Recession Risk 38/100 — June 7, 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. The headline message remains “moderate but contained”: the labor market is cooling at the margin but not breaking, and financial conditions/credit spreads still don’t price imminent stress. The score is being held up by pockets of late-cycle fragility—notably temporary help, freight/goods-side weakness, and crisis-level sentiment—plus a geopolitical energy tail risk that could hit real incomes and confidence quickly. Net: the economy looks below-trend but still expanding, with the next 4–8 weeks hinging on whether labor deterioration accelerates or stays mild.

Score Trend — Last 30 Days

Over the last 30 days (May 8 → June 7, 2026), the score started at 38 and ended at 38 (Δ = 0), with a min of 33, max of 44, and average of 37. That range tells you the model has been highly reactive to short-lived swings in market and macro “risk appetite” proxies, without confirming follow-through in hard activity or the labor triggers that matter most.

The shape is best described as choppy mean reversion: repeated spikes to 44 (risk flare-ups) quickly retraced to the mid-30s (risk relief), and the series failed to trend either higher (classic pre-recession cascade) or lower (broad-based re-acceleration). The last 10 readings underscore the point—44 → 34 → 44 → 44 → 38 → 44 → 34 → 34 → 38 → 38—a pattern consistent with headline/geopolitical shocks and positioning whiplash, not a decisive macro turn.

Key Drivers

1. Labor market still expansionary; no Sahm dynamics

   • May 2026 payrolls: +172k; unemployment rate: 4.3%—a “resilient but not overheating” profile that keeps the highest-weight labor trigger from flashing recession. (axios.com)
   • Initial claims: 225k (week ending May 30)—up modestly, but still consistent with a labor market that is cooling rather than cracking. (apnews.com)
   • Your tracker: Sahm Rule = 0.10 (SAFE), far from a recession threshold.

2. Credit spreads remain tight (no immediate credit stress)

   • Your reading: HY OAS ~274 bps (SAFE). Tight spreads typically imply that corporate refinancing risk and default expectations remain contained—an important offset to soft spots in goods activity and sentiment.

3. Yield curve has normalized vs the 2022–2023 inversion regime

   • Your readings: 2s10s ~ +0.38 (WATCH) and 2s30s ~ +0.92 (SAFE). A positive curve reduces the “classic inversion” near-term recession signal and aligns with the model holding the score in MODERATE rather than escalating toward HIGH.

4. Manufacturing survey data look better, but goods-side plumbing is warning

   • ISM Manufacturing PMI: 54.0 in May (expansion; highest in four years per reporting)—a strong survey print that argues against an imminent production-led downturn. (axios.com)
   • But your real-economy proxies are split: Freight Transportation Index = 0.5 (DANGER) and Copper/Gold = 0.00077 (DANGER), implying industrial caution despite survey strength.

5. Confidence is collapse-level, raising downside asymmetry to shocks

   • University of Michigan sentiment: May 2026 final 49.8 (DANGER)—this is “recessionary mood” even when hard data aren’t recessionary. (sca.isr.umich.edu)
   • Low confidence matters because it amplifies pass-through from energy prices and negative headlines into discretionary spending.

6. Energy/geopolitics is the near-term tail risk with real-income leverage

   • The Iran conflict continues to embed an “oil shock optionality.” Recent reporting notes Brent has been under $100 despite Hormuz disruptions risk—suggesting markets are pricing containment, but also acknowledging the fragility of that assumption. (axios.com)

Category Breakdown

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Mixed but stable: hard labor is mostly watch/safe, while temp help and sentiment keep structural late-cycle risk present.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary signals lean benign overall, consistent with “moderate risk, not imminent.”

• Housing & Construction: 0 safe / 2 watch / 0 danger
  Housing is slowing, not breaking—watch status fits a rate-sensitive sector in a below-trend growth regime.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity is holding up, supporting the steady (non-rising) 30-day score trend.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  Stress is building at the margin: delinquencies are elevated and savings are low, implying less buffer if jobs weaken.

• Market Signals: 6 safe / 3 watch / 5 danger
  Markets are sending a two-track message: index levels and volatility look calm, but valuation/ratio metrics and industrial “fear” proxies are flashing danger.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a quiet concern (RRP depleted; banking system mark-to-market sensitivity), raising vulnerability to shocks even if spreads are tight.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency is not recessionary, but it’s not clean either—enough softness to keep the score in MODERATE.

Biggest Movers

1. NY Fed Recession Probability (4.9%): +185.7% (7D) — Confirmatory (worsening risk)
   A sharp percentage jump (from a low base) suggests the probability model is reacting to rate/growth inputs—worth watching for follow-through, even though the level remains low.

2. Bank Unrealized Losses ($5155B): -90.3% (7D) — Contradictory (improving)
   A move this large is likely data-definition/printing volatility rather than a true week-to-week balance-sheet repair. Treat as “noise until confirmed.”

3. SLOOS Lending Standards (8.1%): +88.7% (7D) — Confirmatory (worsening risk)
   Faster net tightening is typically a forward drag on credit creation and capex; it pushes the score higher unless offset by labor strength.

4. VIX (15.4): +29.1% (7D) — Confirmatory (worsening risk)
   Still “low” in absolute terms, but the direction signals a modest pickup in hedging demand—consistent with geopolitical uncertainty.

5. US Interest Expense ($1219B): -22.6% (7D) — Contradictory (improving)
   Similar to bank unrealized losses, the magnitude suggests measurement timing effects; structurally, higher-for-longer rates keep fiscal interest dynamics a medium-term risk factor.

90-Day Indicator Trends

Important limitation: the provided “90-day history” window in this prompt contains many series with observations concentrated in March 2026, not a full daily span through June 7. Where the history is sparse, we focus on directional inference using (a) your “today” readings and (b) the available historical snapshots.

Labor & labor-leading

• Sahm Rule: 0.27 (Mar) → 0.10 (today), an improvement that strongly argues against near-term recession dynamics.
  • Interpretation: unemployment may be drifting, but not accelerating in a way that historically marks recessions.
• Initial claims: ~205k–213k (Mar) → 225k (May 30 week, today reading)
  • Direction: up modestly—cooling, not crisis. Claims would need to trend higher persistently (not just print higher once) to change the score regime.
• JOLTS quits rate: 2.0% (Mar) → 1.9% (today, WARNING)
  • Direction: down, consistent with weaker worker bargaining power and slower wage pressure, but also a late-cycle cooling signal.

Production, goods, and business activity

• Industrial production index: 102.3–102.6 (Mar) → 102.5 (today)
  • Flat-to-slightly-up: production is expanding but not accelerating.
• Manufacturing employment: ~12.6M (Mar) → 12.6M (today, WATCH)
  • Essentially flat, consistent with “manufacturing stabilizes but doesn’t hire aggressively.”
• Freight index: -0.5 (Mar) → +0.5 (today, DANGER)
  • The label remains danger, and the message remains the same: goods movement is weak relative to broader services/asset-market strength.

Financial conditions & credit

• Chicago Fed NFCI: -0.52 (Mar) → -0.49 (today)
  • Financial conditions remain easy/near normal, not recessionary.
• Credit spreads: ~300–327 bps (Mar) → 274 bps (today)
  • Clear improvement: spreads are tighter, which typically suppresses near-term recession probability unless the labor market cracks.

Consumer resilience

• Personal savings rate: 3.6% (Mar) → 2.6% (today, DANGER)
  • A meaningful deterioration in buffer. This is one of the most important “silent” recession accelerants if energy prices rise or employment softens.
• Consumer sentiment: ~56 (Mar snapshot) → 49.8 (May final, today reading)
  • Down hard: sentiment has moved from “bad” to “crisis-like,” even as jobs remain solid—this creates fragile demand psychology.

Markets & valuation regime

• Index levels (S&P/Nasdaq/Dow) are up sharply versus March snapshots in your dataset, while valuation ratios and “market-to-GDP” style indicators remain elevated. The model treats this as vulnerability, not an immediate recession signal: it raises the risk of a financial conditions reversal if a shock hits.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) with a smaller pocket of “oversold growth” (CHTR, TLK). That composition suggests the market is not positioning for a clean cyclical re-acceleration; instead, it’s leaning toward cash-flow defensiveness and income.

Two additional read-throughs:

• The presence of multiple financial/credit-adjacent names (ARCC, AIG, FNF) fits a regime where spreads are tight and carry still works, but it also highlights sensitivity to any credit widening or liquidity accident.
• The “oversold growth” signals (CHTR with RSI 28; TLK with RSI 30) look like idiosyncratic mean-reversion rather than broad risk-on. That lines up with the score trend: choppy, not trending into a new expansion impulse.

One caution: the listed yields (e.g., ARCC “1002%”) are clearly data-quality artifacts rather than investable forward yields. The qualitative point still stands: the screener is flagging lower-multiple, cash-flow names more than high-beta cyclicals—consistent with MODERATE recession risk rather than “all clear.”

Latest Economic Developments

• May 2026 jobs report (released June 5, 2026): payrolls +172,000, unemployment rate 4.3%. Markets and policymakers will read this as continued labor-market resilience heading into mid-June policy deliberations. (axios.com)
• Weekly initial claims (released June 4, 2026): claims rose to 225,000 for the week ending May 30; continuing claims dipped to ~1.777 million. That’s consistent with mild cooling but not a layoff wave. (apnews.com)
• Manufacturing pulse (ISM, released June 1, 2026): ISM manufacturing PMI printed 54.0 for May, indicating expansion and a survey-level rebound. (axios.com)
• Energy/geopolitics: reporting suggests Brent remained below $100 even with elevated Iran conflict risks and Hormuz-related concerns—implying the market is pricing partial containment, but acknowledging persistent upside risk to prices. (axios.com)

Near-Term Outlook (Next 30 Days)

Base case: steady-to-slightly softer growth, with recession risk staying MODERATE unless one of two conditions breaks.

What could push the score higher quickly:

• Claims trend: a persistent climb (not one-off) would change the labor narrative fast. Watch the 4-week moving average and whether initial claims start printing in the mid-230k+ range with momentum.
• Unemployment/Sahm proximity: if the unemployment rate rises and the Sahm reading moves meaningfully toward trigger territory, the score would likely jump out of the high-30s.
• Credit spread regime shift: HY OAS is tight now; a move wider would be a strong confirmatory signal that markets are pricing deterioration.

What could pull the score lower:

• A continued “soft landing” sequence: stable unemployment, claims capped, and surveys not rolling over—paired with contained energy prices—would likely keep the model in the mid-to-high 30s or drift toward the low 30s.

Long-Term Outlook (3-6 Months)

The medium-term setup remains a tug-of-war:

• Disinflationary/soft-landing forces (risk-lowering): labor remains functional, spreads are tight, and financial conditions are not restrictive enough to force a near-term downturn.
• Late-cycle fragilities (risk-raising):
  • Consumer buffer erosion (savings rate danger; delinquencies watch).
  • Goods-side weakness (freight danger; temp help danger).
  • Valuation fragility (market/GDP and tech valuation danger flags), which matters because a sharp equity drawdown can tighten financial conditions even before unemployment rises.

The key macro question for the next 3–6 months is whether the economy stays in a below-trend expansion (most consistent with today’s 38/100) or whether a shock—most plausibly energy—forces a fast deterioration in real incomes and sentiment that then shows up in claims and hiring.

What to Watch

Labor (highest signal value)

• Initial claims: watch for sustained prints >230k and an upward-sloping 4-week average.
• Unemployment rate: any step-up that pushes the 3-month average higher and lifts the Sahm Rule meaningfully above today’s 0.10.

Credit & liquidity

• HY OAS: a decisive widening from ~274 bps would be a key confirmatory recession-risk move.
• Bank unrealized losses / liquidity plumbing: look for signs that liquidity sensitivity is rising (funding stress, sudden tightening in conditions).

Consumer

• Savings rate (2.6% danger): if it stays pinned low while gas/energy rises, consumption becomes more shock-sensitive.
• Sentiment (49.8 danger): watch whether confidence stabilizes or continues to grind lower.

Energy/geopolitics

• Watch oil price sensitivity: a renewed spike would hit headline inflation, squeeze real incomes, and could trigger a faster pullback in discretionary demand.

Sources

No data available for this window.