Recession Risk 38/100 — October 13, 2026

Recession Risk Score: 38/100 — MODERATE (+4 vs 30 days ago)

Today’s Recession Risk Score is 38/100 (MODERATE), up +4 points vs 30 days ago (from 34 on September 13, 2026 to 38 on October 13, 2026). The message is mixed but coherent: real-time labor stress is still absent, yet cyclical forward indicators (goods/housing/temp help) are deteriorating and consumer psychology is flashing downside risk. In short: recession isn’t “here,” but the economy is behaving more late-cycle than soft-landing.

Score Trend — Last 30 Days

The last 30 days show a grind higher in risk from 34 → 38, with a range of 34–44 and an average of 36. The path matters: most readings clustered at 34 or 38, but a single spike to 44 on October 11 signals a market/indicator shock rather than a smooth deterioration.

Interpretation: this is not an accelerating recession cascade—yet. It looks more like stepwise repricing of macro risk: the system repeatedly tries to mean-revert back to mid-30s (healthy expansion), but keeps getting pulled back toward high-30s/low-40s by weak forward indicators (temp help, freight, housing) and fragile sentiment.

Key Drivers

1. Layoffs remain extremely low (supports “no imminent recession”).
   Initial jobless claims are 197k for the week ending Oct 3, 2026, down from 199k the prior week, keeping the 4-week average near ~200k territory—levels typically inconsistent with an economy already contracting. (apnews.com)

2. Sahm Rule is not even close to triggering (major real-time “all clear”).
   The Sahm Rule sits at 0.00 (Sep 2026) versus the classic 0.50 recession trigger. That’s a powerful rebuttal to “recession is already here” narratives, even as hiring cools. (dol.gov)

3. Hiring momentum has slowed sharply (late-cycle warning, not collapse).
   September payrolls printed +29k and the unemployment rate is 4.2%—soft enough to keep recession chatter alive, but not yet the kind of labor-market break that historically drives deep demand destruction. (dol.gov)

4. Consumers are signaling stress and pessimism (spending risk).
   The University of Michigan preliminary October 2026 sentiment reading fell to 46.3—near historical lows and consistent with households acting defensively even if they remain employed. (sca.isr.umich.edu)

5. Yield curve is positive again (reduces near-term recession odds, but can be late-cycle).
   A positive 2s10s spread around +0.44pp typically weakens the “inversion = imminent recession” argument, but steepening after inversion can also happen late-cycle as markets price future easing. (narwhalapi.com)

6. Fed guidance remains hawkish enough to keep policy risk in play.
   September meeting minutes suggest officials still worry inflation could spread and imply another hike later in 2026 even if October is a hold—this keeps downside tails alive for rates-sensitive sectors (housing, credit, smaller firms). (apnews.com)

Category Breakdown

• Primary Indicators: 3 safe / 4 watch / 2 danger
  Net: labor is okay now (claims/Sahm) but breadth is mixed, with forward labor components (e.g., temp help) pressuring the score.

• Secondary Indicators: 2 safe / 0 watch / 1 danger
  Secondaries are not confirming recession today; they’re more consistent with deceleration than contraction.

• Housing & Construction: 0 safe / 1 watch / 1 danger
  Housing remains a weak link: permits/starts softness is the classic “rates lag” channel.

• Business Activity: 2 safe / 1 watch / 0 danger
  Business activity isn’t flashing a cliff; this category is a stabilizer for the overall score.

• Consumer Credit Stress: 1 safe / 3 watch / 0 danger
  Stress is rising at the margin (delinquencies, savings/debt service), but not yet an acute event.

• Market Signals: 6 safe / 3 watch / 5 danger
  Markets are sending a bifurcated message: equities calm / volatility low while several valuation and cyclicality signals are stretched or flashing caution.

• Liquidity: 0 safe / 1 watch / 2 danger
  Liquidity is a “slow burn” risk: the system is more vulnerable to shocks when buffers are thin.

• Real-Time / High-Frequency: 0 safe / 1 watch / 1 danger
  High-frequency data are not screaming recession, but they’re no longer cleanly expansionary either.

Biggest Movers

1. Freight Transportation Index: -533.3% (7D) — Confirmatory (worsening)
   This is an outsized deterioration and aligns with a cooling goods economy and softer industrial demand.

2. Sahm Rule: -142.9% (7D) — Contradictory (improving / less recession risk)
   A drop toward/through zero underscores that the unemployment-rate acceleration trigger is absent.

3. SLOOS Lending Standards: -100.0% (7D) — Contradictory (improving)
   A move toward easier standards reduces near-term credit crunch risk (though SLOOS can be noisy).

4. NY Fed Recession Probability: +54.8% (7D) — Confirmatory (worsening, but context matters)
   The level is still low in absolute terms (today shown at 2.5%), but directionally it’s a nudge toward higher risk.

5. ON RRP Facility: -32.6% (7D) — Confirmatory (worsening liquidity cushion)
   A shrinking RRP balance is consistent with reduced system liquidity backstops versus prior years.

90-Day Indicator Trends

Your provided “90-day history” window contains many series from mid-July through early August 2026; we use those points to establish direction of travel, then anchor to today’s reading (Oct 13) where provided.

Labor market: still sturdy, but cooling at the margin

• Initial jobless claims improved from ~215k (Jul 15) → ~187k (Jul 25) → ~199k (Aug 7–9), and now 197k (Oct 3 week)—still extremely low and not trending higher in a recessionary way. (fred.stlouisfed.org)
• Sahm Rule moved from ~0.07 (mid-July) to -0.03 (Aug 8) and is 0.00 as of Sep 2026—flat-to-down, consistent with no unemployment spike. (dol.gov)
• JOLTS quits rate is pinned around 1.9–2.0% in the history—“cooling labor bargaining power,” but not a crash signal by itself.

Bottom line: the labor picture says deceleration without layoffs—that’s why risk is MODERATE rather than HIGH.

Consumers: sentiment is the red flag; balance sheets are the slow leak

• UMich sentiment rose from 44.8 (mid-July) to 49.5 (early Aug) but remains depressed; the preliminary Oct 2026 reading is 46.3, i.e., still crisis-like. (sca.isr.umich.edu)
• Personal savings rate in the history slipped from 3.0% (mid-July) to 2.7% (early Aug) (danger), while today’s snapshot says 4.1%—an improvement, but still low versus longer-run norms (meaning less buffer if unemployment rises).

Housing: weakening persists (rates-sensitive drag)

• Building permits fell from 1410k (Jul 15) to 1367k (Jul 18) and stayed around ~1374k into early August; today’s reading is 1403k (WATCH)—a modest improvement from the July dip but still not a re-acceleration story.
• Housing starts jumped in the history to 1427k (WATCH) by Jul 18 and persisted there in the excerpt, but today’s reading shows 1275k (WARNING)—a clear downshift versus mid-summer levels.

Financial conditions/credit: not acute, but less forgiving

• Chicago Fed NFCI in the history hovered around -0.55 to -0.53 (easy-ish). Today it’s -0.49, still close to neutral/easy but drifting tighter.
• HY OAS today is ~315 bps (WATCH)—not “stress,” but no longer “priced to perfection.” (markets.akyla.ai)
• ON RRP remains near depletion in your snapshot, which matters because “shock absorbers” are thinner.

Markets: calm surface, stretched internals

• Equity indices are “near highs” in your current snapshot (S&P 500, NASDAQ, DJIA), while some valuation-to-GDP and NASDAQ/GDP measures are elevated/danger. This configuration often coincides with late-cycle complacency rather than early-cycle recovery.

Stock Screener Signals

Today’s quant flags cluster in two buckets: (1) high-yielding “value dividend” names and (2) a couple of “oversold growth” situations with very low RSI. That mix is telling: markets are not positioned for a clean, broad-based cyclical boom—your screen is pulling up cash-flow and carry.

A few takeaways:

• Carry/defensive income bias: Names like ARCC, AIG, T, FNF, BCE screen as value/dividend. In macro terms, that’s consistent with investors wanting income + durability while growth visibility gets murkier (slowing payrolls, weak sentiment).
• Selective risk-on via oversold growth: CHTR (RSI 28) and TLK (RSI 30) suggest pockets of capitulation/mean-reversion opportunity rather than a “buy everything” tape. That’s typical when the index is strong but breadth is uneven: defensives and mega-cap-like exposures hold up; rate/credit-sensitive stories get punished and then screen as oversold.

One important hygiene note for readers: the listed dividend yields (e.g., ARCC 1002%) look like data-field errors rather than economic reality—interpret the screen primarily as factor exposure (value, dividend/carry, oversold) rather than literal yield magnitude.

Latest Economic Developments

• Jobless claims (latest week): The Department of Labor reported initial claims at 197,000 for the week ending October 3, 2026, underscoring that layoffs remain low. (apnews.com)
• Consumer sentiment shock: The University of Michigan’s preliminary October 2026 sentiment index fell to 46.3, one of the weakest prints on record—bad news for discretionary spending impulse if it persists. (sca.isr.umich.edu)
• Fed communications (last several days): Reporting on the September FOMC minutes emphasizes ongoing concern that inflation pressures could broaden; market pricing has leaned toward holding steady at the October 27–28, 2026 meeting, with the “next hike” risk pushed later (e.g., December). (apnews.com)
• Leading indicators: The Conference Board said the LEI fell -0.1% in August 2026 to 99.5, a mild caution flag rather than a collapse. (conference-board.org)

Net: the last 48 hours’ dataflow reinforces the core stance—labor is fine now, confidence is not, and policy uncertainty remains a tail risk.

Near-Term Outlook (Next 30 Days)

Base case for the next month: MODERATE risk holds (roughly mid-to-high 30s) unless we see a clear break in labor-market high-frequency data or a credit/liquidity wobble.

Key catalysts:

• Weekly jobless claims: The most actionable recession “tripwire” remains a sustained move higher in claims. Your framework’s watch level near ~230k makes sense: a persistent break above that zone would raise the odds that weak hiring is turning into layoffs.
• FOMC (Oct 27–28, 2026): With the Fed still signaling inflation vigilance in the minutes, the key is not just the decision (likely hold), but the reaction function—how willing the committee is to risk growth to re-anchor inflation. (federalreserve.gov)
• Next waves of consumer/price data: Given sentiment is already at 46.3, any upside surprise in inflation expectations (within the UMich release) or downside surprise in real spending could tighten financial conditions via the “Fed stays hawkish” channel.

Long-Term Outlook (3-6 Months)

The 90-day trajectory embedded in your tracker points to a familiar late-cycle configuration:

• Real economy: The economy can limp along with slow payroll growth as long as layoffs stay low; that’s consistent with a “stall speed” regime rather than immediate recession. But stall speed is fragile—small shocks (energy, policy, credit events) can tip it.
• Forward cyclical signals: Temp help and freight weakness are historically uncomfortable because they often deteriorate before broader employment does. If those don’t stabilize, the labor market’s “good news” can lag reality by a quarter or two.
• Markets/financial conditions: Elevated valuation-to-GDP style indicators and low volatility can coexist for a long time, but they increase the probability that any macro shock is amplified (positioning + liquidity). That matters because recessions are often catalyzed by tightening financial conditions interacting with a cooling labor market.

History rhyme (not repeat): many pre-recession episodes feature the same sequencing—curve re-steepens, hiring slows, sentiment weakens, credit is “fine”… until it isn’t. The absence of a Sahm trigger today buys time, but it doesn’t eliminate the risk of a 2027 slowdown if layoffs emerge.

What to Watch

Hard thresholds / triggers

• Initial claims: sustained move >230k (watch) and especially >260k (escalation). (fred.stlouisfed.org)
• Sahm Rule: any sustained climb toward 0.50 (recession trigger region).
• HY OAS: regime shift above ~450 bps would be a classic “stress is spreading” signal (especially if equities remain calm).

Event calendar / known catalysts

• FOMC meeting: Oct 27–28, 2026 (statement + press conference dynamics are critical). (federalreserve.gov)
• Next labor releases: watch payroll diffusion (hours worked, temp help, unemployment duration) more than the headline jobs number.

Sources

No data available for this window.