Recession Risk 38/100 — May 6, 2026

Recession Risk Score: 38/100 — MODERATE (-6 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), down 6 points from 30 days ago (44 → 38). The score is falling because the highest-weight recession tripwires—labor deterioration and credit stress—remain unbroken, with claims low and the Sahm Rule still well below trigger. At the same time, the goods/industrial side continues to flash yellow-to-red (temp help contraction, freight weakness) and consumer psychology remains fragile. Net: the next 90 days still look moderate-risk, but the distribution is fat-tailed if inflation re-accelerates and boxes the Fed in.

Score Trend — Last 30 Days

Over the last 30 days (Apr 6 → May 6), the score drifted lower from 44 to 38 (Δ -6) with a min of 34 and max of 49 across 24 samples. The path wasn’t a straight line: the series printed several “risk flare” spikes into the mid-to-high 40s before mean-reverting lower.

The shape looks mean-reverting with episodic stress rather than a sustained acceleration toward recession. In other words: risk is being “released” through improved/steady financial conditions and labor stability, while the cyclicals (freight/temp help) keep tugging the score upward without yet pulling the broader system into a negative feedback loop.

In the last 10 readings, the notable feature is volatility without follow-through (47 → 37 → 38 → 44 → 44 → 46 → 47 → 44 → 47 → 38). That’s consistent with a market and data environment that reacts sharply to each macro print (and geopolitical/inflation headlines), but then resets as the hard-stop indicators (claims/spreads/curve) refuse to confirm recession.

Key Drivers

1. Labor recession triggers remain unbroken (still the biggest anchor on near-term risk).

   • Sahm Rule: 0.20 vs the 0.50 recession trigger (SAFE).
   • Initial claims: ~189K (SAFE), consistent with very low layoff intensity. Recent reporting highlighted claims at/near multi-decade lows. (apnews.com)

2. The yield curve is no longer a classic pre-recession warning (timing tailwind).

   • 2s10s: +0.50 (SAFE) and 2s30s: +0.20 (WATCH).
   • A decisively positive 2s10s reduces the probability of an “imminent” recession signal in the classic playbook, even if it doesn’t eliminate medium-term risk.

3. Credit and broad financial conditions remain easy (no stress transmission yet).

   • HY OAS: 278 bps (SAFE) — still “tight” by risk-off standards.
   • Chicago Fed NFCI: -0.52 (SAFE) — loose conditions continue to cushion growth shocks.

4. Manufacturing is expansionary, but the mix is stagflationary (growth risk via margins + hiring).

   • ISM Manufacturing PMI: 52.7 (expansion) but Employment: 46.4 (contraction) and Prices Paid: 84.6 (surging). (ftportfolios.com)
   • This combination tends to show up when firms can pass through some costs, but protect margins by restraining headcount—often a precursor to broader labor cooling if demand softens.

5. Goods/industrial leading signals are flashing red (the “yellow-to-red” block).

   • Temporary Help Services: 2475K (DANGER) — temp help is historically one of the earliest labor-market “cuts” in downturns.
   • Freight Transportation Index: 1.5 (DANGER) — consistent with a soft goods pipeline and weaker industrial throughput.

6. Consumer fragility is rising through sentiment + low buffer stock.

   • UMich sentiment: 49.8 (April final) vs 53.3 (March) (deteriorating). (investinglive.com)
   • Personal savings rate: 3.6% (WARNING): low cash-flow resilience raises sensitivity to energy/food inflation and rates.

Category Breakdown

Using today’s signal counts:

• Primary Indicators (3 safe / 4 watch / 2 danger): Labor and the curve keep this bucket from tipping, but temp help and other early-cycle labor internals keep it mixed.
• Secondary Indicators (2 safe / 0 watch / 1 danger): Mostly stable, but the “one danger” is enough to keep the composite from moving into a low-risk regime.
• Housing & Construction (1 safe / 0 watch / 1 danger): Starts are holding, but permits/forward activity are softer, implying housing may stop contributing positively at the margin.
• Business Activity (2 safe / 1 watch / 0 danger): The real economy is still “okay,” but the watch signals suggest deceleration risk rather than acceleration.
• Consumer Credit Stress (0 safe / 3 watch / 1 danger): No “all clear” here—delinquencies and debt service are elevated enough to matter if unemployment drifts higher.
• Market Signals (7 safe / 3 watch / 4 danger): Index levels and volatility remain supportive, but valuation/relative-value extremes add fragility.
• Liquidity (0 safe / 1 watch / 2 danger): The liquidity backdrop is no longer improving cleanly—this is a key vulnerability if markets wobble.
• Real-Time / High-Frequency (0 safe / 1 watch / 1 danger): High-frequency data aren’t recessionary, but they are no longer uniformly benign.

Biggest Movers

From the top 5 |7-day % change| movers:

1. ON RRP Facility ($1B): -78.1% (7D) — confirmatory (worsening liquidity risk).
   A rapidly depleting ON RRP balance reduces a ready “buffer” in money markets and can increase sensitivity to bill supply, TGA swings, or funding stress.

2. NY Fed Recession Probability (5.4%): -39.5% (7D) — contradictory (improving).
   A sharp drop here is a strong counter-signal against near-term recession narratives.

3. Copper-to-Gold Ratio (0.00077): -31.9% (7D) — confirmatory (worsening).
   This is a classic “industrial optimism” proxy; a sharp fall aligns with the freight/temp help weakness.

4. Personal Savings Rate (3.6%): +25.0% (7D) — contradictory (improving), but context-dependent.
   Higher saving can mean better household buffers or fear-driven retrenchment. With sentiment depressed, interpret this as “less consumption impulse” until proven otherwise.

5. VIX (18.3): +15.8% (7D) — mildly confirmatory (worsening), but not a stress regime.
   Vol is rising, but the level remains consistent with orderly risk-taking, not panic.

90-Day Indicator Trends

Rates/curve (supportive but drifting):

• 2s10s moved from ~0.74 (Feb 5) to 0.51 (Mar 13) in your history, and stands near +0.50 today. That’s still positive, but the direction of travel is mildly toward a flatter curve—something to watch if growth disappoints or inflation shocks the front end.
• 2s30s eased from ~1.38 (Feb 5) to ~1.22 (Mar 13). The long end is no longer steepening aggressively, consistent with “mid-cycle” rather than “re-acceleration.”

Financial conditions (easy, stable):

• NFCI is tightly range-bound around -0.55 to -0.51 over the observed window—still “loose,” still supportive, and not confirming recession.

Labor (healthy headline, softening internals):

• Initial claims in your 90-day history hover around 206K–213K in Feb–Mar, versus ~189K today (improvement).
• The labor nuance is that JOLTS March showed hiring jumping to 5.55 million while openings were about 6.9 million—a “firming” signal, even as openings are down from prior-cycle peaks. (apnews.com)
• Quits are lower vs the boom years (your quits rate signal sits 1.9% warning), implying reduced worker bargaining power—often a late-expansion/early-cooldown feature.

Growth nowcasts / activity (cooling but not collapsing):

• GDPNow has been choppy but is currently ~1.8% (WATCH), down from prints like 3.0% in parts of Feb. That’s a deceleration story, not a recession story—yet.
• Industrial production (in your history near 102.3) looks stagnant; today’s 101.8 implies slight softening but no sharp downtrend.

Manufacturing inflation impulse (re-accelerating risk):

• The standout 90-day “macro tension” is ISM Prices Paid at 84.6 (April). (ftportfolios.com)
  If that feeds into CPI/PCE prints, the Fed’s reaction function becomes less forgiving—raising the probability of a “growth scare” even if recession doesn’t arrive.

Liquidity (buffer depletion):

• ON RRP in your history oscillated mostly in the low single-digit billions and has printed extremely low readings (sub-$1B at points). That “depletion” isn’t automatically recessionary, but it can amplify market moves when bill supply or funding conditions shift.

Stock Screener Signals

Today’s screener is dominated by “value dividend” flags—$ARCC, $BBY, $FNF, $HMC, $AIG, $BCE, $T—plus oversold growth ($CHTR, $TLK). The macro read-through is that markets are still willing to own risk (indices near highs), but leadership is tilting toward cash-flow and balance-sheet narratives rather than pure growth duration.

Two interpretations matter for recession risk:

1. Defensive carry without full risk-off: High dividend/value clustering often shows up when investors want income + valuation support in case growth cools. That’s consistent with our score: moderate risk, not imminent recession.

2. Selective stress pockets: Oversold signals like $CHTR (RSI 29) suggest stress in rate-sensitive / leverage-sensitive business models—important because recessionary dynamics often start in credit- and leverage-adjacent equities before showing up in unemployment.

One red flag in the screener is data-quality plausibility: the stated yields (e.g., ARCC 992%) look like feed artifacts rather than true dividend yields. Treat the factor classification (value/dividend, oversold) as the signal, not the raw yield numbers.

Latest Economic Developments

Fed: hold, but a fractured committee. The Federal Reserve held the federal funds rate at 3.50%–3.75% on April 29, 2026, with an unusually high number of dissents and debate around “easing bias” language—an important tell that policy is closer to an inflection point than the steady-rate headline suggests. (federalreserve.gov)
Macro implication: if inflation re-accelerates (consistent with ISM manufacturing prices), the Fed may be less able to cushion a growth wobble—raising downside tail risk.

Labor: JOLTS suggests firmness, claims remain very low. March JOLTS showed openings ~6.9M and hires jumping to 5.55M; layoffs/discharges edged up, but the hires surge argues against imminent labor-market rollover. (apnews.com)
Meanwhile, weekly jobless claims around 189K remain consistent with a labor market that is not behaving like pre-recession regimes. (apnews.com)

Services: still expanding, but with price pressure. ISM Services for April printed in expansion (mid-53s), while prices remain elevated (around low-70s on the Prices Paid index). (ismworld.org)
This matters because a recession typically requires services to break; right now, services are slowing at the margin, not contracting.

Sentiment: consumer psychology remains a vulnerability channel. April final UMich sentiment 49.8 (down from March 53.3) keeps the household sector “fragile,” especially with a low savings rate and rising revolving-credit stress. (investinglive.com)

Near-Term Outlook (Next 30 Days)

Base case: moderate risk, slow-growth equilibrium—labor holds, credit stays easy, and the curve remains positive. The score is more likely to fluctuate between the mid-30s and mid-40s than to trend straight to “high risk” unless we see a labor break.

Catalysts most likely to move the score within 30 days:

• Labor inflection evidence: a sustained rise in initial/continuing claims, or an unemployment rate drift that begins to compress the Sahm gap (today: 0.20 vs 0.50).
• Inflation surprise via supply/input costs: ISM manufacturing prices at 84.6 is the kind of upstream signal that can force hawkish repricing if it shows up in CPI/PCE. (ftportfolios.com)
• Liquidity/funding volatility: with ON RRP essentially depleted, short-rate plumbing is more exposed to bill supply/TGA swings than when buffers were large.

Long-Term Outlook (3-6 Months)

The 90-day dashboard points to a two-speed economy: services are still expanding, financial conditions are easy, and labor is not recessionary—yet goods/industrial indicators are persistently weak. That’s a classic setup for rolling slowdowns rather than an immediate synchronized contraction.

The key structural question for the next 3–6 months is whether we get:

• A soft landing extension (goods stays weak but stabilizes, services holds, inflation cools), which would likely push the score toward the low-30s, or
• A policy/inflation-driven growth scare (input costs and energy/geopolitics keep inflation sticky, limiting Fed flexibility), in which case weak goods signals can propagate into hiring, capex, and eventually household delinquency.

Historically, recessions tend to become “locked in” when at least two of three pillars break simultaneously: labor, credit, profits. Right now, the first two are not broken; profits (per your after-tax profits indicator) also remain in the “safe” bucket. That’s why the score remains MODERATE rather than HIGH—even with ugly goods-cycle signals.

What to Watch

Hard thresholds (score-moving tripwires):

• Sahm Rule: watch 0.35 → 0.50 as the danger zone approach; the move from 0.20 to 0.35 can happen quickly if unemployment rises by even a few tenths.
• Initial claims: a regime shift is usually visible when claims stop mean-reverting and begin stair-stepping higher for several weeks.
• HY OAS: a move from ~278 bps to the 350–450+ bps zone would be a major confirmation of stress transmission.

High-signal “tell” indicators:

• Temp help: continued declines here are often the earliest “true” labor warning.
• Freight: look for stabilization rather than further drops; freight rarely bottoms after recession starts.
• ISM Prices vs Employment: if prices stay hot while employment stays sub-50, the stagflation risk rises.

Near-term calendar (next few weeks):

• Monthly labor report(s) (payrolls, unemployment rate) and weekly claims.
• Inflation prints (CPI/PCE) to validate or reject the ISM upstream price shock.
• Fed communications: any shift in the “bias” debate after the unusually dissent-heavy April meeting would be market-moving. (federalreserve.gov)

Sources

No data available for this window.