Recession Risk 38/100 — June 6, 2026

Recession Risk Score: 38/100 — MODERATE (+1 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), up +1 point from 30 days ago. The macro picture still reads as slowing—but not breaking: the core “trigger” signals that typically accompany an imminent recession (notably labor-market deterioration and broad financial stress) remain contained. At the same time, the dashboard is flashing late-cycle fragility—especially in consumer buffers (saving) and in goods-cycle / cyclicals (freight, copper-gold). Net: the economy is expanding, but the margin for error has narrowed.

Score Trend — Last 30 Days

Over the last 30 days (May 7 → June 6, 2026), the score moved from 37 to 38 (+1), with a wide range: min 33, max 44, avg 37. That spread matters: the system is not drifting steadily higher; it’s swinging between “benign expansion” and “risk-on-with-fragile-foundations,” often driven by fast-moving market/liquidity and sentiment inputs rather than a clean collapse in hard activity.

The shape looks “mean-reverting with spikes”. In the last 10 readings, we’ve repeatedly snapped up to 44 (May 29, May 31, June 1, June 3), then quickly retraced to 34–38. That’s characteristic of an environment where headline risk (geopolitics/energy, rates repricing, positioning) can temporarily overwhelm the underlying macro, but where labor and credit have not yet rolled over enough to lock in a higher-risk regime.

Key Drivers

1. Labor market: still expansionary, cooling at the margin

   • May payrolls: +172k; unemployment rate: 4.3% (BLS release June 5, 2026). (bls.gov)
   • This is not a recession print. But with quits down and temp help weak, it’s increasingly a “headline strong, internals softer” labor story.

2. Sahm Rule remains well below trigger

   • Sahm Rule: 0.10 (SAFE) — recession alarm is decisively off.
   • This is the single most important reason the score stays in MODERATE rather than drifting into high-risk territory.

3. Consumer buffer is the macro weak spot

   • Personal saving rate: 2.6% (DANGER) — a thin cushion that amplifies downside risk if gasoline/food costs rise or if hours worked soften.
   • Pair this with consumer sentiment at 49.8 (DANGER): psychologically, households are already acting “recession-ish,” even if incomes/employment haven’t fully cracked.

4. Goods-cycle stress: freight + copper/gold are blinking red

   • Freight Transportation Index: 0.5 (DANGER) — consistent with weaker goods demand / inventory caution.
   • Copper-to-Gold ratio: 0.00077 (DANGER) — extreme “industrial fear” style signal, often seen when markets price a growth downshift.

5. Financial conditions are not the problem—yet

   • HY OAS: 274 bps (SAFE) and Chicago Fed NFCI: -0.49 (WATCH) point to easy-to-normal conditions rather than tightening stress.
   • But the ON RRP facility at ~$761M (WARNING) implies reserve/liquidity plumbing is thinner, reducing shock-absorption capacity in a volatility event.

6. Growth pulse: soft-but-positive

   • BEA Q1 2026 real GDP (second estimate): +1.6% SAAR (released May 28, 2026). (bea.gov)
   • Atlanta Fed GDPNow: 3.0% for 2026:Q2 as of June 1 (down from 3.8% on May 28). (atlantafed.org)
   • Growth is not collapsing—rather, it’s uneven and vulnerable to shocks.

Category Breakdown

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Mixed. The critical point is that the highest-weight triggers are not firing, but multiple labor/income internals remain on watch.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Still mostly supportive, with isolated red flags rather than a broad deterioration.

• Housing & Construction: 0 safe / 2 watch / 0 danger
  Housing is slowing but not sliding—consistent with a higher-rate world and affordability pressure, not a crash impulse.

• Business Activity: 2 safe / 1 watch / 0 danger
  Surveys are showing expansion, particularly manufacturing, but employment components are less convincing.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  This is a key vulnerability: debt service, delinquencies, and saving suggest households are increasingly dependent on credit to sustain spending.

• Market Signals: 6 safe / 3 watch / 5 danger
  Markets are sending a split message: equities near highs and volatility low, but valuation/ratio metrics and cyclicals (e.g., copper/gold) warn of macro complacency.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a non-trivial tail risk: less cash parked in ON RRP can mean less “shock absorber” in episodes of funding stress.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency signals are not uniformly recessionary, but they are sensitive—labor and freight will be pivotal.

Biggest Movers

1. Yield Curve (2s30s) (0.92): +385.0% (7D)
   Contradictory / improving for recession risk: a steeper long curve typically implies less near-term recession pricing and/or more inflation term premium.

2. GDP Growth (QoQ Annualized) (1.6%): +200.0% (7D)
   Contradictory / improving: the growth impulse is positive, even if below trend.

3. Conference Board LEI (1.7): -117.4% (7D)
   Confirmatory / worsening: big negative move signals leading components are wobbling (even if the April headline was slightly positive in official reporting). (conference-board.org)

4. ON RRP Facility ($761M): -98.8% (7D)
   Confirmatory / worsening: declining ON RRP is not “bad” in isolation, but at extreme depletion it can coincide with tighter liquidity buffers.

5. NY Fed Recession Probability (4.9%): -42.7% (7D)
   Contradictory / improving: model-based recession odds have fallen, aligning with the “no imminent recession trigger” view.

90-Day Indicator Trends

Even with limited points shown in the 90-day history block, the direction of travel is clear across several core indicators:

• Labor-market trigger metrics

  • Sahm Rule: 0.27 (Mar 8) → 0.10 (today). That’s a meaningful improvement in the recession trigger backdrop: it implies the unemployment-rate run-up relative to its 12-month low has not accelerated.
  • Initial jobless claims: 213k (Mar 8) → ~225k (week ending May 30). Claims are higher than early March, but remain historically low and not yet in an “acceleration” pattern. (apnews.com)
  • JOLTS quits rate: ~2.0% (Mar) → 1.9% (today), a mild but notable decline that usually signals reduced worker confidence and cooling labor churn.

• Consumer resilience

  • Personal saving rate: 3.6% (Mar 8) → 2.6% (Apr, current reading). That is a material deterioration in household buffer over roughly 90 days, and it’s the cleanest “late-cycle” message in the dataset.
  • Consumer sentiment: 56.4 (Mar 8) → 49.8 (today). Sentiment has moved from “weak” to crisis-level pessimism, which raises the risk that spending retrenches abruptly if job security perceptions change.

• Business cycle / goods economy

  • Freight index remains in DANGER across the window—consistent with ongoing softness in goods movement.
  • ISM manufacturing PMI is strong in the latest data: 54.0 in May (highest in several years), but the employment sub-index remained in contraction (48.6)—a classic “output up, hiring cautious” configuration. (ismworld.org)

• Financial conditions and liquidity

  • NFCI moved from about -0.52 (early March) to around -0.49 (late March / current reading), i.e., still near normal-to-easy.
  • ON RRP shows repeated “near-zero” prints and occasional spikes in the history—today’s near-depletion is consistent with a liquidity regime where marginal stress can surface faster than in a high-RRP world.

• Markets

  • Equities in the history window (S&P, Nasdaq, DJIA) showed drawdowns in March; today’s readings show near highs. The macro takeaway isn’t “no recession”—it’s that risk appetite is elevated while several macro internals (consumer buffer, goods-cycle) are not.

Stock Screener Signals

Today’s quant flags cluster into two buckets: (1) value/high-yield defensives and (2) oversold idiosyncratic growth. Names like AIG, BBY, FNF, T, BCE, ARCC signal a market that still wants cash flow, dividends, and balance-sheet durability—a typical stance when investors are not betting on a clean acceleration in real growth, even if equities are near highs. The presence of multiple “value dividend” flags suggests selective risk-taking rather than broad cyclicality leadership.

The “oversold growth” flags (CHTR, TLK) suggest pockets of stress inside growth/telecom/communications—sectors that can be sensitive to rates, credit conditions, and consumer substitution. That mix fits a macro environment where recession isn’t imminent, but the market is pricing dispersion: pockets of the economy look tight (consumer cash flow), while others remain supported (capex themes, AI infrastructure, energy capex).

One caution: several yields listed (e.g., ARCC 1002%, AIG 257%) appear mechanically distorted (likely data glitches or special distributions). Treat the screener’s style signal (value/dividend vs oversold growth) as more informative than the raw yield print.

Latest Economic Developments

• Jobs report (May, released June 5, 2026): Payroll growth came in at +172,000 with the unemployment rate 4.3%. (bls.gov)
  This keeps the near-term recession narrative contained: recession risk typically escalates when payrolls are consistently near stall speed and unemployment is rising fast enough to move the Sahm Rule toward 0.5. We’re not there.

• Markets and Fed pricing: A stronger-than-expected jobs report pushed markets toward higher-for-longer / potential hikes later in 2026 thinking, with reports noting rising expectations for rate increases. (investing.com)
  For recession risk, the channel is straightforward: if the market forces a tighter expected policy path (or tighter real yields), consumer and levered pockets tend to feel it first.

• Fed leadership and policy backdrop: The next FOMC meeting is June 16–17, 2026, and commentary around the first meeting under Chair Kevin Warsh is emphasizing persistent inflation risks—especially energy and tariffs pass-through—arguing for caution on rate cuts. (investing.com)
  That matters because the economy’s most visible vulnerability today is consumer buffer depletion; tighter financial conditions would pressure that weak point quickly.

• Growth tracking: Atlanta Fed GDPNow puts 2026:Q2 at 3.0% as of June 1, down from 3.8% on May 28. (atlantafed.org)
  Net: still expansion, but with enough volatility to keep risk elevated.

• Manufacturing: ISM manufacturing PMI rose to 54.0 in May, while the prices and supplier delivery signals reflect ongoing cost and supply-chain pressures; employment stayed in contraction at 48.6. (ismworld.org)
  This is consistent with an economy where output can hold up without broad hiring—fine in expansion, but fragile if demand softens.

• Leading indicators: The Conference Board LEI rose +0.1% in April 2026 to 97.4 after a March decline. (conference-board.org)
  LEI isn’t flashing an “imminent recession” message, but it’s not shouting acceleration either.

Near-Term Outlook (Next 30 Days)

The next 30 days hinge on whether labor cooling becomes labor deterioration. With payrolls still positive and claims still low, the risk score should remain MODERATE unless we see a persistent upward drift in high-frequency labor stress.

Catalysts that could move the score higher quickly:

• Initial claims: a sustained move up (especially if the 4-week moving average starts climbing meaningfully) and a rise in continuing claims would be the cleanest early warning.
• Unemployment rate: another step-up from 4.3% that begins compressing the distance to Sahm-rule trigger territory.
• Energy/geopolitics: renewed oil spikes would hit real incomes and sentiment—already weak—turning “soft landing” into “consumer-led slowdown.”

Upcoming known event risk:

• FOMC meeting: June 16–17, 2026. (investing.com)
  Markets are sensitive to any signal of less dovish policy (or renewed hikes) given the consumer buffer and stretched valuations.

Long-Term Outlook (3-6 Months)

Over a 3–6 month horizon, the economy looks like it’s balancing on three pillars:

1. Labor still carrying the cycle
   As long as job losses remain contained and the unemployment rate rises slowly (or stabilizes), recession odds remain limited. The Sahm Rule at 0.10 is a strong “not now” signal.

2. Consumer fragility rising
   The saving rate at 2.6% is the structural red flag: it implies the consumer has less self-insurance against shocks. Historically, once buffers compress, the cycle becomes more sensitive to:

   • gasoline/food inflation shocks,
   • hours-worked declines,
   • tightening credit availability.

3. Markets: complacency + valuation risk
   With VIX ~15 and equities near highs while cyclicals flash caution (copper/gold, freight), the macro risk is not an immediate recession—it’s a nonlinear repricing that tightens financial conditions quickly. If spreads remain tight, that repricing may be limited; if spreads gap wider, recession risk would climb rapidly even before hard data turns.

Base case: continued expansion with rising dispersion (some sectors weaken, others remain strong). Bear case: consumer retrenchment + hiring freeze causes unemployment to drift higher and quickly tightens the Sahm-rule channel.

What to Watch

Labor (fastest transmission to recession risk score)

• Initial claims: watch for a sustained move above recent ranges (and acceleration in the 4-week average).
• Continuing claims: a persistent rise would confirm layoffs are turning into longer unemployment duration.
• Unemployment rate: the path from 4.3% matters more than the level—another leg higher changes the regime.

Consumer

• Saving rate: a move back toward ~4% would be stabilizing; a further fall would increase downside convexity.
• Credit card delinquencies and debt service: continued uptrend would validate “consumer stress” risk.

Markets / financial conditions

• HY spreads: keep an eye on whether tight spreads stay tight; widening is often the earliest “macro break” signal.
• Liquidity plumbing: ON RRP staying near depleted levels increases sensitivity to shocks.

Business cycle / goods economy

• Freight: stabilization would argue the goods slowdown is bottoming; further weakness supports recession-risk drift higher.
• ISM employment: the manufacturing headline can stay strong while hiring is weak—watch whether employment crosses back above 50.

Sources

No data available for this window.