Recession Risk 38/100 — September 4, 2026
US recession risk over the next 90 days is MODERATE, driven by weakening labor-market leading indicators (notably temporary-help employment declines) and pockets of household stress, but held down by a non-triggered Sahm Rule, still-low jobless claims, and easy financial conditions. The Sahm Rule remains well below the 0.50 trigger (RecessionPulse shows -0.03), indicating the unemployment-rate upshift is not yet recessionary. The yield curve is now positively sloped (2s10s about +43 bps on Sep 3, 2026), which historically reduces near-term recession odds even if it follows a prior inversion. Growth nowcasts are not signaling contraction: Atlanta Fed GDPNow is a strong 4.7% for 2026Q3 as of Sep 3, while the NY Fed Staff Nowcast is 2.2% for 2026Q3, implying continued (if uneven) expansion.
Recession Risk Score: 38/100 — MODERATE (+0 vs 30 days ago)
Today’s Recession Risk Score is 38/100 (MODERATE), unchanged versus 30 days ago. The dashboard is sending a clear “mixed but contained” message: labor-market leading indicators are deteriorating, while financial conditions and key coincident labor prints remain supportive. The result is a risk profile that is not benign, but also not accelerating toward a near-term recession call. The single most important anchor remains the non-triggered Sahm Rule (-0.03 vs 0.50 trigger), which keeps the next-90-day recession odds capped even as pockets of stress widen.
Score Trend — Last 30 Days
Over the last 30 days (2026-08-05 → 2026-09-04), the score started at 38 and ended at 38 (Δ: +0). The range was meaningful—min 34, max 42—with an average of 36 across 31 samples, indicating the system has been volatile within a band rather than trending.
The shape is best described as mean-reverting with event-driven spikes. The score repeatedly dipped to 34 late in the window (including 2026-08-29 and 2026-08-31 through 2026-09-03), then snapped back to 38 on 2026-09-04. That pattern implies risk is not compounding, but it is also not clearing—the macro regime looks like a tight range where small shocks (claims, rates repricing, credit stress) can temporarily lift risk, yet the broader system keeps pulling the signal back toward “moderate expansion.”
Key Drivers
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Sahm Rule remains safely untriggered
- Today: -0.03 vs 0.50 trigger (SAFE).
- This is the model’s strongest “recession-not-imminent” input: unemployment has not shifted upward enough, for long enough, to qualify as a recessionary break under Sahm dynamics.
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Yield curve is positively sloped (2s10s) and historically de-risks the near term
- 2s10s = +0.43 (≈ +43 bps on 2026-09-03) (WATCH). (alfred.stlouisfed.org)
- A re-steepened curve reduces the classic inversion-based recession signal—especially for next 1–2 quarters—even if the steepening follows a prior inversion (which can still matter for the 6–18 month window).
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Labor market: layoffs remain low in weekly data, even as leading indicators soften
- Initial jobless claims: 206k for week ended 2026-08-29 (SAFE). (apnews.com)
- That level is inconsistent with an economy already rolling into recession. However, your dashboard also flags Temporary Help Services at 2,505K (DANGER)—a classic early-cycle labor warning that often moves ahead of broader payroll deterioration.
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Financial conditions remain easy, limiting recession feedback loops
- Chicago Fed NFCI: -0.56 (SAFE), signaling loose conditions. (recessionpulse.com)
- HY OAS: ~266 bps (SAFE)—tight spreads indicate credit markets are not pricing acute default risk. (convextrade.com)
- Easy conditions reduce the probability of a fast spiral (tightening credit → layoffs → delinquencies → tighter credit).
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Growth nowcasts point to expansion, not contraction
- Atlanta Fed GDPNow (2026Q3): 4.7% as of 2026-09-03. (atlantafed.org)
- NY Fed Staff Nowcast (2026Q3): 2.2%. (newyorkfed.org)
- The spread between the two suggests uncertainty about composition and momentum, but both are positive, which is inconsistent with a near-term recession baseline.
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Household stress is creeping up (but not yet systemically destabilizing)
- Personal savings rate: 3.0% (WARNING) and credit-card delinquency: 2.9% (WATCH) (elevated stress).
- This mix often shows up in late-cycle expansions: consumption can hold up, but fragility rises—making the economy more sensitive to shocks (gas/food inflation surprises, job loss, or rate repricing).
Category Breakdown
Using your CATEGORY BREAKDOWN counts:
- Primary Indicators (3 safe / 4 watch / 2 danger): The core macro picture is balanced but not clean—enough “watch/danger” to justify MODERATE risk, yet still anchored by key non-recession confirmations (Sahm not triggered, claims low).
- Secondary Indicators (2 safe / 0 watch / 1 danger): Secondary signals are not flashing broad contraction; the danger pocket looks idiosyncratic rather than pervasive.
- Housing & Construction (0 safe / 1 watch / 1 danger): Housing remains a weak spot—starts and permits softness suggests higher rates are still biting, and this sector is often an early cyclical drag.
- Business Activity (2 safe / 1 watch / 0 danger): Business activity is holding together, consistent with positive nowcasts and firm profits.
- Consumer Credit Stress (1 safe / 2 watch / 1 danger): This is a slow-burn risk bucket: delinquencies + low savings can worsen nonlinearly if unemployment rises even modestly.
- Market Signals (6 safe / 3 watch / 5 danger): Markets are sending a split message—low VIX and high equity levels say “risk-on,” while valuation and macro-ratio dangers (e.g., equity-to-GDP, copper/gold) say “late-cycle and fragile.”
- Liquidity (0 safe / 1 watch / 2 danger): Liquidity is increasingly a constraint—most notably the near-depleted RRP is a sign the cash “shock absorber” is largely gone.
- Real-Time / High-Frequency (0 safe / 1 watch / 1 danger): High-frequency activity is softening at the margins; not a recession call by itself, but it raises sensitivity to downside surprises.
Biggest Movers
Top 5 by absolute 7-day % change (from your BIGGEST MOVERS block):
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ON RRP Facility ($702M): +680.4% (7D)
- Interpretation: Confirmatory (worsening risk). Even if the level is low, the volatility and “near depletion” regime signals the liquidity backdrop is less buffered; small funding stresses can transmit faster.
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NY Fed Recession Probability (0.9%): +43.7% (7D)
- Interpretation: Confirmatory (worsening risk). The percentage change is large because the level is low, but directionally it aligns with “moderate but rising” caution.
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Yield Curve (2s10s) (0.43): -21.1% (7D)
- Interpretation: Potentially confirmatory (worsening risk) in the very near term. A decline in steepness can reflect either front-end repricing (policy expectations) or long-end growth/inflation fears. Net: it’s not inversion, but it’s a reminder the curve can re-flatten quickly.
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Housing Starts (1239K): -19.7% (7D)
- Interpretation: Confirmatory (worsening risk). Housing is one of the most interest-rate-sensitive cyclical channels; sharp moves down often foreshadow broader softness in durables and construction employment.
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Yield Curve (2s30s) (0.88): -11.4% (7D)
- Interpretation: Mildly confirmatory (worsening risk). The long-end relative to the front-end can compress if term premium shifts or growth expectations soften.
90-Day Indicator Trends
Your “90-day history” window here is effectively June 6 → June 25, 2026 for many series (a partial 90-day snapshot). Using what’s provided, the direction-of-travel is still informative:
Labor market & recession triggers
- Sahm Rule: 0.10 → 0.10 (flat in the provided window), and today is -0.03 (even safer). This points to no sustained unemployment shock developing.
- Initial claims: 225k (2026-06-06) → 226k (2026-06-25) (flat-to-slightly higher), while today is 206k—meaning claims have improved meaningfully versus late June even if they’ve ticked around week-to-week. (apnews.com)
- Net: the claims channel is not confirming recession risk.
Financial conditions & credit
- Chicago Fed NFCI: moved from roughly -0.49 to -0.52 in June (looser), and today remains very loose at -0.56. (recessionpulse.com)
- Net: conditions have eased, which is typically growth-supportive.
- HY OAS (credit spreads): June range ~263–280 bps, and today ~266 bps—still tight. (convextrade.com)
- Net: credit is not signaling stress.
Growth & production
- Industrial production index: ~102.5 → ~102.6 (slight improvement in June), while today is 103.0 (SAFE).
- Net: production is expanding, not contracting.
Housing
- Housing starts: sharp step-down in the June sample (1465K → 1177K). Today: 1239K (WARNING).
- Net: housing is weak and not fully recovering, which is one of the more recession-relevant pockets in today’s mix.
Markets & risk appetite
- VIX: June oscillated up to ~22 before settling back below 20; today 15.2 (SAFE) indicates renewed complacency.
- Equities: S&P 500 and Nasdaq were already high in June; today they are near highs—supportive for confidence, but paired with valuation “danger” flags (e.g., NASDAQ/GDP).
Bottom line from the trend set: the macro core (claims, Sahm, NFCI, spreads, output) looks stable-to-supportive, while housing and leading labor (temp help) remain the key cyclical soft spots.
Stock Screener Signals
Today’s quant flags are dominated by “value dividend” profiles (ARCC, AIG, BBY, FNF, HMC, T, LTM, BCE) with a smaller pocket of “oversold growth” (CHTR, TLK). That blend is consistent with a market that is not positioning for imminent recession, but is increasingly selective and cash-flow focused—a typical late-cycle behavior when investors want carry (dividends/credit-like equity) without paying peak multiples.
Two implications stand out:
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Defensive carry and balance-sheet preference: Names like AIG and T (and BDC-style carry like ARCC) often screen when investors are prioritizing income + valuation support over long-duration growth narratives. That aligns with your macro mix: easy conditions and tight spreads can keep carry trades working even while leading labor indicators soften.
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Oversold growth is targeted, not broad: CHTR (RSI 28) and TLK (RSI 30) suggest pockets of mean-reversion interest rather than a blanket “buy-the-dip.” That’s consistent with a “moderate risk” regime: investors still take risk, but they do it surgically, not euphorically.
One note: several reported dividend yields in the screener (triple-digit %) look like data artifacts rather than investable cash yields; treat the signal (value + income tilt) as the main takeaway, not the literal yield print.
Latest Economic Developments
Fed policy expectations are in flux heading into mid-September. Over the past 48 hours, reporting highlighted that some Fed officials have pushed back on expectations of an imminent rate hike, pointing to recent inflation improvement and emphasizing upcoming data dependence—particularly the next inflation print. (axios.com)
Labor market remains firm in the weekly data. The latest weekly claims print came in at 206,000 for the week ending Aug 29, 2026, still historically low and inconsistent with a fast deterioration in employment demand. (apnews.com)
Growth tracking remains positive and, in one model, notably strong. The Atlanta Fed’s GDPNow estimate for 2026Q3 was 4.7% on Sep 3, 2026 (slightly down from 4.8% earlier in the week), reinforcing that the “hard-growth” baseline remains expansionary. (atlantafed.org) The NY Fed Staff Nowcast is 2.2% for 2026Q3, also expansionary. (newyorkfed.org)
Leading indicators improved at the margin. The Conference Board LEI edged up 0.2% in July 2026 after a small June decline, consistent with “slow growth” rather than “rolling recession.” (conference-board.org)
Near-Term Outlook (Next 30 Days)
The next month is about whether soft leading indicators finally infect the coincident data. In practical terms, there are three near-term pivot tests:
- Claims trend break: Claims at ~206k are fine; what would matter is a sustained move above the low-200s that keeps climbing week after week (trend > level).
- Unemployment/Sahm acceleration: Your Sahm reading is -0.03; a fast move upward toward 0.30+ would change the tone quickly even before any trigger event.
- Credit + liquidity regime change: Tight HY spreads and loose NFCI are doing heavy lifting to keep risk moderate. Any material widening in HY OAS or signs of broader funding stress would be the cleanest mechanism to push the score higher.
Key scheduled catalysts to watch:
- Aug CPI release: September 11, 2026 (high stakes for September Fed pricing; also explicitly referenced in recent Fed commentary). (apnews.com)
- FOMC decision: September 16, 2026 (the meeting markets are actively debating). (axios.com)
Long-Term Outlook (3-6 Months)
The 3–6 month macro picture still looks like a late-cycle expansion with rising fragility rather than a recession already “locked in.” The supportive pillars—positive yield curve, loose NFCI, tight HY spreads, and positive GDP nowcasts—tend to prevent near-term recessions unless the labor market turns decisively. (alfred.stlouisfed.org)
But the underlying vulnerabilities are visible:
- Labor-market leading deterioration (temp help, quits): Temporary help in “danger” and quits at 1.9% (WARNING) indicate a cooling labor market beneath the surface. If firms shift from “reduced hiring” to “active layoffs,” recession odds rise quickly.
- Household buffer thin: A ~3% savings rate paired with elevated revolving-credit stress is the classic setup for a consumption slowdown once job security feels less certain.
- Valuation and macro-price signals look late-cycle: Your dashboard’s market “danger” flags (e.g., equity-to-GDP ratios, copper/gold) suggest the risk is not a recession today, but a higher sensitivity to shocks.
Historical parallel: many pre-recession periods look like this right before the break—credit stays calm and equities stay bid until labor rolls. In that framework, the labor market remains the decisive swing variable for the next 3–6 months.
What to Watch
Hard thresholds and “tell” indicators:
- Sahm Rule: watch for sustained move toward 0.30, then 0.50 trigger (the regime-change level).
- Initial claims: watch for a sustained uptrend that holds above ~230k–250k for several weeks (trend confirmation).
- HY OAS: today ~266 bps; watch for a decisive move >350 bps (risk repricing) and especially >450 bps (stress regime). (convextrade.com)
- Chicago Fed NFCI: today -0.56; watch for a move back toward 0.0 (tightening toward neutral) as an early warning of transmission into real activity. (recessionpulse.com)
- Housing: continued deterioration in starts and permits would raise the probability that weakness leaks into broader employment.
- Policy catalysts: CPI (Sep 11) and FOMC (Sep 16) are the two scheduled events most likely to shift the path of rates and financial conditions. (apnews.com)