout metrics.
• The presence of telecom (T, BCE, TLK) and credit/financial exposures (ARCC, AIG, FNF) suggests the market is comfortable owning duration-ish defensives and credit proxies—consistent with loose financial conditions and tight HY spreads.

Latest Economic Developments

• Jobless claims remain low: The latest weekly claims data (week ending June 20, 2026) showed filings fell to 215,000—a key reason the real-time recession triggers remain benign. (apnews.com)
• LEI modestly improved: The Conference Board’s LEI increased +0.1% in May 2026 to 99.3 (after +0.2% in April), aligning with a “slowing but not contracting” baseline. (conference-board.org)
• Consumers still spending (nominally): Retail and food services sales rose +0.9% m/m in May 2026 (reported June 17), beating consensus and underscoring that the consumer has not yet rolled over. (census.gov)
• JOLTS quits rate remains subdued: BLS indicates a quits rate of 1.9% (prelim) in April 2026, consistent with cooling worker bargaining power vs the peak “Great Resignation” regime. (bls.gov)
• Macro calendar risk is concentrated this week: Multiple outlets highlight a dense run of labor and activity data into early July, with central bankers convening in Sintra and major U.S. releases imminent. (axios.com)

The key implication for recession risk is that hard activity and labor data are still “okay,” while soft and leading signals remain uneasy. That combination typically keeps the score in MODERATE unless/until labor momentum flips.

Near-Term Outlook (Next 30 Days)

Base case for July 2026: risk score stays in the mid-to-high 30s, with two-sided tails.

Likely upward catalysts (risk score rises toward 45–60):

• A sustained increase in initial claims (not a single-week pop), especially if the 4-week average trends higher.
• Unemployment drifting higher enough to push the Sahm Rule meaningfully upward from 0.10.
• A decisive widening in HY OAS from the ~280s into a regime that signals tightening credit availability.

Likely downward catalysts (risk score falls toward low 30s):

• Housing stabilizes (starts/permits stop deteriorating).
• Temporary help stops falling (or shows even a small rebound).
• LEI continues to print positive and diffusion improves.

Known scheduled catalysts:

• Weekly jobless claims updates (next key print referenced on calendars around early July). (tradingeconomics.com)
• ISM manufacturing release timing is set for July 1, 2026. (ismworld.org)

Long-Term Outlook (3-6 Months)

Over a 3–6 month horizon, the macro setup looks like late-cycle deceleration with asymmetric downside.

Why downside is asymmetric:

• Household buffers (low savings, rising delinquency) imply that once labor softens, consumption can downshift quickly because there’s less cushion.
• Labor-leading indicators (temporary help, quits) suggest reduced churn and a thinner margin of safety if hiring demand slows.

Why recession is not “pre-ordained”:

• Financial conditions are currently loose (NFCI -0.52) (convextrade.com) and credit spreads are tight—conditions that can extend expansions even with weak sentiment.
• LEI is not in a clear contraction signal regime (+0.1% m/m in May) (conference-board.org), and nominal consumer spending is still advancing (retail sales +0.9% m/m in May) (census.gov).

Historical parallel framing: this resembles “slowdown-without-stress” phases that can persist—until a catalyst (labor, credit, or exogenous shock) converts it into “slowdown-with-stress.” Your current score (38) says we’re not in the second phase yet.

What to Watch

Labor (highest priority)

• Initial claims: watch for a sustained move above the recent low band (your baseline ~215K).
• Unemployment rate: any drift that pushes the Sahm Rule meaningfully higher from 0.10.

Credit & liquidity

• HY OAS: a move from ~283 bps to a clearly wider regime would be an early warning that markets are repricing default and refinancing risk.
• Liquidity buffers: continued depletion/tightness signals (e.g., RRP dynamics) matter most if paired with market volatility.

Cyclicals / leading

• Temporary help: stabilization vs continued declines.
• Freight/goods: confirmation whether weakness is spreading beyond a narrow goods pocket.
• Housing: permits and starts—watch for follow-through weakness beyond rate-sensitive segments.

Sentiment vs spending

• Sentiment is already extremely weak; the key is whether that pessimism finally translates into slower real consumption.

Sources

No data available for this window.