Recession Risk 38/100 — May 14, 2026

Recession Risk Score: 38/100 — MODERATE (+0 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), unchanged from 30 days ago (April 14 → May 14). The data still describe an economy expanding on the surface—financial conditions remain loose and equities are near highs—but with a more fragile internal mix: weaker “cyclical plumbing” (temp help, freight) and rising credit sensitivity (delinquencies, low saving). The highest-weight labor trigger (Sahm Rule) remains clearly untriggered, which keeps near-term recession odds contained. Net: not imminent, but the distribution is getting fatter in the left tail—labor-market cooling + credit transmission remain the swing variables.

Score Trend — Last 30 Days

Recession risk score — last 30 days

The last 30-day window (2026-04-14 → 2026-05-14) shows a flat net change: Start 38 → End 38 (Δ 0), but with meaningful volatility inside the month (Min 34, Max 47, Avg 41, 24 samples). That pattern matters: the score is not “calm,” it’s range-bound—alternating between risk-on impulses (tight spreads, strong equities) and late-cycle warnings (soft labor-leading indicators, rising volatility bursts).

In the last 10 readings, the path looks like mini risk spikes that fail to sustain: a late-April peak at 47 (Apr 28) rolled down to the high-30s by May 6–8, popped back to 44 (May 9, May 11–12), then briefly printed a low of 34 (May 13) before rebounding to 38 (May 14). This “spike-and-revert” shape is consistent with an expansion regime where investors keep buying dips, while the underlying macro tape is increasingly mixed. In practical terms: the economy is not signaling recession now, but it is signaling instability in the narrative—and instability is how recessions usually start (not from a stable high score, but from a regime shift that starts showing up first in labor and credit).

Key Drivers

Labor trigger remains untriggered (core recession off-switch still OFF)
- Sahm Rule: 0.13 (SAFE) vs recession trigger ~0.50.
- Initial claims: ~200k (SAFE) and still consistent with contained layoffs.
- Unemployment rate: 4.3% (WATCH)—up modestly, but not accelerating enough to flip the Sahm signal.
Growth tracking is “okay,” but dispersion is rising
- GDP growth (QoQ annualized): 2.0% (WATCH) in your stack.
- Nowcasts still imply expansion, but the risk is that growth becomes less broad-based and more inventory/financial-conditions-driven than labor-income-driven.
Yield curve steepening = late-cycle transition, not a clean all-clear
- 2s10s: +0.46 (WATCH); 2s30s: +1.03 (WATCH).
- A post-inversion steepening often reflects policy-easing expectations (or inflation risk premia in the long end), not necessarily improved forward growth. With inflation re-accelerating in April, the curve is also being pulled by higher long-end yields and term premium dynamics, not just “soft landing confidence.”
Late-cycle labor-leading indicators are deteriorating
- Temporary Help Services: 2,485K (DANGER)—a classic early-warning series for broad labor softening.
- Manufacturing employment: 12.6M (WATCH)—not collapsing, but not strengthening.
Household downside convexity is rising
- Personal savings rate: 3.6% (WARNING)—low buffer if hiring slows.
- Credit-card delinquency: 2.9% (WATCH)—elevated; suggests the marginal household is more rate-sensitive and less able to absorb shocks.
- Household debt service ratio: 11.3% (WATCH)—not crisis-level, but rising sensitivity if rates stay restrictive longer.
Markets are calm on the surface, but valuations and “macro hedges” are flashing late-cycle
- VIX: 18 (SAFE) (low stress pricing).
- Yet valuation-to-economy ratios are hot: NASDAQ/GDP: 0.8288 (DANGER), S&P 500/GDP: 0.2337 (WARNING), and Copper/Gold ratio: 0.00077 (DANGER) (industrial cyclicality priced poorly).
- This combination often coincides with recession risk that is underpriced until a labor/credit catalyst forces repricing.

Category Breakdown

Using your CATEGORY BREAKDOWN counts:

Primary Indicators: 2 safe / 6 watch / 1 danger
Primary is still “expansion-leaning,” but it’s watch-heavy, meaning the cycle is vulnerable to a small deterioration in employment or income growth.
Secondary Indicators: 2 safe / 0 watch / 1 danger
Secondary looks stable overall, but the single danger flag implies a thin margin of safety—secondary tends to move faster once labor turns.
Housing & Construction: 1 safe / 0 watch / 1 danger
Housing is mixed: starts are healthy, but permits are soft. That often signals future pipeline cooling rather than current activity collapse.
Business Activity: 2 safe / 1 watch / 0 danger
Business activity is broadly okay; the risk is that hiring demand fades faster than output, squeezing income growth.
Consumer Credit Stress: 0 safe / 3 watch / 1 danger
This is a key late-cycle pocket: stress is not acute, but it’s broadening. If labor softens, this bucket can deteriorate quickly.
Market Signals: 6 safe / 3 watch / 5 danger
Market internals are contradictory: “risk-on” price levels sit next to danger valuation/ratio signals. That’s classic late-cycle.
Liquidity: 0 safe / 1 watch / 2 danger
Liquidity is tightening at the margin (not in spreads, but in plumbing). Low/near-depleted RRP usage raises sensitivity to shocks.
Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
High-frequency signals are mixed; the danger signal here is important because it can lead turns.

Biggest Movers

Top 5 by absolute 7-day % change (from your BIGGEST MOVERS):

ON RRP Facility ($4B): -84.7% (7D)
- Confirmatory (worsening resilience / liquidity buffer): lower RRP can mean cash is being deployed elsewhere, but near depletion reduces a backstop and can increase funding sensitivity in stress windows.
GDP Growth (QoQ annualized) (2.0%): -50.0% (7D)
- Confirmatory (worsening growth momentum): a move like this typically reflects either a hard-data downgrade or a methodological/nowcast swing. Either way, it raises the odds of a negative growth surprise if it persists.
NY Fed Recession Probability (20.0%): -30.8% (7D)
- Contradictory (improving): model-implied risk is easing even as household/late-cycle indicators soften. Treat as a “model offset,” not a decisive all-clear.
VIX (18.0): +29.0% (7D)
- Confirmatory (worsening risk pricing): still low in level terms, but the jump suggests investors are paying more for near-term protection—often an early tell that macro uncertainty is rising.
Personal Savings Rate (3.6%): +25.0% (7D)
- Contradictory (improving): directionally better, but the level remains low. This is “less bad,” not “good.”

90-Day Indicator Trends

Your 90-day history shows a consistent theme: financial conditions and headline markets look fine; late-cycle internals keep fraying. Key trend reads:

Rates / curve: steep but drifting (late-cycle, not early-cycle)

2s10s: 0.64 (Feb 13) → ~0.55–0.59 (early March) → 0.46 today
Directionally, the curve is less positive than 90 days ago, implying either higher front-end persistence or long-end volatility. It’s not screaming recession, but it is not “accelerating growth” either.
2s30s: 1.29 (Feb 13) → 1.12 (Mar 14–15) → 1.03 today
The long curve has flattened vs 90 days, consistent with a market that is less convinced about sustained acceleration.

Financial conditions: still loose, slowly less loose

Chicago Fed NFCI: roughly -0.54 (Feb 13) → -0.51 (mid-March) → -0.52 today
This stays a major recession-risk suppressant—conditions are easy enough to prevent a rapid demand collapse absent a labor shock.

Credit: spreads tight, but household stress creeping

HY OAS: ~295 bps (Feb 13) → peaks around 319 bps (Mar 11) → ~282 bps today
Credit spreads are tighter than 60–90 days ago, contradicting recession pricing. Historically, spreads often widen after labor weakens—so this is a “lagging comfort.”
Credit-card delinquencies: hovering near ~2.9–3.0% across the window (watch-level)
The key here is persistence: it’s not exploding, but it’s not mean-reverting down, implying households are absorbing higher rates with thinner buffers.

Labor-leading: the clearest soft patch

Temporary help: ~2,480K (late Feb) → ~2,447K (mid-March) → 2,485K today (DANGER)
Even with the small bounce in the “today” reading, the level remains deep in danger. This is the most important leading labor deterioration in your dashboard.
Initial claims: ~208K (Feb 14) → ~213K (early March) → ~200K today
Claims are stable-to-better—which is why your score stays moderate. The watchpoint is whether claims trend higher (not one week).

Real economy / sentiment: weak mood, mixed output

Consumer sentiment: 56.4 (Feb 22–mid-March) → 53.3 today (DANGER)
Sentiment is depressed and deteriorating—not a direct recession trigger, but it raises risk that spending snaps if job security perceptions change.
Industrial production: stable around 102.3 (Feb–Mar) → 101.8 today (WATCH)
Output is stagnating, consistent with “services okay / goods soft.”

Liquidity plumbing: thinner cushion

ON RRP: down from the low-single-digit billions in the window to ~$4B today (WARNING)
Not a recession signal by itself, but it increases fragility during risk-off episodes and can transmit stress into short-term funding.

Stock Screener Signals

Today’s quant flags are dominated by “value dividend” profiles—AIG, BBY, FNF, HMC, T, ARCC, plus a handful of oversold growth names (CHTR, TLK) and international cyclicals (LTM, BCE). The aggregate message looks like late-cycle positioning rather than early-cycle chasing: investors (or the screener) are finding relative value in cash-flowing, rate-sensitive, and balance-sheet stories rather than pure high-multiple momentum.

Two important nuances:

The very high stated yields (e.g., ARCC, BBY, TLK) look mechanically distorted (likely data-field issues), so treat the “yield” column as a flag rather than a literal payout expectation. The more actionable signals are low P/E + mid/low RSI:
- BBY (RSI 39, P/E 8.4) and T (RSI 40, P/E 10) read as defensive mean-reversion rather than growth optimism.
- CHTR (RSI 28, P/E 3.5) is classic “oversold growth/value hybrid,” often showing up when the market is nervous about consumer affordability and refinancing risk.

Macro interpretation: this basket aligns with a world where growth is okay, but investors want margin-of-safety cash flows because the next move could be either (a) softer labor → defensives outperform, or (b) inflation persistence → long rates stay high → quality cash flows matter more than distant-duration narratives.

Latest Economic Developments

Inflation re-accelerated in April, complicating the Fed path. The BLS reported April 2026 CPI on May 12, 2026, and the release confirms a hotter print: headline CPI +0.6% m/m and +3.8% y/y, with core CPI +0.4% m/m and +2.8% y/y. (bls.gov) That matters for recession risk because it reduces the probability of timely “insurance cuts” if growth cools—raising the chance of a policy mistake or a tighter-for-longer impulse.

The policy backdrop also shifted: the Senate confirmed Kevin Warsh as Fed Chair on May 13, 2026 (54–45), replacing Jerome Powell as chair at a moment when inflation pressures are again central. Leadership transitions tend to raise near-term policy uncertainty—even if the reaction function remains similar—because markets must re-price communications and committee dynamics. (apnews.com)

Markets are also reacting to higher long-end yields. Reports indicate the 30-year Treasury yield hit ~5%, with auction pricing around that level (the “first time since 2007” framing underscores the psychological threshold). (bloomberg.com) Higher term yields are a slow-burn tightening channel—especially for housing affordability, corporate capex hurdle rates, and credit-card APR pass-through.

On the data calendar, April retail sales (advance report) is scheduled for May 14, 2026 at 8:30 a.m. ET, and will be a key test of whether depressed sentiment is translating into real spending retrenchment. (census.gov) (If the print is strong, it supports the “still expanding” case; if it is weak, it raises the risk that the labor market softens next.)

Near-Term Outlook (Next 30 Days)

Base case for the next month: moderate risk, range-bound, with the score likely to oscillate in the mid-30s to mid-40s unless labor cracks. The most important near-term mechanism is: inflation persistence → fewer cuts → higher real rates → more credit stress → labor softening. The data you should anchor to:

Weekly jobless claims / continued claims: the cleanest early warning. A sustained move higher (not a one-week spike) would push WATCH → WARNING quickly.
Unemployment rate + Sahm Rule: today the Sahm reading is 0.13, leaving room; the risk is a rapid move if unemployment jumps by 0.2–0.3pp over a few months.
Retail sales (May 14 release): confirms whether consumer resilience persists despite low sentiment and low saving. (census.gov)
Inflation follow-through into May: with April CPI hot, the next prints will shape whether the Fed can pivot if growth slows. (bls.gov)

Catalysts that could push the score higher quickly:

A claims breakout (especially continued claims) + rising delinquencies
A credit spread widening from very tight levels (HY OAS currently benign)
A sharp equity drawdown that tightens financial conditions (not visible now)

Long-Term Outlook (3-6 Months)

The 90-day dashboard profile is consistent with a late-cycle expansion: financial conditions are loose, equity indices are elevated, and spreads are tight—yet labor-leading indicators (temp help) and household buffers (saving, delinquencies) are flashing vulnerability.

Three plausible regimes for the next 3–6 months:

Soft landing extension (still the modal outcome)
Labor stays intact (claims contained, unemployment drifts), spending holds, and inflation slowly cools from energy-driven spikes. The risk score would likely drift low-to-mid 30s.
Adverse growth surprise without an immediate recession (the rising probability tail)
Consumer pulls back (low saving + delinquency pressure), goods-side weakness bleeds into services hiring, and the Fed is constrained by sticky inflation. Score would drift into the 40s and stay there.
Classic labor/credit turn (recession pathway)
Temp help weakness spreads into payrolls; claims rise for several weeks; delinquencies accelerate; spreads widen. Sahm moves rapidly toward 0.50. Score would move 50+ and stop mean-reverting.

Your current setup—Sahm safe, claims safe, NFCI loose—argues against imminent recession. But the combination of depressed sentiment, low saving, and deteriorating labor-leading indicators argues that recession odds can rise quickly if the labor market loses momentum.

What to Watch

High-signal thresholds and events:

Sahm Rule: watch 0.20 → 0.30 → 0.40 as “pre-trigger” steps; recession trigger near 0.50.
Initial claims: a sustained move above ~230k–250k (and rising) would be a meaningful regime shift from today’s ~200k.
Credit-card delinquencies: a move above ~3.2–3.5% would suggest accelerating household stress.
HY OAS: sustained widening above ~350–400 bps would indicate credit is no longer complacent.
Housing pipeline: if building permits continue to slide while long yields stay elevated, expect housing to become a stronger drag.
Retail sales and real income: resilience requires that nominal spending isn’t just inflation; watch real income trend alongside retail volumes.

Sources

No data available for this window.