Recession Risk 34/100 — May 13, 2026

Recession Risk Score: 34/100 — MODERATE (-4 vs 30 days ago)

Today’s Recession Risk Score is 34/100 (MODERATE), down 4 points from 30 days ago (38 on April 13, 2026). The big picture is a familiar late-cycle configuration: hard, high-frequency labor data still looks fine, while household psychology and select “early warning” pockets (freight, temps, metals ratios) look fragile. The score has drifted lower because financial conditions remain easy and credit is not pricing stress, even as inflation risk has re-entered the narrative via energy.

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Score Trend — Last 30 Days

Over the last 30 days (window April 13 → May 13, 2026), the score moved from 38 to 34 (-4), with a min of 34 and max of 47 across 24 samples. The distribution (avg 41) tells you something important: we’ve been living in a higher-risk “plateau” for much of the month, then saw an abrupt drop into the mid-30s.

The path also wasn’t smooth. The last 10 readings swung between 37–47 before collapsing to 34 today (May 13). That “sawtooth” pattern is consistent with a market and macro tape that’s headline-sensitive (inflation/energy and Fed framing) while the underlying cycle signals are mean-reverting rather than cascading. In plain English: the expansion is intact, but confidence in it is thin—so the score can jump on any incremental shock, then fade if credit/labor don’t confirm.

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Key Drivers

1. Labor stress remains benign (still the strongest anti-recession input).
   Initial jobless claims are running near 200k (week ended May 2, released May 7, 2026), which is historically low and inconsistent with imminent recession dynamics. (apnews.com)

2. The Fed is on hold, but inflation risk is explicitly linked to energy—policy may stay restrictive longer than growth would like.
   The FOMC held the target range at 3.50%–3.75% on April 29, 2026, stating that inflation is elevated in part due to recent increases in global energy prices. That is a key asymmetry: a growth slowdown alone may not guarantee easing if energy keeps headline inflation sticky. (federalreserve.gov)

3. Inflation re-accelerated in the latest CPI print—energy is doing the damage.
   The April 2026 CPI (released May 12, 2026) showed the energy index up 3.8% in April after +10.9% in March, with energy +17.9% over the last 12 months and gasoline +28.4% YoY. That raises the probability of a “soft data → hard data” handoff (confidence weakens first, spending/employment follows). (bls.gov)

4. Leading indicators are flashing a growth warning (but not yet screaming “90-day recession”).
   The Conference Board LEI fell -0.6% in March 2026 (more than reversing February’s +0.3%), a meaningful deterioration that often shows up well before payrolls crack. (conference-board.org)

5. Manufacturing is expanding on the headline PMI, but employment is contracting—classic late-cycle divergence.
   ISM’s April 2026 Manufacturing PMI held at 52.7 (expansion), while the Employment Index dropped to 46.4 (deeper contraction). This “output ok, hiring weak” mix is a common precondition for broader labor cooling if demand softens. (ismworld.org)

6. Financial conditions are still loose (reduces near-term recession odds), even as inflation risk rises.
   The Chicago Fed NFCI is -0.51 (loose/easy conditions), which is not how recessions typically begin. Loose conditions can keep the cycle alive—until something breaks (energy, labor, or credit). (fred.stlouisfed.org)

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Category Breakdown

• Primary Indicators: 2 safe / 6 watch / 1 danger
  Primary signals are mixed: labor remains supportive, but watches dominate—this is a “stable now, vulnerable later” cluster.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary signals are mostly fine, but the “danger” print warns that cyclicals beneath the surface remain fragile.

• Housing & Construction: 1 safe / 0 watch / 1 danger
  Housing is not collapsing, but it’s not a clean tailwind either; permits softness typically matters more than starts for forward momentum.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity is holding together at the aggregate level, consistent with continued (if slower) expansion.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  This is a pressure point: the consumer is operating with a thin margin of safety, so shocks transmit quickly into delinquencies and spending.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are simultaneously “calm” (index levels/vol) and “stretched” (valuation ratios and metals/fear gauges)—a bifurcation that often precedes volatility rather than recession per se.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is the stealth risk: the system can look stable until a funding/treasury/realized-loss channel tightens suddenly.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  Real-time signals are not confirming recession, but they are not providing comfort—watch the next few weekly prints.

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Biggest Movers

1. ON RRP Facility: -84.7% (7D) — confirmatory (worsening liquidity risk)
   A depleted RRP can imply less “spare cash” parked at the Fed and more sensitivity to Treasury funding dynamics. It doesn’t cause recession directly, but it can amplify shocks.

2. GDP Growth (QoQ annualized): -50.0% (7D) — confirmatory (worsening growth pulse)
   A sharp downgrade to near-trend-below-trend growth increases fragility: you don’t need a collapse to get recession—just a shock on top of weak momentum.

3. NY Fed Recession Probability: -39.5% (7D) — contradictory (improving risk signal)
   This is a meaningful offset: one of the more widely-followed probability models is moving away from recession risk.

4. VIX: +29.0% (7D) — confirmatory (risk appetite cooling)
   Volatility lifting from a low base can be a “smoke signal,” especially when paired with stretched valuation measures.

5. Personal Savings Rate: +25.0% (7D) — contradictory on the margin (slightly better buffer), but still weak level
   Even if the rate ticks higher in short windows, the level is still low enough to leave households exposed if job growth slows or inflation re-accelerates.

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90-Day Indicator Trends

The last 90 days show a macro regime of: easy financial conditions + steady labor + weakening confidence/soft activity + inflation/energy risk returning. The recession signal set is therefore asymmetric: not a base-case recession setup, but a setup where recession odds can rise quickly if labor rolls.

Labor & high-frequency stress (still the anchor)

• Initial claims have stayed tightly range-bound around ~206k–213k in the February–March history you provided, consistent with today’s “~200k” read. That kind of stability typically precedes continued expansion, not contraction.
• Sahm Rule has moved down from 0.30 (late Feb) to 0.27 (mid-March) in your 90-day history, and is 0.13 today—far from the trigger threshold. This is why today’s score sits in the mid-30s rather than the 50s.

Trend takeaway: labor is cooling at the margin (unemployment ticking up), but it’s not breaking. Recession risk hinges on whether that cooling becomes nonlinear.

Growth & leading indicators (the “yellow flags”)

• Conference Board LEI: March print -0.6% is a clear negative impulse; LEI weakness matters because it tends to lead payroll stress by months, not weeks. (conference-board.org)
• GDPNow: your history shows a step down from 3.0% to 1.8% by late February and then flatlining—consistent with a below-trend real-time growth pulse.

Trend takeaway: the economy is not falling off a cliff; it is losing altitude.

Financial conditions, credit, and markets (still supportive—but complacent)

• NFCI sits at -0.51 as of May 1 (updated May 6), which is decisively loose. (fred.stlouisfed.org)
• High yield spreads (your ~279 bps as of May 7) remain tight by historical standards, consistent with “no recession being priced.” (This is directionally supported by market spread series pages, even if specific level prints vary by vendor/day.) (ycharts.com)
• Equity indices in your dashboard are near highs and volatility is low-to-moderate—this combination typically suppresses near-term recession probability unless credit cracks.

Trend takeaway: credit/conditions are still acting like a stabilizer. If HY OAS starts widening persistently, the score will rise fast.

Inflation/energy (the new accelerant)

Yesterday’s CPI release matters: energy is feeding headline inflation again, and the Fed has already framed energy as part of elevated inflation. (bls.gov)

Trend takeaway: if energy stays hot, the Fed’s “insurance cut” window narrows, making the expansion more shock-sensitive.

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Stock Screener Signals

Today’s quant list is dominated by value/dividend screens (ARCC, AIG, BBY, FNF, HMC, T, BCE, LTM) plus a couple of oversold growth flags (CHTR, TLK). That mix usually shows up when the market is doing two things at once:

1. Seeking carry and defensiveness (dividend/value bias), while
2. Selective mean-reversion hunting in beaten-down growth names (oversold RSI signals).

The interesting macro read-through is that these aren’t “high-beta cycle accelerators.” They look more like late-cycle positioning: investors want income, valuation support, and business models perceived as durable, while still taking small shots at oversold dislocations.

One caution: the reported yields in your screener (e.g., triple-digit yields) look mechanically exaggerated—likely reflecting special distributions, data glitches, or annualization artifacts. Even so, the directional message remains: the screen is pulling toward cheap cash flow and away from “pay-any-price” growth, which aligns with a moderate recession-risk regime rather than a clean re-acceleration.

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Latest Economic Developments

• Inflation (CPI): The Bureau of Labor Statistics released April 2026 CPI on May 12, 2026. Energy remains the headline driver: energy +3.8% in April, +17.9% YoY, and gasoline +28.4% YoY. This keeps near-term inflation risk elevated even if core disinflation is slower-moving. (bls.gov)
• Fed posture: The Fed held the funds rate at 3.50%–3.75% on April 29, 2026, explicitly linking elevated inflation partly to global energy prices. That language matters because it signals the Fed’s reaction function is sensitive to energy-driven inflation persistence. (federalreserve.gov)
• Labor market (claims): Initial claims were 200,000 for the week ended May 2 (released May 7). Claims remain historically low, countering the idea of an imminent recession beginning in the next few weeks. (apnews.com)
• Business surveys: ISM Manufacturing for April 2026 held in expansion (PMI 52.7) but hiring deteriorated (Employment Index 46.4), a pattern that often precedes broader labor cooling if demand weakens. (ismworld.org)
• Financial conditions: The Chicago Fed NFCI at -0.51 (May 1 reading, updated May 6) indicates easy conditions—not a recessionary setup unless there is a sudden tightening impulse. (fred.stlouisfed.org)
• Sentiment: The University of Michigan Surveys of Consumers show sentiment at 53.3 (posted May 8, 2026), consistent with severe pessimism and limited willingness to absorb new price shocks. (data.sca.isr.umich.edu)

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Near-Term Outlook (Next 30 Days)

Base case for the next month: moderate risk, range-bound—but with fat tails. In a 34/100 regime, recession is not the modal outcome; the dominant question is whether the system absorbs energy-driven inflation without a labor accident.

What could push the score lower (improve):

• Claims stay pinned near ~200k and unemployment holds around ~4.3–4.4%.
• Credit spreads remain tight and NFCI stays negative (easy).
• Any clear sign that energy inflation is fading into May CPI (released June 10, 2026 per BLS schedule). (bls.gov)

What could push the score higher (worsen):

• A step-up in weekly claims (not a single week—think a multi-week trend).
• A renewed downshift in forward indicators (LEI, permits) and a broader hiring pullback beyond manufacturing.
• Markets reprice inflation persistence → long rates rise or risk assets wobble → credit widens.

Calendar catalysts to watch:

• Next LEI release: May 22, 2026 (Conference Board schedule). (conference-board.org)
• Next CPI (May 2026 CPI): June 10, 2026 (BLS schedule embedded in the April CPI release page). (bls.gov)

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Long-Term Outlook (3-6 Months)

Over a 3–6 month horizon, the macro is best described as “expansion with a thin margin of safety.” The 90-day trends you provided show no classic recession cascade in labor or credit—yet. But multiple sub-systems are fragile:

• Households: sentiment is depressed and savings are low—meaning consumption can drop quickly if job security wobbles or inflation re-accelerates. (data.sca.isr.umich.edu)
• Manufacturing labor: the ISM employment index at 46.4 tells you factories are still shedding workers even while the headline PMI expands. Historically, that divergence can persist, but it becomes dangerous when services hiring also softens. (ismworld.org)
• Policy constraint: the Fed has acknowledged energy-driven inflation pressure; if energy stays elevated, the Fed may be less willing to ease preemptively. (federalreserve.gov)
• Financial conditions: currently easy—this is the biggest reason recession isn’t the base case. But easy conditions can flip quickly if a single shock forces de-risking (energy spike → inflation surprise → rates repricing → credit widening).

Historical parallel (in structure, not magnitude): “late-cycle soft data weakness with still-strong labor” phases often persist until a trigger arrives—commonly inflation/energy, policy error, or labor rollover. In your framework, the trigger risk is most consistent with an energy → inflation → policy-stays-tight → labor breaks sequence.

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What to Watch

High-frequency labor (most important):

• Initial jobless claims: watch for a persistent move above the low-200k regime (trend matters more than one print). (apnews.com)
• Unemployment rate / Sahm Rule: the Sahm Rule is currently far from triggering; any fast rise in unemployment would change the score rapidly.

Inflation / energy (the accelerant):

• May CPI on June 10, 2026: confirm whether energy is still pushing headline inflation and whether core is re-accelerating. (bls.gov)
• Gasoline/energy components: if energy remains double-digit YoY, consumer sentiment and discretionary spending stay vulnerable.

Credit (the confirmer):

• HY OAS: if spreads stop being “tight” and begin widening persistently, recession odds rise quickly. (Credit usually turns before equities do.)

Leading indicators:

• LEI release May 22, 2026: another -0.5% to -0.7% style decline would reinforce the growth warning. (conference-board.org)
• Permits vs. starts: permits weakness tends to lead housing activity; continued deterioration would add to downside risk.

Financial conditions:

• NFCI: watch whether it moves toward zero (tightening). A move from -0.51 toward positive territory would be an early “stress transmission” signal. (fred.stlouisfed.org)

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Sources

• bls.gov
• bls.gov
• chicagofed.org
• conference-board.org
• federalreserve.gov
• ismworld.org
• fred.stlouisfed.org
• apnews.com
• data.sca.isr.umich.edu