Recession Risk 38/100 — May 8, 2026

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

Today’s Recession Risk Score is 38/100 (MODERATE), down 9 points from 30 days ago (47 → 38). The core message is that near-term (90-day) recession triggers are not firing, especially in labor-market real-time data and broad financial conditions. But the “slow-growth” cluster—sentiment, housing forward indicators, and select early-cycle labor internals (temps/quits)—is deteriorating enough to keep downside risk elevated. This remains a slowdown-with-tail-risk setup, not an imminent recession call.

Score Trend — Last 30 Days

The last 30-day window shows a net improvement in recession risk: Start 47 → End 38 (Δ -9), with a min of 34, max of 47, and average of 42 (24 samples). The distribution matters: the score spent meaningful time in the mid-to-high 40s late in April, then mean-reverted lower into early May.

The shape looks non-linear: a late-April risk flare (peaking at 47 on Apr 26 and again on Apr 28) followed by a fast drop back to the high-30s (38 on May 6, 37 on May 7, 38 today). That pattern is consistent with a market/macro mix where liquidity and spreads stay supportive (limiting “break” risk), while growth-sensitive internals keep eroding (preventing a clean all-clear).

Key Drivers

1. Labor-market break risk remains low (claims + Sahm Rule both benign)

   • Initial jobless claims: 200k for the week ending May 2 (reported May 7)—still historically low and inconsistent with recessionary layoff dynamics. (apnews.com)
   • Sahm Rule: 0.20 (SAFE) vs the 0.50 recession trigger. Your unemployment rate has drifted up to 4.3–4.4%, but not in the accelerating pattern typically required to flip the Sahm trigger.

2. Yield curve “normalization” is a near-term recession negative (i.e., reduces odds)

   • Your 2s10s is +49 bps and the curve is positively sloped in the key long-end measures you track—very different from inversion regimes that tend to precede downturns.
   • Your NY Fed recession probability: 5.7% (SAFE) and the broader 3m10y-probit backdrop has clearly eased from earlier peaks in your 90-day history (double-digits in February down to single-digits by mid-March). (Model backdrop and interpretation are consistent with the yield-curve/probit logic used by the NY Fed and similar frameworks.) (clevelandfed.org)

3. Confidence is recession-like even if activity is not

   • UMich consumer sentiment: 53.3 (DANGER)—this is the kind of pessimism that tends to suppress discretionary demand, raise savings intent (even if not realized), and tighten the “animal spirits” channel for small firms and hiring. (UMich’s latest release schedule confirms the May preliminary release timing as of May 8.) (sca.isr.umich.edu)

4. Housing forward indicators have rolled over

   • Building permits: 1,363k (WARNING)—below trend in your framework and down meaningfully versus your 90-day history (e.g., 1448k in late Feb/early Mar to 1376k by mid-March in your series). Permits typically lead starts and residential employment; that’s a classic “slowdown” signal rather than a same-month recession trigger.

5. Business cycle mix: manufacturing output expanding, manufacturing hiring contracting

   • ISM Manufacturing PMI: 52.7 (expansion) but Employment index: 46.4 (contraction) (per your summary). That split often appears late-cycle: firms keep producing but get more cautious on headcount.

6. Financial conditions are supportive, but banking/fiscal stress channels remain “shock amplifiers”

   • HY OAS: 275 bps (SAFE) and Chicago Fed NFCI: -0.52 (SAFE) argue the credit transmission mechanism is not currently breaking.
   • Offsetting: bank unrealized losses ($500B, WARNING) and federal interest expense ($1.219T, WARNING) raise the system’s sensitivity to a rate/liquidity shock even if baseline conditions look calm.

Category Breakdown

• Primary Indicators: 2 safe / 6 watch / 1 danger
  The center of gravity is “watch”: labor is not breaking, but unemployment/quits/income are softening enough to keep the primary composite from clearing.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondary remains mixed, with at least one major “danger” flag suggesting the slowdown narrative is still present beneath headline stability.

• Housing & Construction: 1 safe / 0 watch / 1 danger
  Housing is bifurcated—starts are OK, but forward-looking measures (permits) are flashing deterioration, keeping recession sensitivity elevated.

• Business Activity: 2 safe / 1 watch / 0 danger
  This is the most constructive block: activity is not collapsing, consistent with “muddle-through” growth.

• Consumer Credit Stress: 0 safe / 3 watch / 1 danger
  Stress is rising at the margin (delinquencies/savings cushion/debt service), which matters because consumer spending is the main engine in a late expansion.

• Market Signals: 7 safe / 2 watch / 5 danger
  Markets are sending a split message: indices and spreads look fine, while several valuation/ratio-style flags and growth-sensitive cross-asset signals are risk-positive (i.e., warning).

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a weak spot in your framework—especially as the ON RRP facility is effectively depleted (less “buffer” liquidity parked at the Fed).

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency is not recession-confirming (claims are low), but the presence of a danger flag means you’re still seeing pockets of real-economy softness.

Biggest Movers

Top 5 indicators by absolute 7-day % change (your block), with interpretation:

1. GDP Growth (QoQ annualized): -50.0% (7D)
   Confirmatory (worsening risk). A step-down in growth reduces the margin for error if labor softens or credit tightens.

2. NY Fed Recession Probability: -39.5% (7D)
   Contradictory (improving). A sharp drop in the probability model is consistent with curve normalization and lower near-term recession odds.

3. ON RRP Facility: -64.5% (7D)
   Confirmatory (worsening risk). Less RRP usage can reflect system-level liquidity shifts; in your framework it’s a “warning” because it reduces a convenient liquidity reservoir.

4. Personal Savings Rate: +25.0% (7D)
   Contradictory (improving, with nuance). Higher savings can rebuild household buffer. The nuance: if savings rises because consumption weakens, that can be growth-negative. But purely as “cushion,” it’s risk-reducing.

5. VIX: +15.8% (7D)
   Confirmatory (worsening risk) at the margin—volatility rising from low levels tends to coincide with tighter risk appetite, though 17.4 remains low in absolute terms.

90-Day Indicator Trends

The 90-day window in your data highlights a clear pattern: labor real-time is stable, financial conditions are loose, while cyclical forward indicators (permits, temps, sentiment) and growth proxies have weakened.

Labor & real-time

• Initial claims moved from ~229k (Feb 7) down into the low-200k range (~208–213k across mid-Feb to mid-March in your series), keeping the labor “break” signal firmly off.
• Sahm Rule improved from 0.30 (late Feb / early Mar) to 0.27 by Mar 8–14 in your history, aligning with your current “SAFE 0.20” reading—still far from the 0.50 trigger.

Growth / activity nowcasts

• GDPNow in your history shows a step-down from 3.0% readings at times (late Feb / early Mar entries) to 1.8% for a long stretch (late Feb through mid-March in your series). The Atlanta Fed page confirms an update on May 7, 2026 (mechanically, GDPNow updates as inputs arrive). (atlantafed.org)
• Your GDP growth QoQ SAAR: 2.0% today (WATCH) fits the same “slower but positive” regime—enough to avoid recession mechanics if labor holds, but not enough to absorb shocks easily.

Housing

• Building permits held 1448k through much of late Feb to early Mar, then fell to 1376k by Mar 13–14 (and your “today” reads 1363k). That’s a meaningful 90-day deterioration and one of the cleaner early-cycle slowdowns in your dashboard.

Financial conditions, spreads, and risk appetite

• HY spreads widened from the high-280s to low-310s bps during early-to-mid March in your series, but remained far from stress levels. Your current 275 bps is consistent with “risk-on credit.”
• NFCI stayed negative (loose) throughout the period, drifting from around -0.56 to -0.51 by mid-March—still accommodative.
• Equities in your 90-day series dipped into mid-March (S&P around 6632 on Mar 14 in your history) but your current readings are near highs, reinforcing the “financial conditions not broken” message.

Sentiment & labor internals (leading-ish)

• Consumer sentiment sat at 56.4 through late Feb to mid-March in your history and is now 53.3 (DANGER)—still depressed and worsening versus already-low levels.
• Temporary help services fell from ~2480k to ~2447k by mid-March and remains DANGER today (2475k). Temp help is one of the better early labor signals; the fact that it’s weak while claims are low is the dashboard’s most important “late-cycle tension.”

Stock Screener Signals

Today’s quant flags cluster into two buckets: (1) “value dividend” defensives and (2) “oversold growth” idiosyncratic risk.

The heavy presence of value/dividend names—ARCC, AIG, BBY, FNF, HMC, T, BCE—reads like a market that still wants cash flow, balance-sheet durability, and carry, not pure cyclicality. In macro terms, that’s consistent with a moderating growth regime: investors are willing to own risk (indices near highs; HY spreads tight), but they prefer to be paid while they wait—especially with your dashboard showing consumer stress creeping and housing forward indicators softening.

The oversold-growth flags (CHTR RSI 28, TLK RSI 30) suggest selective drawdowns rather than broad risk-off. That fits the current score: recession probability is not spiking, but dispersion is rising—some business models are getting repriced as refinancing risk, competitive intensity, or slower demand becomes more salient. Net: the screener supports a “late-cycle rotation + dispersion” interpretation more than an “everything breaks” recession tape.

Latest Economic Developments

• Weekly jobless claims (reported Thu, May 7, 2026): Claims rose to 200,000 for the week ending May 2, still extremely low. This is the single most important 48-hour macro update because it speaks directly to recession mechanics (layoffs → income → demand). (apnews.com)
• Atlanta Fed GDPNow: The GDPNow model shows it was updated May 7, 2026, aligning with your current “sub-2%” growth framing (your dashboard reads 1.8%). GDPNow’s high-frequency updates matter because they often capture inflection points before quarterly GDP prints. (atlantafed.org)
• Markets (last 24–48 hours): Broad U.S. equity benchmarks were little-changed to modestly lower around the May 7 session, with commentary emphasizing yields, oil, and geopolitics as the swing variables. (schwab.com)
• Conference Board LEI context: The LEI’s -0.6% decline in March 2026 remains an important forward-looking slowdown marker (and aligns with your “permits/expectations drag” narrative), with the next scheduled LEI release shown as May 22, 2026 for April data. (forexfactory.com)

Near-Term Outlook (Next 30 Days)

Base case for the next month: risk score drifts sideways to slightly lower (mid-30s to low-40s) unless the labor market shows a clear, sustained deterioration. The dashboard is currently configured so that claims + spreads + curve are doing most of the “stabilizing,” while housing + sentiment + temp help + consumer stress are doing most of the “warning.”

Key catalysts over the next 30 days:

• Weekly jobless claims: the market will react more to trend than one print. A sustained move up (e.g., a multi-week climb with a rising 4-week average) would change the story quickly. The latest print (200k) is still far from that. (apnews.com)
• LEI (April 2026) on May 22, 2026: If the LEI continues to post large negatives and diffusion worsens, it will reinforce slowdown risk even if “hard” labor data holds. (investing.com)
• Payrolls (May and June prints): You flagged June 5 and July 2, 2026 releases—these will be the highest-impact macro events for validating whether unemployment drift is a benign normalization or the start of a recessionary climb.
• Rates/curve dynamics: With the curve now positive in your 2s10s measure, watch whether front-end repricing (hawkish) or long-end growth fears (bear steepening vs bull steepening) change the signal mix.

Long-Term Outlook (3-6 Months)

Three to six months out, the macro picture is best summarized as: recession risk is contained, but fragility is rising. Your dashboard shows a “soft landing / late-cycle slowdown” structure where credit is not stressed (HY spreads tight; NFCI loose), yet the economy’s internal cushions are thinner (low savings rate, rising delinquencies, temp help contraction, housing permits rolling over).

What the 90-day trajectory suggests:

• If labor holds: With claims near historic lows and the Sahm Rule far from trigger, the economy can keep expanding at sub-trend pace. In that world, recession risk stays moderate largely because pessimism and forward indicators are weak, not because the real economy is collapsing.
• If labor cracks even modestly: The risk is convex. Late-cycle setups can look stable until they don’t—especially when the dashboard simultaneously shows thin household buffers (low savings) and tightening at the margin in credit standards. A move in unemployment up another 0.2–0.3 pp combined with softer hiring breadth would push several indicators from WATCH to WARNING/DANGER quickly.
• Amplifiers matter: Large bank unrealized losses and high government interest expense are not “timing tools,” but they can turn an ordinary shock into a sharper tightening of financial conditions—particularly if rate volatility rises or funding markets reprice.

What to Watch

Hard thresholds and high-signal checkpoints:

• Initial claims: Watch for a sustained uptrend from ~200k toward the mid-200s and beyond, especially if the 4-week average turns decisively higher (trend > level).
• Sahm Rule: Anything approaching 0.35–0.40 would be an early warning that unemployment acceleration is becoming non-linear, even before the 0.50 trigger.
• Building permits: Continued deterioration below the low-1.3M range would reinforce housing-led slowdown risk.
• Credit spreads: HY OAS moving from the high-200s into a sustained 400+ bps regime would be a meaningful “stress transmission” warning.
• LEI (May 22): Another large negative and worsening diffusion would strengthen the slowdown case.
• Consumer credit stress: Any further rise in delinquencies paired with a falling savings rate would tighten the consumer constraint just as hiring is cooling.

Sources

No data available for this window.