Recession Risk 34/100 — May 23, 2026

Recession Risk Score: 34/100 — MODERATE (-10 vs 30 days ago)

Today’s Recession Risk Score is 34/100 (MODERATE), and it has fallen meaningfully (-10 points) over the past 30 days (44 → 34). The signal mix still leans “slowdown/soft patch” rather than “imminent recession,” because the highest-signal labor trigger (Sahm Rule) remains decisively untriggered and credit conditions are not pricing systemic stress. The risk that can re-price fast is a confidence/inflation expectations shock (energy + geopolitics) that tightens financial conditions while hiring decelerates. For now, the model says: late-cycle cracks are visible, but the near-term recession setup is incomplete.

Score Trend — Last 30 Days

Over the last 30 days (2026-04-23 → 2026-05-23), the score moved from 44 to 34 (-10), with a min of 33, max of 47, and an average of 39 (24 samples). The range tells you this isn’t a straight-line improvement; it’s been a choppy de-risking process, with periodic “macro scare” spikes that faded.

The last 10 readings show a mean-reverting, stabilizing pattern in the mid-30s: after dipping to 33 (May 15 and May 18, May 20), the score briefly popped to 36 (May 21) and then settled back to 34 (May 22–23). In plain English: risk has come down, but it’s not collapsing lower—it’s hovering in a band consistent with a soft-landing base case plus tail risk.

Key Drivers

1. Sahm Rule: 0.13 (SAFE)
   The Sahm Rule is still the cleanest “real-time recession trigger” in the dashboard—and it’s not close. At 0.13 vs the 0.50 trigger, the labor market would have to deteriorate substantially (and persistently) for this to flip. This single datapoint is the biggest anchor keeping risk in the MODERATE band rather than HIGH.

2. Yield curve re-steepening: 2s10s ≈ +0.43 (WATCH); 2s30s ≈ +1.02 (WATCH)
   A positive 2s10s reduces the classic “inversion-is-screaming” recession narrative. However, the 2s30s steepening can also be consistent with “Fed cuts are coming” dynamics later—so this is supportive for the next ~90 days, but not an all-clear for the next 6–12 months.

3. Credit stress contained: HY OAS ~278 bps (SAFE), NFCI -0.52 (SAFE)
   High-yield spreads staying tight and the Chicago Fed’s NFCI staying loose are inconsistent with a near-term recession. In the model, this matters because recessions that arrive quickly usually show up first in credit pricing and financial conditions.

4. Labor cooling without breakage: initial claims 209k (SAFE); unemployment 4.3% (WATCH); quits 2.0% (WATCH)
   The labor market is clearly decelerating, but weekly claims remain low and stable (still not behaving like a recession prelude). The quits rate at 2.0% suggests workers have less leverage—late-cycle normal—but not a collapse.

5. Late-cycle “cracks” are real: Temporary Help 2,485k (DANGER) + Freight index (DANGER)
   Temp help is a classic early warning—firms cut flexible labor first. Pair that with weak goods-side proxies like freight, and you have a coherent “industrial slowdown” story even while the broader economy stays afloat.

6. Confidence shock risk rising: UMich sentiment flagged crisis-level (DANGER)
   Consumer psychology matters most when it bleeds into spending and credit performance. The University of Michigan’s final May result (released May 22, 2026) shows sentiment falling further and explicitly ties weakness to gasoline/energy constraints and inflation concerns. (sca.isr.umich.edu)

Category Breakdown

• Primary Indicators: 3 safe / 5 watch / 1 danger
  Core recession triggers remain mostly stable; the “danger” is concentrated in forward-looking labor composition (temp help) rather than broad unemployment dynamics.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary confirms “soft patch” conditions—enough deterioration to respect risk, not enough breadth to confirm contraction.

• Housing & Construction: 0 safe / 2 watch / 0 danger
  Housing is slowing but not collapsing; permits/starts are “yellow,” consistent with rate sensitivity and affordability strain rather than a housing-led recession impulse.

• Business Activity: 2 safe / 1 watch / 0 danger
  The business backdrop is mixed-to-okay; the message is “activity continues, hiring is the weak link.”

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  Household buffers look thin (savings) and delinquencies are elevated—this is the most plausible transmission channel if sentiment stays depressed.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are buoyant (indices near highs, low VIX), but valuation/ratio signals and cyclicals (e.g., copper/gold) are flashing “late-cycle fragility.”

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is the stealth risk: the RRP being near depletion removes a cushion and can amplify funding volatility when stress hits.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency gauges are split: claims are fine, but goods-side activity proxies are weak.

Biggest Movers

From the past 7 days (top |% change|):

1. ON RRP Facility: -84.7% (7D) — Confirmatory (worsening)
   A fast drawdown in RRP is not automatically recessionary, but it’s liquidity-negative at the margin: less “parked cash,” less buffer if money markets tighten.

2. GDP Growth (QoQ annualized): -50.0% (7D) — Confirmatory (worsening)
   A sharp downtick in tracked growth is consistent with the model’s “soft patch” narrative. On its own it’s noisy, but paired with freight/temp help it adds coherence.

3. Personal Savings Rate: +25.0% (7D) — Contradictory (improving)
   If sustained, higher savings improves household resilience. But in late cycle, savings sometimes rises because consumers pull back—so directionally positive for buffers, ambiguous for growth.

4. NY Fed Recession Probability: -24.6% (7D) — Contradictory (improving)
   Falling model-based recession probability is consistent with yield-curve normalization and stable credit.

5. VIX: +14.9% (7D) — Confirmatory (worsening)
   Volatility rising from low levels can be an early “regime wobble,” even if absolute VIX remains benign.

90-Day Indicator Trends

Your 90-day history block is partial (it contains many series but only a subset of the full 90-day window for each). Using what’s provided, the dominant pattern is labor/real-economy cooling while markets/credit remain supportive—a late-cycle divergence.

Labor & recession triggers

• Sahm Rule improved from 0.30 (watch) in late Feb to 0.27 (safe) by Mar 8–16, and today it’s 0.13 (safe). That’s a material improvement versus where you started the 90-day window, and it argues against an imminent recession impulse coming from broad unemployment dynamics.
• Initial claims held in a tight band ~206k → 213k through late Feb–mid Mar in your history; today’s reading is 209k (still consistent with “no breakage”). The level matters more than week-to-week noise, and the level is still expansionary.

Growth / activity

• Real personal income ex transfers rose from $16.6T to $16.7T in mid-March—small but positive drift.
• Industrial production is steady (102.3 in the history block; 102.5 today).
• Freight deteriorated sharply in early March in your history (from positive to negative) and remains DANGER today—one of the clearest “goods economy is weak” messages.

Housing

• Building permits fell from 1448k to 1376k by mid-March in your history—clear softening.
• Housing starts improved from 1404k to 1487k by mid-March (modest stabilization). Net: housing is not screaming recession, but it’s not providing upside momentum either.

Credit, liquidity, and stress plumbing

• HY spreads in your history drifted higher into mid-March (~317 bps), while today they’re ~278 bps—a meaningful tightening that supports the “no imminent recession” call.
• ON RRP in your history shows a rapid decline from tens of billions down into sub-$1B territory by mid-March; today it remains close to depleted. That’s not a direct recession trigger, but it raises the odds that a shock transmits faster.

Markets & “risk appetite vs macro”

• Your equity index histories (Feb–mid Mar) show a drawdown; today, the indices in the snapshot are near highs (S&P 500 7,473; Nasdaq 26,344; Dow 50,580). This widening gap between “soft” data and asset prices is exactly the kind of divergence that can persist—until it doesn’t.

Stock Screener Signals

Today’s screener output is shouting two themes:

1. “Value dividend” defensiveness in financials/telecom/insurers, and
2. Selective oversold growth (low RSI) rather than broad risk-on chasing.

On the defensive side, names like AIG, ARCC, FNF, T, BCE cluster around low P/E and “value dividend” tags. That’s consistent with a market that still wants cash-flow durability and downside resilience even while major indices sit near highs. It also aligns with the macro dashboard: credit spreads are tight, but household stress indicators are creeping, so investors prefer business models that can endure a soft patch.

On the “oversold growth” side, CHTR (RSI 28) and TLK (RSI 30) suggest targeted mean reversion rather than a broad-based cyclical bid. That’s a very “late-cycle” posture: pick your spots, don’t pay up for beta, and keep one foot in defensives.

One technical note: several yields shown (e.g., ARCC 1002%) are almost certainly data artifacts rather than investable reality; treat the directional classification (value/defensive vs oversold) as the useful signal, not the literal yield number.

Latest Economic Developments

1) Conference Board LEI stabilized in April.
On May 22, 2026, The Conference Board reported the U.S. LEI rose +0.1% in April 2026 after a -0.6% decline in March. They emphasized that 6- and 12-month growth rates remain negative, implying fragile conditions despite the monthly uptick. (prnewswire.com)

2) Jobless claims remain low and steady.
The Department of Labor’s May 21, 2026 release showed initial claims of 209,000 for the week ending May 16, down 3,000 from the prior revised week; the 4-week average was 202,500. This is not recession behavior in the weekly data. (dol.gov)

3) Consumer sentiment deteriorated further and inflation expectations rose.
The University of Michigan’s final May 2026 release shows the Index of Consumer Sentiment at 44.8, down from 49.8 in April, with expectations also weak; reporting explicitly links the drop to gasoline prices and supply disruptions. Major outlets also highlighted the rise in long-run inflation expectations to around 3.9%, a key Fed sensitivity. (sca.isr.umich.edu)

4) Markets: risk appetite resilient into late May.
Market coverage on May 22, 2026 emphasized equity resilience as bond-market pressure eased, consistent with your “indices near highs / VIX low-ish” snapshot. (timesofindia.indiatimes.com)

Near-Term Outlook (Next 30 Days)

Base case for the next month: risk score stays in the low-to-mid 30s, with two-way volatility driven by labor-market “rate of change” and inflation expectations.

Catalysts that could push the score higher (worse):

• Claims trend shift: If initial claims stop ranging and begin a sustained climb (e.g., multiple prints that push the 4-week average meaningfully higher), the Sahm Rule will follow with a lag.
• Inflation expectations stay elevated: UMich’s long-run expectations moving higher is the kind of development that can keep the Fed cautious, limiting the economy’s ability to “grow through” labor cooling. (wsj.com)
• Liquidity/funding hiccups: With RRP near depleted, any money-market stress has less of a shock absorber.

Catalysts that could push the score lower (better):

• LEI continues to print small positives (or at least avoids another March-style drop), reinforcing “slowdown, not recession.” (prnewswire.com)
• Credit stays calm (HY spreads remain tight) while claims stay low—this combination is historically hard to reconcile with an imminent recession.

Long-Term Outlook (3-6 Months)

Over a 3–6 month horizon, the macro picture is best described as late-cycle bifurcation:

• The recession trigger set is not armed (Sahm Rule low; claims low; credit tight). That argues against a near-term “sudden stop.”
• But the late-cycle weakening channels are broadening: temp help deterioration, weak goods-side activity, and household buffer depletion (low savings, rising delinquencies). These are exactly the cracks that can turn a slowdown into a recession if a shock hits.

The key structural risk is a policy constraint problem: if inflation expectations remain sticky (or energy keeps prices elevated), the Fed’s ability to ease into weakness is reduced, and the economy has to do more adjustment through employment/income rather than rates. Meanwhile, elevated fiscal burden metrics (debt/interest expense) imply less clean countercyclical capacity if the downturn becomes real.

Net: soft-landing remains the modal outcome, but recession odds in late 2026 rise materially if (a) labor cooling accelerates into rising insured/continuing unemployment, or (b) a renewed inflation impulse tightens conditions while consumers are already pessimistic.

What to Watch

Labor (highest priority)

• Initial claims 4-week average: watch for a sustained uptrend off ~200k.
• Continuing claims / insured unemployment: any persistent acceleration would validate temp-help weakness.
• Sahm Rule: the critical threshold remains 0.50; direction matters more than daily noise.

Credit & financial conditions

• HY OAS: a fast move wider from ~278 bps toward recessionary regimes would be an early warning.
• NFCI: watch for a move from loose (negative) toward positive territory.

Consumers

• UMich sentiment + inflation expectations: sentiment is already extremely depressed; the question is whether it begins to show up in spending and delinquencies. (sca.isr.umich.edu)

Growth/leading

• Conference Board LEI: follow-through after April’s +0.1% will matter more than the one-month bounce. (prnewswire.com)

Liquidity

• RRP usage: if it stays pinned near depleted, funding markets can become more sensitive to shocks.

Sources

No data available for this window.