Recession Risk 44/100 — May 11, 2026

Recession Risk Score: 44/100 — ELEVATED (+0 vs 30 days ago)

Today’s Recession Risk Score is 44/100 (ELEVATED), and it’s unchanged versus 30 days ago (April 11, 2026 → May 11, 2026). The headline is a familiar late-cycle mix: labor “break” signals remain benign, while goods-side cyclicals and household stress indicators keep fraying. Financial conditions are still providing a cushion—credit spreads remain tight and broad conditions remain loose—keeping this from tipping into an imminent-recession regime. The path from “elevated” to “high” still runs primarily through the labor market, not markets.

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Score Trend — Last 30 Days

Over the last 30 days, the score started at 44 and ends at 44 (flat), with a min of 34, max of 47, and an average of 42 (24 samples). The shape of the path matters: this wasn’t a calm, sideways drift—it was a mean-reverting chop that repeatedly tested the upper-40s, then backed off into the high-30s before snapping back.

The last 10 readings highlight that instability: the score printed 46–47 several times (Apr 25–28), dropped sharply to 37–38 (May 6–8), and then jumped back to 44 (May 9 and May 11). That pattern is typical of a market-and-sentiment-driven tape where liquidity/markets damp recession pricing, while leading data and household stress keep pushing the other direction. In plain terms: the system is not escalating, but it is also not healing—risk is stabilizing at an elevated plateau.

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Key Drivers

1. Labor-market trigger metrics remain safely below recession thresholds

   • Initial jobless claims: 200,000 (week ending May 2, 2026)—still historically low and consistent with low layoff intensity. (apnews.com)
   • Sahm Rule: 0.13 (SAFE)—well below the 0.50 trigger level used as a classic recession onset signal.

2. Leading growth momentum has deteriorated (LEI back in the red)

   • The Conference Board LEI fell -0.6% m/m in March 2026 to 97.3, reversing February’s gain and signaling weakening forward momentum. (forexfactory.com)
   • Importantly, this aligns with the “soft underbelly” narrative: permits/expectations weaken first, then employment follows.

3. Housing is cooling where it tends to lead (permits)

   • Building permits: ~1.372M SAAR in March 2026 (revisions show ~1.363M), the lowest since Aug 2025, consistent with a late-cycle rollover in interest-rate-sensitive activity. (census.gov)
   • Starts are holding, but permits are the forward-looking edge.

4. Manufacturing says “growth,” but the internals say “stagflation risk”

   • ISM Manufacturing PMI: 52.7 (April 2026) (expansion), but Employment: 46.4 (contraction) while Prices Paid: 84.6 (spike; highest since April 2022). (ismworld.org)
   • That mix keeps recession risk elevated: firms are producing and ordering, but appear reluctant to add labor, and inflation pressure limits policy flexibility.

5. Financial conditions still offset the slowdown signals

   • Chicago Fed NFCI: -0.51 (loose), which historically supports risk-taking and cushions real-economy deceleration. (chicagofed.org)
   • High-yield OAS ~279 bps (tight), consistent with credit not pricing recession imminently. (dollarliquidity.com)

6. Fed policy is steady, but the communications regime is a new risk factor

   • The Fed held the target range at 3.50%–3.75% on April 29, 2026, but the decision was unusually divided and the statement drew notable internal dissent. (federalreserve.gov)
   • With leadership transition headlines in focus, policy reaction function uncertainty is a tail risk (especially if inflation re-accelerates).

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Category Breakdown

• Primary Indicators: 2 safe / 6 watch / 1 danger
  Labor triggers are mostly contained, but the “watch” cluster (income/output/curve dynamics) is large enough to keep the baseline elevated.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary signals are not screaming recession, but the presence of a danger reading reinforces the idea that the slowdown is real even if not yet acute.

• Housing & Construction: 1 safe / 0 watch / 1 danger
  Housing is bifurcated: starts are okay, but permits are a forward-looking warning that demand/financing constraints are biting.

• Business Activity: 2 safe / 1 watch / 0 danger
  This is the main stabilizer outside markets—activity is not collapsing, but it’s no longer accelerating.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  The household is the weak link: rising delinquency and thin savings buffers increase downside convexity if labor softens.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are “safe” on volatility/spreads/levels, but valuation and cyclicality warnings remain pronounced—classic late-cycle tension.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity signals are increasingly relevant as ON RRP depletion and banking-system vulnerabilities raise the odds of a nonlinear tightening.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency/goods-side indicators (freight, temp help) are the canary: they’re soft enough to matter.

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Biggest Movers

From the top 5 by absolute 7-day % change:

1. ON RRP Facility ($80B): -64.5% (7D)
   Confirmatory (worsening tail risk): shrinking overnight liquidity buffers can amplify volatility if funding stress appears.

2. GDP Growth (QoQ Annualized) (2.1%): -50.0% (7D)
   Confirmatory (worsening): sharp downgrade in growth momentum supports the “softening” narrative.

3. NY Fed Recession Probability (6.3%): -39.5% (7D)
   Contradictory (improving): model-based recession odds eased, aligning with easier financial conditions and re-steepening.

4. Personal Savings Rate (3.6%): +25.0% (7D)
   Contradictory (improving, but context matters): a higher savings rate can signal rebuilding buffers, but if driven by precautionary behavior it can also foreshadow weaker consumption.

5. VIX (17.1): +15.8% (7D)
   Confirmatory (worsening, modest): volatility is still low in level terms, but the direction suggests rising hedging demand.

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90-Day Indicator Trends

Rates/curve: The 2s10s curve eased from roughly 0.71 (Feb 10) to the high 0.5s by mid-March in your history window, reflecting a gradual shift in the term structure. A re-steepened curve reduces the classic inversion signal, but late-cycle steepening can also occur when markets start to anticipate easier policy later (often because growth cools first). Net: curve risk is less loud, but not all-clear.

Labor (real-time): Initial claims stayed tightly rangebound around 208K–213K across the Feb–Mar history window, consistent with labor stability. That steadiness matters because, historically, recession risk accelerates when claims trend higher for multiple weeks—not when they wobble around cycle lows. Today’s 200K print keeps that trigger quiet. (apnews.com)

Financial conditions: NFCI remained solidly negative (loose) in the Feb–Mar window, culminating near -0.51 more recently—conditions that typically delay recession onset by keeping credit flowing. (chicagofed.org)

Credit: HY spreads in your 90-day history hovered in the high-200s to low-300s bps and are currently ~279 bps—still consistent with benign default expectations. (dollarliquidity.com)

Growth nowcasting: GDPNow is in the mix as a directional check; as of early May updates, it remains a sub-trend/moderate growth signal. (atlantafed.org)

Cyclicals (goods side): The freight index deterioration and temporary help weakness (danger signals) are the most recession-consistent pieces in your dashboard. These often lead because firms cut variable labor and logistics intensity before they cut core headcount. If these stay in “danger” while unemployment drifts up, the risk score likely rises even if markets remain calm.

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Stock Screener Signals

Today’s screener is dominated by “value dividend” flags (ARCC, AIG, BBY, FNF, HMC, T, BCE) with a smaller subset of “oversold growth” (CHTR, TLK). The macro read-through is defensive: the model is finding attractive setups in cash-yielding, lower-multiple names rather than high-duration cyclicals. That is consistent with an environment where growth is slowing and investors want carry and downside resilience, even while broad indexes remain near highs.

Two notable caveats:

• The yields shown (e.g., ARCC 1002%) are clearly distorted (likely data/field mapping issues). Treat the directional message (dividend/value clustering) as the real signal, not the literal yield prints.
• CHTR (RSI 28) and TLK (RSI 30) show up as oversold growth—more consistent with selective drawdowns rather than a broad market panic. That matches today’s macro setup: pockets of stress beneath an index-level surface that still looks fine.

Net: positioning implied by the screener is “late-cycle defensives + selective mean reversion,” not “recession liquidation.”

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Latest Economic Developments

Fed: The Federal Reserve held rates on April 29, 2026, maintaining the 3.50%–3.75% target range. The meeting stood out for its level of dissent and debate around signaling an “easing bias,” underscoring that policy is increasingly constrained by inflation sensitivity even as growth cools. (federalreserve.gov)

Labor: Weekly jobless claims for the May 2 week rose to 200,000 but remain historically low—still inconsistent with recession dynamics. (apnews.com)

Business cycle / leading data: The Conference Board LEI’s -0.6% m/m decline in March 2026 is a meaningful macro development because it blends housing expectations, market inputs, and forward-looking components. It reinforces that the economy is losing momentum even if the labor market hasn’t cracked. (forexfactory.com)

Manufacturing: ISM manufacturing remains in expansion at 52.7, but the internals are the story—employment contraction (46.4) alongside a prices spike (84.6). That combination keeps “soft landing” outcomes fragile because it risks forcing the Fed to stay restrictive even as hiring demand fades. (ismworld.org)

Upcoming inflation catalyst: The BLS CPI release schedule shows April 2026 CPI will be released May 12, 2026 at 8:30 AM ET—tomorrow relative to today’s assessment. (bls.gov)

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Near-Term Outlook (Next 30 Days)

Base case (score likely rangebound 40–50): The dashboard is set up for continued chop unless the labor market accelerates weaker. The risk score is most sensitive to:

• Claims trend (not one print): a sustained move higher would rapidly push the score toward the high-50s/60s.
• Unemployment rate drifting higher: if the rate rises and the Sahm Rule climbs meaningfully, that’s the fastest path to “high” risk.

Key catalysts in the next month:

• CPI (May 12, 2026): a hot print would reinforce the ISM prices spike and could tighten financial conditions quickly (even without Fed hikes). (bls.gov)
• FOMC minutes (May 20, 2026) from the April 28–29 meeting: tone on inflation persistence vs growth downside will shape rate expectations and risk assets.
• LEI follow-through: another negative print would strengthen the signal that March wasn’t noise.

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Long-Term Outlook (3-6 Months)

The 90-day indicator configuration points to a slowdown-with-fragility regime rather than an imminent recession. Historically, recessions tend to become “inevitable” when three conditions align:

1. Labor deteriorates (claims rise, unemployment rises, Sahm moves toward trigger),
2. Credit reprices (HY spreads widen materially; NFCI tightens sharply),
3. Leading indicators keep printing negative (LEI down persistently, permits down, temp help down).

Right now, you have (3) and parts of the goods cycle showing (1) early-warning behavior (temp help/freight), but you do not yet have labor confirmation or credit repricing. That argues for a 3–6 month outlook of elevated downside risk with a meaningful “tail” scenario: if inflation pressure persists (as hinted by ISM prices) while growth cools, the economy can drift into a recession later via policy constraint + household buffer erosion, even without a classic financial shock.

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What to Watch

Labor tripwires

• Weekly initial claims: watch for a persistent uptrend (several weeks), not a single jump.
• Unemployment rate and Sahm Rule: any move that lifts Sahm meaningfully toward 0.50 changes the regime quickly.

Housing lead indicators

• Building permits: sustained prints around/under the ~1.36–1.37M SAAR zone would reinforce housing-led slowdown.

Credit & conditions

• HY OAS: a move from ~279 bps toward 350–400+ bps would be a major recession-pricing shift. (dollarliquidity.com)
• Chicago Fed NFCI: watch for a turn upward toward 0 (tightening) from -0.51 (loose). (chicagofed.org)

Inflation constraint

• CPI release May 12, 2026: if inflation re-accelerates, it raises the probability that growth weakness translates into a more abrupt demand hit later (because policy easing is delayed). (bls.gov)

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Sources

No data available for this window.