Recession Risk 38/100 — May 28, 2026

Recession Risk Score: 38/100 — MODERATE (-9 vs 30 days ago)

Today’s Recession Risk Score is 38/100, keeping the near-term U.S. outlook in the MODERATE band. The score has fallen by 9 points over the past 30 days (from 47 on April 28, 2026 to 38 today), signaling that the system has shifted away from “imminent stress” and toward a slower-growth but still resilient baseline. The key story remains asymmetry: hard labor-loss triggers haven’t fired, and financial conditions remain loose, but leading labor-quality and goods-economy indicators keep flashing yellow/red. Net: slow growth remains the base case, but downside outcomes remain meaningfully fatter than markets are pricing.

Score Trend — Last 30 Days

The last 30 days show a clear de-risking cycle: the score moved from 47 → 38 (-9), with a max of 47, min of 33, and average of 37 across 24 samples. The shape is best described as mean-reverting lower with intermittent spikes—consistent with a macro environment where financial conditions loosen faster than real-economy leading indicators improve.

In the final 10 readings, risk bottomed at 33 on May 20, then stabilized in the mid-to-high 30s into month-end (closing at 38 today). That “bounce” matters: it suggests the system is not trending cleanly toward “low risk,” but instead stabilizing at a moderate plateau—a typical late-cycle configuration where markets look fine, credit looks fine, but the forward labor/housing/goods complex keeps eroding.

Key Drivers

Here are the most important forces holding the score at MODERATE (not SAFE) despite strong equity levels:

1. Labor trigger still dormant (confirmation absent)

   • Sahm Rule: 0.13 (SAFE) vs 0.50 trigger — far from recession confirmation via unemployment dynamics.
   • Initial Claims: 209K (SAFE) — still consistent with a steady labor market (watching trend more than a single print).

2. Labor-market quality deteriorating (leading edge worsening)

   • Temporary Help Services: 2,485K (DANGER) — historically a high-signal early recession leading indicator, and it remains sharply down in your dashboard.
   • JOLTS Quits Rate: 2.0% (WATCH) — cooling quits implies declining worker confidence and weaker wage pressure ahead.

3. Housing is softening again (rate-sensitivity still biting)

   • Building Permits: 1,442K (WATCH) and Housing Starts: 1,465K (WATCH) — both remain in “slowdown” territory.
   • Mortgage-rate conditions remain restrictive: 30-year fixed ~6.472% (Fortune’s May 28 snapshot). (fortune.com)

4. Goods economy and freight are signaling contraction

   • Freight Transportation Index: 1.5 (DANGER) — consistent with weaker goods demand and inventory caution.

5. Financial conditions and spreads remain supportive (offsetting)

   • Chicago Fed NFCI: -0.52 (SAFE) — still “loose,” reducing the odds of an immediate credit-driven downturn.
   • HY OAS: 272 bps (SAFE) — tight spreads indicate limited near-term credit stress priced by markets.

6. Consumer psychology is recessionary despite asset prices

   • UMich Consumer Sentiment: 49.8 (DANGER) — crisis-level pessimism is a classic “soft data vs hard data” divergence that can become self-fulfilling if it persists.

Category Breakdown

Using the provided signal counts:

• Primary Indicators: 3 safe / 5 watch / 1 danger
  Mixed-to-constructive overall. The big positive is no labor-trigger confirmation; the big negative is that forward labor quality is still eroding.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary data remain mostly supportive, but the one danger signal reinforces the “under the hood” slowdown narrative.

• Housing & Construction: 0 safe / 2 watch / 0 danger
  Housing is not collapsing, but it’s not healing either—permits/starts are soft and remain a key channel for a growth downshift.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity is holding up at the headline level, consistent with “slow growth” rather than contraction.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  The consumer is increasingly the weak link: delinquencies rising and debt service elevated are classic late-cycle stress markers.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are sending a split message: index levels and volatility look benign, but valuation/ratio-based danger signals (e.g., NASDAQ/GDP, copper-gold) warn of fragility if growth disappoints.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is an underappreciated risk amplifier: ON RRP nearly depleted reduces “shock absorber” capacity in money markets.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency signals are mixed but not improving—consistent with a plateau in risk reduction.

Biggest Movers

Top 5 indicators by |7-day % change| (and what they imply for recession risk):

1. ON RRP Facility ($2B): +23996.4% (7D)
   Confirmatory (worsening tail risk). The move reflects a near-depleted baseline whipsawing; the deeper issue is that the facility has been effectively run down, shrinking liquidity buffers even if the 7D % change looks chaotic.

2. SLOOS Lending Standards (8.1%): +88.7% (7D)
   Confirmatory (worsening). Faster tightening in lending standards often leads real activity by quarters, not weeks—this is a medium-term risk builder.

3. Yield Curve (2s30s) (1.02): -83.5% (7D)
   Contradictory / mixed. Curve dynamics are noisy week-to-week; a rapid change can reflect shifting expectations for policy and growth. A steep curve can be late-cycle “Fed-cut anticipation,” but the weekly move alone isn’t decisive.

4. GDP Growth (QoQ ann., 2.0%): -50.0% (7D)
   Confirmatory (worsening). A sharp downshift in the growth impulse is consistent with the “slow growth + downside tails” regime.

5. Personal Savings Rate (3.6%): +25.0% (7D)
   Contradictory (improving marginally), but still fragile. Even after the jump, 3.6% is a low cushion, and the consumer remains exposed to job-loss shocks.

90-Day Indicator Trends

Your 90-day history (as provided) shows a macro regime that is stable in the coincident data but deteriorating in key leading components:

• Labor (hard data): steady; labor (quality): deteriorating

  • Initial claims stayed tightly range-bound around ~206K–213K in late Feb through mid-March, consistent with today’s 209K SAFE.
  • Unemployment rate edged up from 4.3% → 4.4% (early March), aligning with today’s “WATCH” posture.
  • Temp help fell from about 2,480K → 2,447K in early March (and remains DANGER today at 2,485K in your current reading set—still weak in level/trend terms).
  • Sahm Rule improved from 0.30 (watch) toward 0.27 (safe) in early March, and is 0.13 SAFE today—reinforcing “not close to firing.”

• Housing: permits softened sharply in March

  • Building permits moved from 1,448K to 1,376K around mid-March—a meaningful downshift that matches today’s “WATCH / slowing” interpretation.
  • Starts rose from 1,404K → 1,487K mid-March, but remain “WATCH” today—suggesting activity is choppy rather than recovering.

• Financial conditions: still easy

  • NFCI hovered around -0.56 to -0.51—still loose, consistent with today’s -0.52 SAFE.
  • HY spreads in March drifted from ~298–322 bps; today’s 272 bps is even tighter, an important offset to recession risk.

• Consumer/household resilience: still thin

  • Personal savings rate sat at 3.6% through early/mid-March, briefly showing 4.5% later in the history, but today’s dashboard is back to 3.6% (WARNING)—suggesting the “cushion problem” persists.
  • Debt service ratio sat around 11.3%, still “WATCH”—not crisis levels, but rising sensitivity to job loss.

• Market pricing: complacent indices, fragile internals

  • VIX in the history spiked into the mid-to-high 20s during March, while today sits 17.0 SAFE—implying more complacency now than earlier in the 90-day window.
  • Ratio/valuation danger signals (e.g., NASDAQ/GDP DANGER, Copper/Gold DANGER) remain structurally negative even as index levels stay near highs.

Bottom line from the 90-day lens: hard labor and credit are not breaking, but forward labor quality + housing softness + goods/freight deterioration keep recession odds anchored in MODERATE rather than falling into SAFE.

Stock Screener Signals

Today’s quant screen flags a basket that is overwhelmingly “value dividend” (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) with a couple “oversold growth” names (CHTR, TLK). The macro read: investors (and factor models) are leaning toward cash-flow durability and yield support, consistent with a late-cycle environment where growth is still positive but less reliable.

Two cautionary notes embedded in the screen:

• Several flagged yields are clearly distorted (e.g., ARCC “1002%,” AIG “257%,” BBY “654%”). Treat these as data artifacts (special dividends, trailing calculation quirks, or stale fields), not true payout expectations. Even so, the screen’s directional message stands: dividend/value is being favored.

• CHTR (RSI 28) and TLK (RSI 30) point to selective oversold conditions rather than broad panic. That fits today’s macro: markets are not pricing recession, but there are pockets of stress/rotation consistent with slowing growth and tighter earnings dispersion.

Macro interpretation: this is not a recession screen (you’d expect widespread cyclicals breaking and credit-sensitive equities collapsing). It is a late-cycle positioning screen—income, defensives, and idiosyncratic mean-reversion setups while headline indices stay strong.

Latest Economic Developments

In the past 48 hours, the market narrative has been shaped less by new “hard” U.S. macro prints (beyond scheduled releases) and more by inflation expectations, Fed reaction function risk, and geopolitics.

• PCE / inflation focus (today, May 28, 2026): Markets are centered on the April PCE release scheduled for May 28 (BEA). The BEA’s Personal Income & Outlays calendar confirms May 28, 2026 as the next release date after the March report. (bea.gov)
  Ahead of the print, several market previews point to firm-to-sticky core PCE expectations, keeping “higher for longer” (or even “re-tighten”) conversations alive. (fxstreet.com)

• Financial conditions remain supportive: The combination of tight HY spreads (your dashboard: 272 bps) and loose NFCI (your dashboard: -0.52) implies that even if growth slows, the economy is not yet experiencing the classic “credit event” tightening that typically accelerates recession probability.

• Housing stays constrained by mortgage rates: A widely cited market snapshot shows 30-year fixed near 6.47% on May 28—still restrictive enough to keep permits/starts from cleanly re-accelerating. (fortune.com)

• Geopolitical risk is back in the pricing loop: Commentary in today’s market calendar coverage emphasizes elevated geopolitical risk shaping cross-asset behavior, which matters because energy/inflation shocks are the fastest pathway from “slow growth” to “Fed constrained + recession odds jump.” (xtb.com)

Near-Term Outlook (Next 30 Days)

Base case for the next month: continued slow growth, modest labor cooling, and “two-track” inflation (goods soft / services sticky) keeping the Fed cautious.

Key catalysts and what would move the risk score:

• Labor: weekly claims + June jobs report

  • Watch initial claims for a trend break above ~240K (your own threshold framing is right: trend > one print).
  • BLS Employment Situation: June 5, 2026 is the next major binary node: unemployment rate, full-time vs part-time mix, and temp-help trajectory will matter more than headline payrolls.

• Inflation: April PCE today + May CPI/PCE ahead

  • If core PCE prints hotter than expected and re-accelerates, the “Fed reaction function” tail could push the score into the 40–60 elevated band quickly, even without immediate labor deterioration.

• Housing: permits/starts updates

  • Continued sub-1.5M starts and soft permits would reinforce the “rate-sensitive slowdown” channel.

• Financial conditions: liquidity plumbing

  • With ON RRP effectively depleted, watch for volatility in funding markets (SOFR/OIS spreads, bill demand, bank reserve chatter). A liquidity wobble is the fastest route to a credit spread repricing.

Long-Term Outlook (3-6 Months)

Three-to-six months out, the macro picture is best framed as late-cycle fragility with no immediate recession confirmation:

• The good news: real-time labor triggers (Sahm Rule, claims) remain calm; credit spreads remain tight; financial conditions remain loose. That’s why the score is 38 rather than 55.
• The bad news: the leading edge (temp help, quits, freight, housing momentum, consumer sentiment) continues to erode. This is how recessions usually start—not with claims exploding, but with quality and breadth weakening until a catalyst hits.

Historical parallel (pattern, not prediction): many pre-recession periods show a phase where curves re-steepen after inversion and equities stay buoyant, while labor quality and rate-sensitive sectors soften. That configuration can persist for months—until an external shock (energy/geopolitics), a policy constraint (sticky inflation), or an endogenous tightening (credit event) converts “slow growth” into contraction.

Your 90-day dashboard supports that interpretation: the forward indicators are the problem, and the coincident indicators are the anchor. Unless initial claims and unemployment dynamics deteriorate materially, the most likely path is a grinding, uneven expansion with fat downside tails.

What to Watch

Concrete thresholds and dates that matter:

• Initial Jobless Claims: sustained move >240K, and especially >260K, would be a meaningful regime shift.
• Unemployment rate: a climb beyond 4.5%–4.6% would start to compress the distance to the Sahm trigger (depending on the trailing low).
• Temporary help: any further step-down from today’s depressed level would reinforce recession-leading behavior.
• Housing permits: continued weakness below roughly 1.40M would confirm a renewed housing downshift.
• Credit spreads: HY OAS moving from ~272 bps toward >400 bps would be an early “risk-off” confirmation signal.
• Key dates:
  • May 28, 2026: BEA Personal Income & Outlays (April) / PCE inflation release day. (bea.gov)
  • June 5, 2026: BLS Employment Situation.

Sources

No data available for this window.