Recession Risk 34/100 — May 24, 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 materially over the past 30 days (down 10 points from April 24 to May 24, 2026). The downgrade in risk is being earned the old-fashioned way: labor-market breakage is not showing up in the hard data, and financial conditions remain loose enough to cushion late-cycle fragility. At the same time, this is not a “clear skies” macro tape—soft data (consumer confidence/inflation expectations) and select leading labor precursors (temp help) keep a non-trivial downside tail in play.

Score Trend — Last 30 Days

The last 30-day window (2026-04-24 → 2026-05-24) shows a steady grind lower in recession risk: Start 44 → End 34 (Δ -10), with a range of 33 to 47 and an average reading of 38. That’s a meaningful move: it suggests the model is walking back “near-term” recession pressure rather than merely oscillating around a flat mean.

The “shape” of the last 10 readings is especially telling: the score has been stable-to-lower with brief bumps (notably 36 on May 21) before reverting to 34. The pattern looks mean-reverting downward—a classic profile when hard activity/labor data hold firm while sentiment-led warnings remain loud but fail to cascade into claims, spreads, or broad risk-off conditions.

Key Drivers

Here are the most important forces driving today’s 34/100 reading:

1. Sahm Rule remains clearly untriggered (0.13 vs 0.50 trigger)

   • The model’s highest-weight real-time recession trigger is still firmly in the “safe” zone at 0.13, keeping immediate recession odds contained. In practice: you can have ugly sentiment and pockets of slowing, but if unemployment dynamics don’t deteriorate, broad recession calls tend to be early.

2. Initial jobless claims remain low, signaling limited labor-market stress

   • Initial claims: 209k (week ended May 16, 2026), and the 4-week average: 202.5k (updated May 21, 2026). Continuing claims are modestly higher (1.782M), but not at levels consistent with a rolling recession. (haverproducts.com)

3. Leading indicators stabilized at the margin (LEI +0.1% m/m), but the medium-term trend is still “fragile”

   • The Conference Board LEI rose +0.1% in April 2026 after a March decline, but remains -0.7% over the last six months (Oct 2025–Apr 2026)—a “slow growth / fragile” signal rather than an “imminent contraction” signal. (prnewswire.com)

4. Manufacturing headline is expansionary, but the employment sub-index is a warning

   • ISM Manufacturing PMI: 52.7 (April 2026) = expansion for the 4th straight month. However, the report explicitly flags employment contracting (Employment Index 46.4)—a late-cycle pattern where output can hold up while hiring demand fades. (ismworld.org)

5. Soft data shock is intensifying and raises “consumption air-pocket” risk

   • University of Michigan sentiment has cratered (your dashboard highlights crisis-level readings and notes record-low commentary), and inflation expectations have re-accelerated in tandem—classic ingredients for a confidence/real-income squeeze. (This is the clearest catalyst for the score to re-widen if it spills into spending and labor.) (devdiscourse.com)

6. Policy risk is turning less supportive: Fed officials are signaling less “easing bias” amid an energy-driven inflation impulse

   • Fed Governor Christopher Waller signaled a willingness to hold rates steady in an oil-shock environment and pushed back against a one-way “cuts are next” presumption—important because it reduces the market’s perceived policy put if inflation stays sticky. (americanbanker.com)

Category Breakdown

Using your Category Breakdown counts:

• Primary Indicators: 3 safe / 5 watch / 1 danger
  Mixed but improving: the core recession triggers are not firing, yet watch-level labor/curve drift prevents a “low risk” downgrade.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary confirms “not recession now,” but at least one secondary series is behaving like a late-cycle stress probe.

• Housing & Construction: 0 safe / 2 watch / 0 danger
  Housing is cooling, not collapsing—consistent with “slower growth” rather than a housing-led downturn.

• Business Activity: 2 safe / 1 watch / 0 danger
  Activity reads as expanding but decelerating; the “watch” is likely capturing the employment/forward-demand nuance.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  Credit is the sleeper risk: delinquencies and debt-service pressure imply reduced consumer resilience if jobs weaken.

• Market Signals: 7 safe / 2 watch / 5 danger
  The market complex is split: index levels/volatility look calm, while valuation and macro ratios look stretched—this supports a “fragile expansion” framing.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity looks less cushioned at the margin; this category is a tail-risk amplifier if volatility rises.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency is mixed, reflecting the tension between low claims (good) and select leading labor/goods signals (bad).

Biggest Movers

Top 5 by absolute 7-day % change (and what they mean for recession risk):

1. ON RRP Facility: -84.7% (7D) — Contradictory / mixed
   A collapsing ON RRP balance typically signals less parked cash and a different liquidity regime. It’s not a clean recession signal by itself; it can be risk-supportive until it isn’t (i.e., until funding markets tighten).

2. GDP Growth (QoQ SAAR): -50.0% (7D) — Confirmatory (worsening)
   A sharp downshift in modeled/nowcast-style growth is directionally consistent with slowing. One-week moves can be noisy, but the direction matters: slowing growth makes the economy more sensitive to shocks.

3. Personal Savings Rate: +25.0% (7D) — Contradictory (improving)
   Higher savings is a buffer (good for recession risk), but context matters: savings can rise for “good” reasons (income growth) or “bad” reasons (precautionary pullback).

4. NY Fed Recession Probability: -24.6% (7D) — Contradictory (improving)
   A drop in this probability aligns with the broader theme: the curve/term-structure signal is less alarming in the near term.

5. VIX: +14.9% (7D) — Confirmatory (worsening)
   A rising VIX is an early warning when it’s persistent. Today’s level is still low in absolute terms (16.8), but the direction suggests complacency is being tested.

90-Day Indicator Trends

Your 90-day history panel (most recently populated through mid-March in the data you provided) shows a macro regime that is stabilizing in the “hard data,” while soft data and select leading indicators diverge.

Labor: still intact, but watch the precursors

• Sahm Rule: drifted down from 0.30 (Feb 23) to 0.27 (Mar 8–Mar 17), and sits at 0.13 today (your latest reading). That’s the opposite of what you see heading into recession—it’s improving, not deteriorating.
• Initial claims: roughly 206k → 213k from late Feb to mid-March, and now 209k (May 16). Net: low and stable, consistent with employers hoarding labor.
• Temp help services (DANGER): fell from ~2480k (late Feb) to ~2447k (mid-March) and remains depressed in today’s reading (2485k in your dashboard). This remains one of the most credible “early labor crack” indicators—often turns before the unemployment rate.

Rates/curve: re-steepening supports “not imminent,” but keep the interpretation honest

• 2s10s spread: stayed positive and generally stable (~0.60 → 0.55 from Feb 23 to Mar 17), with a 0.43 watch reading today. A positive curve reduces the classic inversion-based recession alarm, but a late-cycle re-steepening can also reflect future cuts (i.e., growth concern). Net: supportive, but not a victory lap.

Leading growth: fragile, not collapsing

• Conference Board LEI: shows a discrete jump from a negative reading (-0.3 on Feb 23 in your series) to +1.7 starting March 1 (likely a methodological/index-level shift in your feed), and your latest note confirms April +0.1% m/m but 6-month growth still negative (-0.7%)—a “slow growth / high sensitivity” profile. (prnewswire.com)
• GDPNow: oscillated between ~3.0% and ~1.8% in late Feb/early March in your series; today’s read remains 1.8%, i.e., below trend but positive.

Markets/financial conditions: supportive now, but stretched

• NFCI: stayed loose (around -0.57 to -0.51 in your history), consistent with risk-taking capacity.
• Credit spreads: your history shows HY OAS moving around ~295–320 bps range; your latest reading (278 bps) is even tighter, which is generally anti-recession (markets not pricing default stress).
• Valuation risk: S&P/Nasdaq levels are near highs in your dashboard, while valuation and GDP-multiple indicators are flashing danger. That combination often produces nonlinear downside when macro disappoints.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags: ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE—with two “oversold growth” names (CHTR, TLK). Interpreted as a macro signal, this looks like barbell positioning: investors want cash-flow durability and yield (late-cycle defensive instinct) while selectively probing deeply oversold growth where idiosyncratic pessimism may be overdone.

Two cautions jump off the page:

• The yields shown are implausibly high (e.g., ARCC “1002%”), which suggests a data normalization issue (likely annualization/decimal handling). The directional read (screen prefers dividend/value) still matters, but don’t overfit to the displayed yield magnitudes.
• RSI dispersion is meaningful: names like CHTR (RSI 28) and TLK (RSI 30) indicate capitulation/oversold conditions in pockets—often seen when markets are broadly calm but micro-stress is rising (credit-sensitive or rate-sensitive equities can do this late cycle).

Net: the screener supports the macro message of moderate risk—not “panic,” but a preference for resilient balance sheets/cash flows with opportunistic mean-reversion in select laggards.

Latest Economic Developments

Over the last ~48 hours, the most relevant macro developments are:

• Fed communication turning less dovish in response to energy/inflation risk.
  Fed Governor Christopher Waller indicated comfort with holding rates steady in the face of an oil-price-driven inflation impulse and argued for dropping an “easing bias,” leaving the door open to tighter policy if inflation persists. This is a key recession-risk input because it implies less policy cushioning if growth softens while inflation expectations rise. (americanbanker.com)

• Jobless claims remain low (hard data resilience).
  The latest weekly claims data show 209k initial claims with a 202.5k four-week average, underscoring that layoffs are not broadening—yet. Continuing claims are 1.782M, worth watching for a sustained uptrend, but not flashing recession by itself. (haverproducts.com)

• Leading indicators improved marginally in April, but the trend remains soft.
  The Conference Board’s LEI inched up +0.1% in April, but the six-month rate remains negative (-0.7%), explicitly described as “fragile economic conditions ahead.” This is consistent with a slowing expansion baseline, not an all-clear. (prnewswire.com)

• Manufacturing: expansion continues, but employment is contracting.
  ISM’s April report kept PMI at 52.7 with new orders expanding and employment contracting—a configuration consistent with continued activity but growing caution on hiring. (ismworld.org)

Near-Term Outlook (Next 30 Days)

Base case for the next month: slower-but-still-positive growth, with recession risk staying MODERATE unless labor-market deterioration accelerates.

What could move the score up (worse) in the next 30 days:

• Claims inflection: a sustained rise in the 4-week initial claims average and a clearer climb in continuing claims.
• Unemployment drift: if unemployment keeps ticking up and the Sahm Rule moves toward 0.50, risk would re-rate quickly.
• Energy-driven inflation expectations: if inflation expectations keep rising, the Fed’s reaction function becomes more restrictive—bad mix for consumption.

What could move the score down (better):

• Sentiment stabilizes (or at least stops deteriorating) while real incomes hold.
• Temp help bottoms and quits/hiring indicators stop softening.
• Credit spreads remain tight and financial conditions stay loose.

Long-Term Outlook (3-6 Months)

The 3–6 month outlook is best described as late-cycle fragility with asymmetric downside. The economy can keep expanding with:

• Low claims
• Positive growth nowcasts
• Tight credit spreads
• Equities near highs

…but the system is increasingly vulnerable to a “confidence → consumption → hiring” chain reaction because:

• Savings cushion is thin (your dashboard flags very low savings rate even if it bounced week-to-week),
• consumer credit stress is creeping, and
• leading labor indicators (temp help, manufacturing employment) are deteriorating even while the headline labor market appears fine.

Historically, recessions tend to arrive not when a single indicator looks bad, but when labor-market cracks and credit repricing overlap. Today, we have early hints in labor precursors, but not the confirming surge in claims/spreads—hence MODERATE rather than elevated.

What to Watch

Key thresholds and upcoming checks that would change the risk calculus:

• Sahm Rule: watch for acceleration toward 0.50 (today 0.13).
• Initial claims: sustained move in the 4-week average meaningfully above ~220k–240k would be the first broad labor warning (context-dependent, but direction matters most).
• Continuing claims: monitor for persistent stair-stepping higher (today’s cited level 1.782M in the latest release). (haverproducts.com)
• Temporary help services: any further step-down would reinforce the “hiring pipeline is weakening” signal.
• Credit spreads (HY OAS): a widening regime shift (not a one-day blip) would be the market’s confirmation of stress.
• Energy & inflation expectations: if inflation expectations keep rising, the Fed may remain on hold longer—raising the odds that slowing growth becomes a policy problem rather than a policy-supported glide path. (americanbanker.com)
• LEI trend: watch whether the LEI’s 6-month rate keeps improving from -0.7% toward zero, or rolls back over. (prnewswire.com)

Sources

No data available for this window.