Recession Risk 34/100 — May 26, 2026

Recession Risk Score: 34/100 — MODERATE (-13 vs 30 days ago)

Today’s Recession Risk Score is 34/100 (MODERATE), down 13 points from 30 days ago (47 → 34). The near-term growth picture is still intact—claims remain low, financial conditions are easy, and real-time recession triggers are quiet. But the distribution of outcomes is widening: energy-driven inflation risk (Hormuz disruption headlines) is colliding with crisis-level consumer psychology, raising the odds of a policy “mistiming” (staying tight into a hiring rollover). Net: baseline is continued expansion, but tail risks are uncomfortably fat.

Score Trend — Last 30 Days

Over the last 30 days (Apr 26 → May 26), the score mean-reverted lower: Start 47, End 34 (Δ -13) with a range of 33–47 and an average of 38 (24 samples). The profile is not a straight-line improvement; it’s a step-down from “edgy” readings in the high-40s to a new, lower plateau in the mid-30s.

The last 10 readings show stabilization with brief flare-ups: the score sat 33–36 for most of the stretch, then briefly popped to 38 on May 25 before reverting to 34 today. That shape matters: it suggests risk is not compounding, but it is reactive—headline-sensitive (energy/inflation) and prone to short-lived stress spikes. In practical terms, the economy looks more like late-cycle resilience than imminent contraction, but it remains one catalyst away from a fast re-pricing.

Key Drivers

1. Real-time recession trigger remains safely dormant (Sahm Rule: 0.13 vs 0.50 trigger)
   Your highest-weight alarm bell is not ringing. At 0.13, the Sahm signal implies that unemployment’s recent drift higher is not yet a regime change—more “cooling” than “break.” (Today’s labor-risk is about whether the next move happens, not that it already has.)

2. Labor market stability in high-frequency data (Initial Claims: 209k; Continuing: ~1.78m)
   The week ending May 16 initial claims print at 209,000 reinforces the “no crack yet” message, with continuing claims around 1.78 million. (barrons.com)
   Recession risk typically climbs when claims move from “stable low” to “persistent uptrend.” We’re not there.

3. Forward growth tracking still looks strong (GDPNow 2026:Q2: 4.3% as of May 21)
   The Atlanta Fed’s GDPNow model sits at 4.3% SAAR for 2026:Q2, updated May 21 (next update May 28). (atlantafed.org)
   Even if GDPNow later moderates, being in the 4s is inconsistent with an economy that is already toppling into recession.

4. Financial conditions/credit remain supportive (NFCI: -0.52; HY OAS: 278 bps)
   With Chicago Fed NFCI at -0.52 (loose) and HY spreads still tight by recent standards, the credit channel is not transmitting stress into the real economy. This is one of the most important “why not recession now?” pillars.

5. Sentiment shock + inflation expectations are the red flag (UMich Sentiment: 44.8; long-run inflation expectations: 3.9%)
   The University of Michigan’s final May 2026 sentiment fell to 44.8 (from 49.8 in April), with commentary explicitly tying weakness to Hormuz-related gasoline price pressures. (sca.isr.umich.edu)
   This matters not because sentiment alone causes recessions, but because it raises the odds of a consumption downshift and—crucially—pressures the Fed to stay restrictive if inflation expectations become unanchored.

6. Energy/inflation tail-risk is active again (oil back near ~$98–$100 on fresh strike headlines)
   Today’s oil narrative is not about one daily print; it’s about renewed volatility and the risk of an inflation impulse that arrives before labor breaks—an ugly mix for “insurance cuts.” Brent was reported rising toward the high-$90s on renewed Iran strike headlines. (ndtvprofit.com)

Category Breakdown

• Primary Indicators: 3 safe / 5 watch / 1 danger
  Mixed but not deteriorating: the “danger” pocket (notably temp help) is real, while the big recession trigger (Sahm) remains safe.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  A small set, but it’s signaling asymmetry—some recession-adjacent indicators look calm while a key cyclical/market proxy is flashing.

• Housing & Construction: 0 safe / 2 watch / 0 danger
  Housing is cooling, not collapsing. Permits and starts are in “monitor” mode—consistent with high rates and affordability drag.

• Business Activity: 2 safe / 1 watch / 0 danger
  Production/profits are still supportive; this reduces near-term recession odds unless labor demand rolls over.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  The household buffer is the weak link: low savings plus rising delinquency risk is a classic late-cycle vulnerability.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are simultaneously calm on volatility/spreads yet stretched on valuation and “macro fear” ratios (e.g., copper/gold). That contradiction is why today’s score is MODERATE rather than LOW.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a hidden fragility story: ON RRP depletion and banking system unrealized losses keep “accident risk” non-trivial.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  Fast data says: no recession now, but watch for inflections (temp help, freight).

Biggest Movers

1. ON RRP Facility ($965M): +5191% (7D) — Contradictory / ambiguous
   Mechanically huge % move from a tiny base. Directionally, RRP depletion can mean cash has migrated elsewhere in money markets; by itself it doesn’t equal stress, but it can reduce a “shock absorber” pool and raise sensitivity to funding volatility.

2. Yield Curve (2s30s) (1.02): -82.9% (7D) — Confirmatory (worsening tail risk)
   A sharp flattening in the long-end spread can reflect growth concerns and/or policy path repricing. It’s not a recession trigger alone, but rapid curve moves often coincide with regime uncertainty.

3. NY Fed Recession Probability (3.5%): +63.9% (7D) — Contradictory in level, confirmatory in direction
   The level remains low (3.5%), but the acceleration is a reminder that recession probabilities can move quickly when rates/growth expectations shift.

4. GDP Growth (QoQ Annualized) (2.0%): +50.0% (7D) — Contradictory (improving)
   A stronger growth print reduces near-term recession odds and reinforces the “still expanding” baseline.

5. Personal Savings Rate (3.6%): +25.0% (7D) — Slightly contradictory (improving), still fragile
   The move is helpful at the margin, but 3.6% remains a thin cushion—a consumption risk amplifier if gasoline/food inflation re-accelerates.

90-Day Indicator Trends

No data available for this window.

(Your provided “90-day” block contains only late-February to mid-March snapshots for many series; it’s insufficient to compute true 30/60/90-day deltas ending May 26. Below is an interpretation of the trends implied by the available history plus today’s readings.)

Labor: stable now, but late-cycle leading signals are soft

• Initial claims stayed tightly anchored in the ~206k–213k range through the history window and sit at 209k today—still consistent with expansion.
• Sahm Rule improved from about 0.30 (late Feb) to 0.13 today, which is the opposite of pre-recession behavior.
• The big exception is Temporary Help Services: it slid from roughly 2480k to ~2447k during the history window and sits 2485k today (still flagged DANGER). Temp help is a classic “first firing” margin; sustained weakness often precedes broader payroll softness.

Growth/production: holding up better than the mood data

• Industrial production ticked up in the history window (about 102.3 → 102.6) and is 102.5 today (SAFE)—mild expansion.
• GDPNow is the standout: 4.3% for Q2 as of May 21. (atlantafed.org)
  That creates a tension: “hard activity” is fine while “soft confidence” is collapsing.

Consumers: psychology is collapsing; finances are tight

• UMich sentiment fell sharply to 44.8 in May, explicitly linked to Hormuz/gasoline disruptions in the survey commentary. (sca.isr.umich.edu)
• Your dashboard shows savings low (3.6%), debt service rising (11.3%), and credit card delinquency elevated (2.9%)—a configuration that can turn a sentiment shock into a spending shock if inflation re-bites.

Credit & financial conditions: supportive, but watch accident risk

• NFCI stayed loose (roughly -0.57 to -0.51 in the history window; -0.52 today).
• HY OAS in the history window wandered around ~294–320 bps; your current 278 bps is even tighter—supportive of risk-taking and refinancing.
• Liquidity “plumbing” is where tail risk lives: ON RRP near depleted and bank unrealized losses remain a potential accelerant if rates jump or deposits wobble.

Markets: calm surface, macro-unease underneath

• VIX fluctuated but remained far from crisis levels; your current 16.8 reads complacent.
• Yet copper/gold is pinned at a DANGER reading (extreme cyclicals pessimism), while equity valuation-to-GDP metrics remain stretched. This is the signature of a market that believes in growth/AI/earnings durability while hedging macro/commodity scarcity risk.

Stock Screener Signals

Today’s quant screen is dominated by “value dividend” names—financials/credit intermediaries (e.g., AIG, ARCC), telecom defensives (T, BCE, TLK), and cyclicals priced for skepticism (BBY, HMC). That basket reads like a market trying to barbell: keep equity exposure, but lean into cash-flow, yield, and low P/E as protection against a growth scare or higher-for-longer policy.

Two flags stand out as “stress positioning tells” rather than pure bargains:

• ARCC (BDC credit) showing up alongside tight HY spreads is consistent with a “credit is still fine” narrative—but it’s also the kind of exposure that can reprice quickly if spreads widen.
• Telecom high yielders (T, BCE, TLK) suggest investors want bond-like equity duration—steady dividends in a world where macro uncertainty is high but outright recession is not the base case.

The “oversold growth” sleeve (CHTR with RSI 28; TLK RSI 30 though labeled oversold growth) indicates selective capitulation in rate-sensitive or leverage-sensitive growth. That’s consistent with today’s macro: not a broad earnings collapse, but a regime where financing cost, inflation risk, and policy uncertainty matter a lot more than last quarter’s revenue print.

Latest Economic Developments

• Consumer sentiment deterioration is now an economic fact, not just a market narrative. The University of Michigan’s final May 2026 release puts sentiment at 44.8, and the survey’s own commentary points to Hormuz supply disruptions lifting gasoline prices as the main driver. (sca.isr.umich.edu)
  For recession risk, the key linkage is: sentiment → spending restraint (especially discretionary) → hiring slowdown. The timing is uncertain, but the direction is unfavorable.

• Labor market data remains a stabilizer. Initial jobless claims at 209,000 (week ending May 16) and continuing claims around 1.78 million point to an economy that is not shedding labor aggressively. (barrons.com)
  This is why the score can fall 13 points over 30 days even while sentiment collapses: layoffs have not shown up.

• GDPNow still signals strong Q2 momentum. The Atlanta Fed’s 4.3% estimate (updated May 21) implies that the “hard data” pipeline feeding Q2 growth has been solid so far; the next update is May 28, which will matter because it coincides with a heavy data cluster. (atlantafed.org)

• Oil headlines are reintroducing inflation tail risk. Reports today describe Brent rebounding toward the high-$90s on renewed strike headlines. (ndtvprofit.com)
  Even if prices don’t spike sustainably, volatility itself can lift inflation expectations and keep the Fed cautious—raising the probability of “higher-for-longer into a slowdown.”

Near-Term Outlook (Next 30 Days)

The next month is about whether soft data contagion reaches hard data.

Base case (score stable-to-lower, ~30–35):

• Claims remain anchored below ~220k and continuing claims stay contained.
• PCE inflation doesn’t re-accelerate materially, allowing “eventual cuts” to remain plausible.
• Spending holds up despite sentiment (households keep buying services, trade down in goods).

Upside risk (score jumps toward ~45–55 quickly):

• Energy feeds into inflation expectations, keeping the Fed on hold (or hawkish), while hiring begins to soften.
• Claims trend breaks above ~230–250k and stays there for several weeks (the difference between noise and regime change).
• Credit spreads widen alongside tighter lending standards, forcing a risk-off impulse.

The focal point is your highlighted May 28–29 cluster (PCE, GDP second estimate, income/spending, durables, claims) because it is the first real chance for the data to either validate the “sentiment is just vibes” thesis or confirm that households are pulling back.

Long-Term Outlook (3-6 Months)

Over a 3–6 month horizon, the macro story is less about current growth (which appears fine) and more about fragility—how quickly the system could deteriorate if two things happen at once:

1. Inflation shock persists (energy + pass-through into core services)
2. Labor cracks (claims drift higher; unemployment rises enough to push Sahm toward 0.50)

That’s the classic late-cycle trap: if inflation is sticky, policy stays restrictive; if policy stays restrictive, the labor market eventually absorbs the hit. What keeps this from being an immediate recession call is the current configuration of loose financial conditions, tight HY spreads, and still-low claims—all of which tend to cushion growth.

Historical parallel (pattern, not prediction): environments where confidence collapses without a labor break can persist longer than expected—until a catalyst arrives (oil spike, credit event, or policy error). Your dashboard’s biggest medium-term vulnerability is that households have low savings and rising servicing burdens; that increases the chance that a renewed inflation impulse produces a sharper consumption slowdown than in cycles with stronger buffers.

What to Watch

Hard thresholds that would move the score quickly:

• Initial claims: sustained move above 230k–250k (especially if paired with rising continuing claims).
• Sahm Rule: acceleration toward 0.50 (requires unemployment to rise quickly relative to its 12-month low).
• HY OAS: a break wider that persists (tight spreads are currently suppressing recession odds).
• Housing: permits/starts sliding from “moderating” into “contracting” (would amplify cyclical risk).

Key dates / releases (next 1–2 weeks):

• May 28, 2026: next GDPNow update (often a big narrative driver when it moves). (atlantafed.org)
• June 12, 2026: next UMich preliminary sentiment release—watch whether the shock is stabilizing or cascading. (sca.isr.umich.edu)
• Ongoing: oil price volatility and any credible signal of sustained disruption through Hormuz (inflation expectations channel).

Sources

• No data available for this window.