Recession Risk 38/100 — May 10, 2026

Recession Risk Score: 38/100 — MODERATE (-5 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), and it has fallen by 5 points versus 30 days ago (from 43 on April 10, 2026). The macro picture remains two-speed: labor and financial conditions are still broadly supportive, while several early-cycle “crack detectors” (temps, freight, sentiment, and pockets of credit) are flashing yellow-to-red. In other words, recession is not imminent on current real-time data, but the economy looks more shock-sensitive than equities and volatility markets imply.

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Score Trend — Last 30 Days

The last 30 days show a net improvement in risk conditions: Start 43 → End 38 (Δ -5), with an average score of 42 across 24 samples. The path, however, was not a smooth glide—risk spiked to a local maximum of 47 (April 26 and April 28) before mean-reverting lower.

The shape matters: the sequence looks like a stress flare-up followed by stabilization, rather than a clean downtrend. The latest 10 readings also reveal lingering sensitivity: the score improved to 37–38 on May 7–8, jumped back to 44 on May 9, then returned to 38 today. That pattern is consistent with a regime where recession risk is contained, but headline-driven shocks (policy/geopolitics/energy/credit) can still move conditions quickly.

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Key Drivers

1) Labor market remains the primary stabilizer (SAFE real-time stress)

• Initial jobless claims: 200K (week ending May 2, 2026)—still consistent with no layoff wave. (apnews.com)
• April payrolls: +115K; unemployment: 4.3% (BLS, released May 8, 2026)—a “slow but positive” jobs print that keeps recession probabilities from jumping. (bls.gov)
  Why it matters: Most fast recessions don’t start with claims at 200K; they start when claims trend breaks and spreads to continuing claims and unemployment.

2) Growth nowcasting is not recessionary (but is volatile)

• Atlanta Fed GDPNow (Q2 2026): 3.7% as of May 7. (atlantafed.org)
  Why it matters: Strong nowcasts reduce “immediate” recession odds, even if they later revise. Your tracker’s GDPNow 1.8% reading signals uncertainty/instability in the estimate—watch the next updates closely because revisions can shift market psychology fast.

3) The curve is no longer inverted (removes a major near-term alarm)

• Your tracker shows 2s10s: +0.48 and 2s30s: +0.20 (normalized).
  Why it matters: A positive curve doesn’t guarantee expansion, but it reduces the classic inversion-to-recession signal for the next ~6–12 months. The key nuance is that the curve can steepen for “good” reasons (growth) or “bad” reasons (inflation/term premium/fiscal risk). Right now, the labor/growth data argue the steepening isn’t purely “bad,” but fiscal and inflation tail risks keep that interpretation fragile.

4) Leading indicators are mixed-to-soft (classic early warnings still present)

• Conference Board LEI: -0.6% in March 2026 (after +0.3% in Feb). (conference-board.org)
• Meanwhile, your dashboard still shows Industrial Production at 101.8 (WATCH)—stagnant rather than contracting.
  Why it matters: LEI weakness aligns with a slowdown narrative. It’s not a recession call by itself, but it supports the idea that growth is below potential and vulnerable to shocks.

5) “Soft economy” signals remain loud: sentiment + goods cycle

• UMich sentiment in your reading is 53.3 (DANGER); official UMich April final is 53.3 in the published table, with preliminary April even weaker. (sca.isr.umich.edu)
• Freight remains DANGER in your tracker (goods economy weakening).
  Why it matters: Sentiment and freight are often early—they don’t time recessions precisely, but they raise the probability that a demand shock propagates quickly once labor weakens.

6) Policy stance: on hold, but internal Fed disagreement is a risk amplifier

• The Fed maintained a target range of 3.50%–3.75% on April 29, 2026. (federalreserve.gov)
  Why it matters: A hold is typically neutral-to-supportive. But an unusually divided committee (as you noted) can increase policy uncertainty in markets—especially if inflation re-accelerates on an energy shock.

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Category Breakdown

• Primary Indicators: 2 safe / 6 watch / 1 danger
  Labor-related primaries are still doing the heavy lifting, but the “watch” majority tells you the expansion is not robust—it’s stable, not strong.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Mixed secondaries suggest the economy is not rolling over broadly, but one meaningful weak link remains.

• Housing & Construction: 1 safe / 0 watch / 1 danger
  Housing is not collapsing, but permits being weak (warning/danger in your set) is consistent with rate sensitivity and slower forward pipeline.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity is holding up—no clear recession signature here.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  The consumer is increasingly constrained (delinquencies and low savings cushion). This category is one of the most important “next domino” areas if employment cools.

• Market Signals: 6 safe / 3 watch / 5 danger
  Markets are split: major indexes and volatility read “calm,” while valuation/ratio-style indicators scream fragility and asymmetry (bad news could matter more than good news).

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a quiet risk: when liquidity is tight/unstable, shocks transmit faster through funding markets and bank behavior.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  Real-time is not “all clear.” It’s more like: no fire, but smoke in a few leading edges.

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Biggest Movers

1. ON RRP Facility ($80B): -64.5% (7D)
   This move is confirmatory (worsening) for liquidity fragility: declining usage can reflect reserve dynamics and collateral conditions; at extremes it can reduce a readily available liquidity buffer.

2. GDP Growth (QoQ annualized) (2.1%): -50.0% (7D)
   Confirmatory (worsening) for slowdown risk—large weekly swings in “growth” trackers often reflect model or data revisions, but the direction of travel is what matters for risk scoring.

3. NY Fed Recession Probability (20.0%): -39.5% (7D)
   Contradictory (improving): the probability dropping meaningfully is consistent with a normalized curve and resilient labor.

4. Personal Savings Rate (3.6%): +25.0% (7D)
   Contradictory (improving) if it’s a true rise, but interpret cautiously: savings can rise for “good” reasons (income growth) or “bad” reasons (precautionary retrenchment).

5. VIX (17.1): +15.8% (7D)
   Mildly confirmatory (worsening): still low in level, but volatility rising from low bases often signals markets are becoming more sensitive to tail risks.

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90-Day Indicator Trends

Below, I focus on direction of travel using your 90-day history (and where possible, compare 30/60/90-day-ago levels).

Rates/curve: normalized and steady—no inversion stress right now

• 2s10s was ~0.74 on Feb 9, slid to ~0.51 by Mar 13 (still positive), and sits at +0.48 today in your dashboard. Over ~90 days, the curve has flattened modestly but stayed positive—consistent with “slower growth, not recession.”
• 2s30s moved from ~1.37 (Feb 9) to ~1.12 (Mar 14) in your history—again flattening, but not inverting.

Labor: still strong in claims; unemployment drifting up

• Initial claims have been remarkably stable in your history: 208K (Feb 14) → 213K (Mar 14) → 200K (May 2 week, current reading). Stability here is why the score isn’t higher. (apnews.com)
• Unemployment rate in your history shows 4.3% through early March, edging to 4.4% by mid-March. Today’s headline remains 4.3% from the April report, but the broader message is the same: not a spike, but no longer “tightening.” (bls.gov)

Financial conditions: still loose, even as risk pockets widen

• Chicago Fed NFCI stayed around -0.54 to -0.51 in your history—consistently loose. Loose conditions reduce near-term recession odds because they keep credit flowing.
• High yield spreads in your 90-day snippet rose from ~284 bps (Feb 9) to ~317 bps (Mar 14), and your current is 320 bps—a gradual widening that says: risk is creeping back, not panicking.

Risk appetite: equities strong; volatility low; valuation “danger” persists

• S&P 500 in your history fell from ~6965 (Feb 9) to ~6632 (Mar 14), yet your current reading is 7399—a powerful rebound that pushes “risk-on” signals into complacency territory.
• Meanwhile, your valuation/market-to-GDP and NASDAQ/GDP signals remain elevated/danger—this combination typically means recession risk is not priced, which can matter if a shock hits.

Consumers: confidence is deteriorating even as jobs hold

• Consumer sentiment in your history is 56.4 across late Feb–mid March, while today is 53.3 (danger) in your dashboard and 53.3 in UMich’s April final table. (sca.isr.umich.edu)
  That’s a meaningful downshift: sentiment is behaving like the economy is already in late-cycle stress, even though labor data are not.

Goods-cycle leaders: the “early warning” cluster remains the biggest issue

• Temporary help services moved from ~2480K to ~2447K by mid-March and is 2485K (danger) today—still signaling labor demand caution at the margin.
• Freight index deteriorated sharply in early March in your history (from 1.3 to -0.5) and remains danger. This is the cleanest “real economy” recession-leading pocket on your board.

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Stock Screener Signals

Today’s screener is dominated by value/dividend flags—ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE—plus two oversold growth names (CHTR, TLK) with low RSI readings (notably CHTR RSI ~28, TLK RSI ~30). The signal mix suggests investors are still comfortable owning risk (equities near highs), but are increasingly selective: they want cash flows and carry more than long-duration “story” exposure.

Two interpretations stand out:

1. Defensive carry without full risk-off
   Many flagged names fit a “get paid while you wait” posture. That aligns with a moderate recession score: investors aren’t positioning for imminent contraction, but they are implicitly acknowledging downside risk by emphasizing income/value.

2. Mean-reversion in rate/credit-sensitive pockets
   Oversold growth flags (e.g., Charter) alongside income-heavy picks can show a market trying to barbell: hold defensives for protection while selectively buying beat-down cyclicals/levered balance sheets for rebound potential. In a world where HY spreads are only modestly wider (your 320 bps), this makes sense: credit isn’t screaming “recession,” but it’s not “boom” either.

Note: Several yields shown in the screener look mechanically extreme (e.g., triple-digit yields), which often reflects data quirks (special distributions, trailing window effects, or stale price/dividend mapping). The factor direction (value/dividend vs. high-duration growth) is the actionable part.

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Latest Economic Developments

• Jobs (May 8, 2026): The U.S. added 115,000 jobs in April and unemployment held at 4.3%, reinforcing the narrative that labor is cooling but not breaking. (bls.gov)
• Claims (May 7, 2026): Initial unemployment claims rose to 200,000 for the week ending May 2, still historically low and consistent with limited layoffs. (apnews.com)
• Growth tracking (May 7, 2026): Atlanta Fed GDPNow pegged Q2 2026 real GDP growth at 3.7%, suggesting near-term momentum is positive despite weak sentiment and goods-cycle softness. (atlantafed.org)
• Policy backdrop: The Fed held rates at 3.50%–3.75% on April 29, 2026, keeping policy restrictive-to-neutral depending on your inflation view, but not actively tightening at the margin. (federalreserve.gov)
• Leading indicators: Conference Board LEI fell -0.6% in March 2026, consistent with a slowdown and reinforcing why “moderate” risk persists even with solid jobs data. (conference-board.org)
• Sentiment: UMich shows April 2026 sentiment at 53.3 in the official table—weak enough to matter for consumption psychology, especially with savings cushion low on your board. (sca.isr.umich.edu)

Net: the last 48 hours were good for hard data (jobs/claims) and neutral-to-good for near-term growth, but the soft data and leading signals still argue the expansion is brittle.

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Near-Term Outlook (Next 30 Days)

Base case for the next month: continued slow-to-moderate growth, with recession risk range-bound unless labor cracks or credit reprices.

Key catalysts likely to move the score:

• Jobless claims trend: A move from ~200K toward a sustained 4-week average above ~220K would be the clearest “early confirmation” that layoffs are spreading.
• Unemployment + Sahm: The Sahm Rule is safe now; the market will react if unemployment rises enough to push the rule toward 0.50 (especially if the move is fast rather than gradual).
• Credit spreads: Watch HY OAS for a decisive widening (e.g., a fast move toward the 400–450 bps zone). Your current 320 bps is “watch,” not “panic.”
• Consumer spending sensitivity: With a low savings cushion and weak sentiment, a negative gasoline/energy or inflation surprise could dent spending quickly.

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Long-Term Outlook (3-6 Months)

Three to six months out, the economy looks like it’s navigating a late-cycle trade-off:

• Hard data resilience (jobs, claims, financial conditions, nowcasting) is pulling risk down.
• Leading/goods/psychology signals (temps, freight, sentiment, some credit stress) are pulling risk up.

The 90-day trajectory implies the U.S. is not on a recession glidepath today, but is drifting into a state where the next downturn—if it comes—would more likely be triggered by:

• an energy/inflation shock that alters the Fed reaction function,
• a credit event that tightens lending standards quickly,
• or a labor inflection where hiring slows just enough for unemployment to rise faster than expected.

Historically, when claims are low and financial conditions are loose, recessions tend to require a new shock or a policy mistake, not just “slow growth.” That’s why the score is moderate—not high—even with multiple “danger” flags on the dashboard.

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What to Watch

Labor / recession tripwires

• Initial claims: sustained 4-week average > 220K (and rising)
• Unemployment: a fast move toward 4.6%+ would change the regime
• Sahm Rule: move toward 0.50 (trigger zone)

Credit / liquidity

• HY OAS: acceleration wider from ~320 bps toward 400+ bps
• Bank stress proxies: any jump in funding stress or renewed focus on unrealized losses
• Liquidity gauges (including RRP/reserves): watch for signs that liquidity buffers are thinning

Real economy

• Temp help and freight: any further deterioration would be confirmatory of a broader slowdown
• Sentiment: weak confidence persisting alongside low savings raises downside asymmetry for consumption

Markets

• VIX: a sustained move above the low-to-mid teens into the 20s often coincides with tighter financial conditions and wider spreads
• Equities vs. macro: continued equity melt-up alongside weakening leading data tends to increase “air pocket” risk.

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Sources

No data available for this window.