Weekly Recession Report — April 5, 2026

Weekly Recession Risk Report — Week of April 5, 2026

Recession risk remains moderate and unevenly distributed across the economy: labor markets and equity prices are still resilient, but several classic late‑cycle leading indicators are flashing yellow-to-red. This week’s big macro message is a familiar one: “strong payrolls, weakening under the hood.” The March employment report showed +178,000 jobs and an unemployment rate of 4.3%, while weekly initial claims stayed low at 202,000—both supportive of continued expansion. (bls.gov) At the same time, the Conference Board LEI is falling, rate-sensitive sectors (housing) are soft, and multiple labor-market “turning point” measures (quits, temp help, manufacturing jobs) suggest cooling momentum rather than re-acceleration.

Primary Indicators (highest signal-to-noise)

1) Labor market: still expanding, but clearly late-cycle

Unemployment rate (WATCH): 4.3% — “ticking up,” consistent with a late-cycle drift higher. This week’s March BLS report held the rate at 4.3% while payrolls rose +178k. (bls.gov)
Initial jobless claims (SAFE): 202K — low and stable; layoffs remain contained. (apnews.com)
JOLTS quits rate (WARNING): 1.9% — quits are a high-quality confidence gauge; a sub‑2% quits rate tends to coincide with slower wage churn and weaker worker bargaining power.
Temporary help services (DANGER): 2,475K — temp employment is one of the best early labor-cycle indicators; a “sharp decline” here is consistent with businesses quietly trimming labor demand before broader layoffs show up.

Interpretation: The headline jobs market remains healthy, but the composition of labor indicators is more consistent with a slowdown than a renewed expansionary impulse. The recession “trigger” metrics (Sahm Rule) are not close, but the probability distribution is widening: outcomes range from soft landing to growth scare.

2) Output and income: expansion, but below-trend

Industrial Production (SAFE): 102.6 — expanding, supportive of ongoing growth.
Real personal income ex transfers (WATCH): $16.7T — stable but should be monitored; this is a crucial “real economy” backstop for consumption.

Interpretation: Production is still on the right side of zero, but the economy appears to be running below trend—consistent with your other “WATCH” growth indicators (GDPNow and QoQ GDP).

3) Composite leading indicators: recession signal remains active

Conference Board LEI (WARNING/DANGER): -0.3 — with your “3Ds Rule TRIGGERED,” this is the cleanest leading warning in your dashboard. The Conference Board’s March technical notes confirm continued LEI deterioration over the recent window, consistent with soft forward momentum. (conference-board.org)

Interpretation: When equities are near highs but LEI is sliding, the usual macro setup is: markets are pricing a benign path (or cuts), while leading data warn that growth is decelerating.

Secondary Indicators (cycle confirmation, breadth, sector stress)

1) Household balance sheet: rising strain at the margin

Household Debt Service Ratio (WATCH): 11.3% — “moderate, rising,” consistent with the late-cycle pattern where households absorb higher servicing costs and delinquencies follow.
Credit card delinquency rate (WATCH): 2.9% — elevated and rising; this is a distributional stress signal (lower-income households and revolving-credit users first).
Personal savings rate (WATCH): 4.5% — below average; suggests less buffer if employment conditions soften.

Interpretation: The consumer is still spending, but resilience is thinning. In a world where unemployment drifts higher, these household metrics can worsen quickly.

2) Housing: rate-sensitive slowdown remains in place

Building permits (WARNING): 1,386K — below trend.
Housing starts (WATCH): 1,487K — moderate but slowing.

Interpretation: Housing is not collapsing, but it’s not providing the traditional “early-cycle lift” either. That keeps the economy more dependent on services/consumption—and therefore more exposed if labor market momentum turns.

3) Business conditions and hiring: tight but not breaking

NFIB optimism (WATCH): 97.4 — slightly below average; consistent with cautious small business sentiment.
SLOOS lending standards (WATCH): net 10% tightening — modest tightening; not a credit crunch, but directionally restrictive.

Interpretation: Credit conditions aren’t signaling imminent recession on their own, but they’re not easing enough to offset other drags (late-cycle labor cooling + housing softness).

Liquidity & Policy Indicators (plumbing, credit creation, fiscal constraints)

1) Fed stance: “on hold,” but the curve is doing the talking

Fed funds (SAFE): 3.6% — consistent with policy being less restrictive than in 2024–2025.
This week’s macro context remains shaped by the March FOMC hold (target range held steady at 3.50%–3.75%). (federalreserve.gov)
Yield curve (2s10s) (SAFE): +0.52 — normalized.
Yield curve (2s30s) (WATCH): +1.09 — steepening can be benign (term premium) or a warning if markets are anticipating Fed cuts due to weakening growth.

Interpretation: The curve normalization reduces “inversion panic,” but the steepening at the long end should be monitored. In late-cycle episodes, steepening sometimes happens because growth is rolling over and the market begins pricing easing.

2) Money and system liquidity: watch the marginal dollar

M2 money supply (WATCH): $22.7T — your callout (“monitor YoY growth rate”) is key; the direction of broad money growth matters more than the level for near-term demand momentum.
ON RRP facility (WARNING): $80B, ~97% depleted — a near-depleted RRP often indicates that the prior stockpile of money-market cash has been drawn down, shifting the system toward tighter marginal liquidity.
- Recent Fed balance sheet releases show RRP usage has been much higher earlier in March (hundreds of billions). (federalreserve.gov) The downshift toward low levels aligns with your $80B reading: the “easy buffer” is mostly gone.

Interpretation: A low RRP balance is not automatically recessionary, but it can make markets more sensitive to funding shocks and Treasury cash needs—especially with heavy issuance.

3) Banking system duration risk: still a vulnerability channel

Bank unrealized losses (WARNING): ~$500B (HTM) — “vulnerable to liquidity shock.”
The latest FDIC quarterly profile indicates unrealized losses have come down from prior peaks (to about $306B as of Q4 2025), but they remain material and can re-emerge with rate volatility or deposit stress. (fdic.gov)

Interpretation: Even if your $500B estimate is intentionally conservative/stress-based (HTM focus), the core message is right: the system remains duration-sensitive, and liquidity events—not just credit events—are the key tail risk.

4) Fiscal space: a structural headwind, not a timing tool—but it matters

Total U.S. national debt (DANGER): $38.5T
Debt-to-GDP (WARNING): 122%
Interest expense (WARNING): ~$950B/yr — approaching $1T.

Interpretation: Fiscal constraints are more of a regime variable than a short-term recession timing indicator. But they do raise the probability that the next downturn features harder tradeoffs (less countercyclical room, more term premium risk), which can feed back into financial conditions.

Market Indicators (risk appetite vs. macro reality)

1) Equities: near highs, valuations mixed-to-rich

Dow 46,505 / S&P 6,583 / NASDAQ 21,879 (SAFE) — risk assets are still priced for continuation.
Valuation metrics:
- S&P P/E 22x (WATCH) — above long-run average.
- NASDAQ P/E 30x (WATCH) and NASDAQ/GDP 0.6958 (WARNING) — “frothy” tech conditions.
- Dow P/E 18x (SAFE) — more reasonable.
- S&P 500 / GDP 0.200 (WATCH) — above average.

Interpretation: This is a classic late-cycle posture: markets stable, volatility low, but valuations leave less room for disappointment if growth slows further.

2) Credit: not flashing panic, but not “all clear”

HY OAS 320 bps (WATCH) — elevated vs. easy-money conditions; consistent with investors demanding some compensation for late-cycle risk.
Chicago Fed NFCI -0.43 (WATCH) — near normal, indicating broad financial conditions aren’t tight.

Interpretation: Credit is cautious, not distressed. That typically implies recession isn’t imminent—but also that the market is not fully buying the “no-landing” story.

3) Commodities and risk ratios: the loudest warning on your board

Copper-to-gold ratio (DANGER): 0.00077 — 50-year low
Gold-to-silver ratio (WARNING): 85 — elevated fear / defensive positioning.
DXY 120.9 (SAFE) — stable-to-strong dollar can be a headwind for global liquidity and U.S. manufacturing margins at the margin.
Freight Transportation Index (DANGER): -0.6 — goods economy weakening.

Interpretation: The copper/gold and freight signals are screaming industrial caution. When cyclicals (freight, copper) weaken while equities hold up, the “resolution” often comes via either:

cyclicals recover (soft landing), or
equities reprice to slower growth (growth scare / recession risk repricing).

Right now, the balance of indicators leans toward (2) being more likely than markets imply.

Conclusion & Outlook (next 4–12 weeks)

Current recession risk: Moderate (tilted higher than markets). The labor market’s headline metrics (payrolls, claims, unemployment) are still expansionary, and the Sahm Rule remains safe at 0.20. (bls.gov) However, the “early warning stack” is getting heavier: LEI deterioration, temp help contraction, quits weakness, housing permits below trend, and goods-side stress (freight, copper/gold) are consistent with a late-cycle slowdown that could become recessionary if hiring demand cracks or a liquidity/funding shock hits.

What to watch next week (most actionable):

Labor-market breadth: temp help, quits/hiring indicators, and whether unemployment continues to drift higher from 4.3%. (bls.gov)
Financial plumbing: RRP near depletion and signs of funding-market sensitivity (especially around Treasury supply). (federalreserve.gov)
Leading indicators: whether LEI continues to print negative and whether housing permits stabilize. (conference-board.org)
Credit spreads: HY OAS direction (320 bps is “watch,” but a sustained move wider would be a meaningful regime shift).

Base case: Below-trend growth with rising dispersion (soft-landing feel on the surface, late-cycle stress underneath).
Upside: goods/industrial rebound + stabilization in temp employment + steady income growth.
Downside: an acceleration in labor cooling (especially services), renewed banking/liquidity stress, or a sharp tightening in credit spreads that forces corporate retrenchment.

If you want, I can convert this into RecessionPulse’s usual “scoreboard” table (SAFE/WATCH/WARNING/DANGER by category) and assign an overall composite recession-risk score for the week.