Recession Risk 44/100 — May 12, 2026

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

Today’s Recession Risk Score is 44/100 (ELEVATED), unchanged versus 30 days ago. The signal mix still argues for continued expansion over the next ~90 days, but with a fatter left tail than markets are pricing. The labor market’s headline stress gauges (claims, Sahm Rule) remain calm, yet labor-leading and goods-economy internals (temp help, freight, manufacturing employment components) are flashing deterioration. In short: not an imminent recession call, but the economy is behaving more late-cycle than mid-cycle.

Score Trend — Last 30 Days

Over the last 30 days (window 2026-04-12 → 2026-05-12), the score started at 44 and ends at 44 (Δ: +0). But the “unchanged” headline hides meaningful volatility: the score printed a minimum of 34 and a maximum of 47, with an average of 42 across 24 samples.

The shape is best described as range-bound with sharp mean reversion. Spikes toward the high-40s were not sustained, and dips into the mid-30s quickly snapped back—classic behavior when macro data are mixed (labor still OK, goods weak, liquidity shifting) and markets are toggling between “soft landing” and “late-cycle scare.”

The last 10 readings show that this is not a clean uptrend in recession risk—more a sticky-elevated plateau. The cluster of 38–44 prints into mid-May suggests the model is stabilizing at an elevated baseline rather than accelerating toward “high risk.”

Key Drivers

1. Labor stress remains contained (still the strongest “anti-recession” anchor)

   • Initial Jobless Claims: 200K (week ending May 2, 2026) and still historically low; this is inconsistent with an imminent recession regime shift. (dol.gov)
   • Sahm Rule: 0.13 (SAFE) — far below the typical trigger threshold, implying the unemployment uptick has not yet turned into a self-reinforcing downturn dynamic.

2. Yield curve has re-steepened after inversion (late-cycle configuration)

   • 2s10s: +0.47 (WATCH) and 2s30s: +1.05 (WATCH). The level itself looks benign, but the sequence matters: long inversions followed by re-steepening often align with growth scares and/or pricing an easing cycle (sometimes before unemployment breaks).

3. Leading indicators deteriorated (forward-looking backdrop is less supportive)

   • Conference Board LEI fell -0.6% in March 2026 (to 97.3), reversing +0.3% in February (97.9)—a clear negative momentum inflection for forward-looking growth. (conference-board.org)

4. Manufacturing: headline expansion masks employment contraction

   • ISM Manufacturing PMI: 52.7 (April 2026) suggests output is expanding, but Employment Index: 46.4 is firmly contractionary—consistent with “hire-last/fire-first” behavior that often precedes broader labor cooling. (ismworld.org)

5. Financial conditions are loose, but consumer/credit stress is building

   • Chicago Fed NFCI: -0.51 (SAFE) = overall conditions remain loose (supportive).
   • Yet household buffers look thin: Personal Savings Rate 3.6% (WARNING) and Credit Card Delinquency 2.9% (WATCH) point to rising sensitivity to shocks (energy, rates, layoffs).

6. Near-term growth tracking is not recessionary

   • Atlanta Fed GDPNow: 3.7% for Q2 2026 (May 5), up from 3.5% (May 1)—a growth-consistent nowcast that reduces near-term recession odds unless incoming data roll over sharply. (atlantafed.org)

Category Breakdown

• Primary Indicators: 2 safe / 6 watch / 1 danger
  Primary is mixed: claims + Sahm are stabilizers, but unemployment drifting up and yield-curve regime dynamics keep this bucket in WATCH-heavy mode.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary is bifurcated—some model-based probabilities remain low while goods/market internals push pockets into danger.

• Housing & Construction: 1 safe / 0 watch / 1 danger
  Housing is not collapsing, but permits in WARNING is the key forward-looking drag that can bleed into construction employment with a lag.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity reads steady, consistent with a slow-growth expansion rather than contraction.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  This category is a core fragility point: low savings + rising delinquencies raise the risk of nonlinear pullbacks in discretionary spending if labor weakens.

• Market Signals: 7 safe / 5 watch / 2 danger
  Markets are broadly risk-on (indices near highs, volatility low-ish), but metal ratios (copper/gold, gold/silver) and some valuation/risk-premium measures embed late-cycle caution.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is deteriorating at the margin—particularly the depletion of the ON RRP buffer, which can matter for money-market plumbing and Treasury bill dynamics.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency reads soft (freight, temp help), reinforcing the view that the goods economy is already in a downturn—even if services haven’t rolled yet.

Biggest Movers

1. ON RRP Facility ($80B): -84.7% (7D)
   Interpretation: Confirmatory (worsening risk) from a liquidity-buffer perspective—less cash parked at RRP can mean the “easy” liquidity cushion is mostly gone, increasing sensitivity to funding/t-bill supply shifts.

2. GDP Growth (QoQ Annualized) (2.0%): -50.0% (7D)
   Interpretation: Confirmatory—a sharp downshift in the growth print/estimate increases recession probability if it persists (watch for confirmation via consumption and income).

3. NY Fed Recession Probability (5.7%): -39.5% (7D)
   Interpretation: Contradictory (improving)—this is one of the cleaner “not now” recession signals, aligning with still-low claims and loose financial conditions.

4. VIX (17.2): +29.0% (7D)
   Interpretation: Confirmatory in the sense that risk pricing is becoming less complacent, though 17-ish is still not “stress”—more like “wake up.”

5. Personal Savings Rate (3.6%): +25.0% (7D)
   Interpretation: Contradictory (improving) if real—higher savings increases buffer stock. But the level remains low in absolute terms, so it doesn’t negate the consumer fragility story.

90-Day Indicator Trends

Bottom line: the last ~90 days show a pattern of late-cycle rotation: headline labor still fine, markets still buoyant, but leading/goods/labor-leading indicators softening—and liquidity plumbing changing.

Rates / Curve

• 2s10s (WATCH): drifted down from ~0.66 (Feb 11) to ~0.55–0.60 in early March, and later is tracked today at ~0.47. That’s a flattening within positive territory over the period—consistent with rising growth concerns at the margin.
• 2s30s (WATCH): moved from ~1.30 (Feb 11) to ~1.12 (Mar 15) in the history window—less steep, still positive.

Labor (hard + leading)

• Initial claims (SAFE): held in an exceptionally tight range in the history window (~206–213K), and the most recent reported week is 200K (May 2)—still “no layoffs” regime. (dol.gov)
• Unemployment rate (WATCH): moved from 4.3% to 4.4% in early March in your history, and stands 4.3% today in your dashboard. This is not recessionary, but directionally it keeps pressure on Sahm-rule risk if the uptrend continues.
• Sahm Rule: eased from 0.30 (late Feb) to 0.27 (mid-March) in the history window; today your tracker is 0.13—still very safe and consistent with claims stability.

Leading / Business cycle composites

• Conference Board LEI: your internal reading shows positive (1.7), but the official monthly change for March 2026 was -0.6% and the six-month trend (Sep 2025–Mar 2026) was still negative overall—forward momentum is not cleanly supportive. (conference-board.org)

Financial conditions / credit

• NFCI: stayed broadly stable around -0.56 to -0.51 in the history window—still loose, still supportive.
• High yield spreads: widened from ~284 bps (Feb 11) to ~317 bps (mid-March) in your history, while today reads ~320 bps—not crisis, but drifting wider, consistent with late-cycle repricing.

Markets / risk appetite

• S&P 500: dipped from ~6941 (Feb 11) to ~6632 (Mar 14) in the history window, while your “today” reading shows 7399—a strong rally since that earlier soft patch, suggesting risk appetite has reasserted itself even as macro internals look mixed.
• VIX: spiked to near ~29.5 (Mar 10) in your history and later normalized; today 17.2 is calm but not ultra-calm.

Goods economy warnings

• Freight index: fell from +1.3 to -0.5 in early March in your history window and remains DANGER today—one of the clearest “goods recession” signals.
• Temp help: downshift from ~2480K to ~2447K in early March and remains DANGER—a classic labor-leading deterioration channel.

Stock Screener Signals

Today’s quant flags skew heavily toward “value dividend” (ARCC, AIG, BBY, FNF, HMC, T, BCE) with two notable oversold growth screens (CHTR, TLK). That composition usually shows up when the market is rewarding carry and cash flow certainty and/or when the screener is catching idiosyncratic drawdowns inside an otherwise strong index tape.

Two caution flags in the output:

• Several yields shown (e.g., ARCC 1002%, AIG 257%, BBY 654%) are not economically plausible as standard forward dividend yields. Treat them as data artifacts (special dividends, trailing anomalies, or feed errors) rather than signals of true payout. The real signal is the clustering in low P/E + dividend/value buckets.
• The presence of oversold growth (e.g., CHTR RSI 28) alongside value-dividend screens suggests dispersion: the index can be near highs while pockets of cyclicals/consumer-exposed names trade like a slowdown is coming.

Macro read-through:

• Defensive carry preference is consistent with an ELEVATED recession score (44) even without a near-term recession call.
• Consumer discretionary sensitivity (e.g., BBY flagged) aligns with your low savings + rising delinquency theme: markets are selectively discounting a consumer slowdown while still bidding up index leadership.

Latest Economic Developments

• Labor market (weekly claims): For the week ending May 2, 2026, initial jobless claims rose to 200,000, still near historic lows and below expectations in several writeups—this continues to be the cleanest “no imminent recession” datapoint in the real-time stack. (apnews.com)
• Leading indicators: The Conference Board reported the LEI fell 0.6% in March 2026 (released April 30, 2026), reversing February’s increase and reintroducing concern that forward momentum is fading. (conference-board.org)
• Growth nowcast: Atlanta Fed GDPNow has Q2 2026 tracking at 3.7% (May 5), up from 3.5% (May 1)—not a recession profile for the current quarter absent a shock. (atlantafed.org)
• Inflation near-term catalyst (today): The BLS schedule shows April 2026 CPI releases May 12, 2026 at 8:30 AM ET—this is the dominant near-term macro catalyst because it will influence the expected path of Fed policy and financial conditions. (bls.gov)
• Manufacturing mix: ISM’s April 2026 Manufacturing PMI at 52.7 indicates expansion, but the employment index at 46.4 underscores the late-cycle dynamic: activity can hold up while hiring turns down. (ismworld.org)

Near-Term Outlook (Next 30 Days)

Base case over the next month: slow-growth expansion with elevated downside risk. The score is likely to stay in the low-to-mid 40s unless we get a decisive break in labor (claims) or a sharp tightening in financial conditions.

Key catalysts in the next 30 days:

• CPI (April 2026) — May 12, 2026 (8:30 AM ET): a hot print risks re-tightening financial conditions (higher yields, wider spreads), while a cool print supports risk assets and delays recession odds by keeping credit flowing. (bls.gov)
• Weekly initial claims: the cleanest tripwire remains a sustained move upward (not a one-week blip). Watch the 4-week average more than any single print.
• ISM (May data in early June): specifically, whether manufacturing employment rebounds from the mid-40s or continues to sink—continued contraction increases odds the weakness spreads into services payrolls.
• Liquidity plumbing: with ON RRP largely depleted (your dashboard), the market becomes more dependent on other funding channels—raising the odds that Treasury supply or risk-off episodes transmit faster.

Score triggers (what would move the needle fast):

• Upward break in claims (multi-week trend) + unemployment rate step-up → would push Sahm-rule risk higher quickly.
• Wider HY OAS and/or equity drawdown with rising VIX → would tighten conditions and lift the score even if labor lags.

Long-Term Outlook (3-6 Months)

The 3–6 month picture is late-cycle with asymmetric risk:

• Supportive forces: still-low layoffs, loose aggregate financial conditions, and positive near-term GDP tracking.
• Destabilizers: goods-economy contraction signals (freight, temp help), fragile consumer buffers (low savings, rising delinquencies), and a curve regime that can coincide with policy pivot expectations.

The most plausible recession pathway from here is not an immediate collapse, but a sequenced deterioration:

1. hiring slows (already implied by temp help + ISM employment),
2. income growth softens,
3. delinquencies rise and spending pulls back,
4. credit tightens and investment slows,
5. only then do claims jump and the recession becomes “obvious.”

Historically, when labor-leading indicators weaken while the headline labor market remains resilient, recession risk often behaves like it does today: sticky-elevated rather than spiking—until a catalyst forces a nonlinear adjustment (energy shock, policy mistake, or credit event).

What to Watch

Hard thresholds and signposts:

• Initial claims: sustained move above the recent ~200K regime and a clear uptrend in the 4-week average.
• Unemployment rate: another 0.2–0.3 pp rise over a short window would matter far more than level alone because it would accelerate the Sahm Rule.
• Credit spreads (HY OAS): watch for a move from ~320 bps toward levels that historically indicate material stress (a fast widening matters more than the absolute number).
• ISM Employment: continued prints in the mid-40s raise the odds the slowdown broadens.
• LEI: another large negative monthly change would confirm the March deterioration wasn’t a one-off.
• Liquidity: ON RRP staying low while bill supply/funding rates become more volatile would be an underappreciated risk amplifier.
• CPI outcomes and rate expectations: today’s CPI release timing is known; the market reaction matters as much as the number.

Sources

No data available for this window.