Weekly Recession Risk Report — Week of May 24, 2026

This week’s dashboard still reads like a “two-economy” story: financial conditions and equity markets are benign-to-bullish, while several labor-market leading indicators (temporary help), goods-cycle signals (freight), and household buffers (savings, delinquencies) look late-cycle fragile. The biggest macro development was the University of Michigan’s final May consumer sentiment collapsing to 44.8, a fresh cycle low and near the historic troughs of the series—an extreme warning flag even if it hasn’t yet translated into broad-based retrenchment in “hard” spending data. (sca.isr.umich.edu)
Net: near-term recession risk remains “moderate,” not imminent—because claims, profits, and broad financial conditions remain supportive—but the leading edge is deteriorating, and the economy looks more vulnerable to a negative shock than markets are pricing.

Primary Indicators (highest signal-to-noise)

Industrial Production (SAFE): 102.5 — Expanding

Your SAFE reading implies the factory base is still expanding on balance. That aligns with the broader picture of growth slowing but not collapsing.

RecessionPulse take: Industrial production is a coincident-to-slightly-leading signal. As long as production is expanding, it typically buffers recession risk—but production can roll over quickly if labor demand weakens further and consumer demand slips.

Labor Market “Trigger” Indicators

Sahm Rule (SAFE): 0.13 — Well below trigger

At 0.13, the Sahm Rule remains far from recession-trigger territory. This is consistent with the still-contained unemployment backdrop. (Your unemployment rate: 4.3%, WATCH.)

SOS Recession Indicator (SAFE): 1.20 — Low insured unemployment

Low insured unemployment (and your Initial Claims at 209K) indicates the U.S. still sits in a low-layoff regime.

What the week’s data/news say:

Initial jobless claims at 209,000 (week ending May 16, 2026) signals ongoing employer reluctance to lay off workers, even as hiring slows. (datatrack.trendforce.com)

RecessionPulse take: These “trigger” indicators argue against an immediate recession call. If recession risk is rising, it’s coming through slower hiring / longer job searches rather than mass layoffs—consistent with the broader “low-hire, low-quit” regime.

Temporary Help Services (DANGER): 2,485K — Sharp decline (classic leading signal)

This remains one of the most important warnings on your entire board. Temp help is often the first margin companies cut when demand uncertainty rises.

RecessionPulse take: In prior cycles, temp help weakness frequently shows up before the unemployment rate jumps. With U-3 at 4.3% and initial claims still low, temp help is effectively your dashboard’s “canary.”

Unemployment Rate (WATCH): 4.3% — Ticking up

The April 2026 Employment Situation held unemployment at 4.3% with payrolls up 115,000—not recessionary, but softer than expansionary “boom” conditions. (bls.gov)

RecessionPulse take: Watch for a scenario where unemployment rises without a spike in initial claims (i.e., weak hiring rather than layoffs). That tends to feel worse than it looks in headline labor data.

Secondary Indicators (confirmation, breadth, and cycle mechanics)

JOLTS Quits Rate (WATCH): 2.0% — Moderating

The BLS “latest numbers” show quits at 2.0% (preliminary) for March 2026, consistent with cooling worker confidence and reduced job-to-job churn. (bls.gov)

Interpretation: Lower quits typically means less wage pressure and lower labor-market dynamism—a late-cycle characteristic.

Real Personal Income ex Transfers (WATCH): $16.7T

With income growth marked WATCH, the key issue is whether real incomes can keep pace with essentials inflation (especially energy). The week’s most important macro “vibe shift” came from sentiment (below), which often deteriorates when households sense real purchasing power pressure.

Consumer Sentiment (DANGER): 49.8 — Crisis-level pessimism

Your dashboard uses 49.8; note the final May 2026 University of Michigan sentiment printed 44.8 (down from 49.8 in April 2026), with the survey explicitly tying the decline to gasoline-price pressure and supply disruptions around the Strait of Hormuz. (sca.isr.umich.edu)

Why it matters even if “soft data”:

At these levels, sentiment is flashing a high-probability consumption risk if households tighten discretionary spending.
It also increases the chance of a policy constraint: if inflation expectations rise alongside collapsing sentiment, the Fed can’t easily “rescue” growth.

Housing (WATCH): Permits 1,442K / Starts 1,465K — Moderate, slowing

This remains a typical late-cycle slowdown signal. Housing tends to lead the economy; moderation here is consistent with your “GDP slowing” reads.

Conference Board LEI (SAFE): 1.7 — Positive

The latest Conference Board release shows the U.S. LEI rose 0.1% in April 2026 to 97.4, after a 0.6% decline in March. Over the last six months (Oct 2025–Apr 2026) the LEI fell 0.7%. (prnewswire.com)

RecessionPulse take: LEI is not screaming recession today, but it’s consistent with a fragile forward path: positive month-to-month, negative medium-term trend.

Liquidity & Credit (policy stance + plumbing)

Fed Funds Rate (SAFE): 3.6% — Accommodative

Your “accommodative” label fits the idea that policy is no longer tight relative to peak-cycle conditions. The most recent widely-reported policy stance has the Fed holding the target range around the mid-3% area (3.5%–3.75%) in recent meetings. (kiplinger.com)

RecessionPulse take: The Fed is a potential stabilizer if growth weakens—but sentiment-driven inflation expectations (and energy-driven headline inflation) can limit how quickly it can ease.

Chicago Fed NFCI (SAFE): -0.52 — Loose conditions

Loose financial conditions remain a strong “not yet” recession message in your framework, and they also help explain the resilience in risk assets. (recessionpulse.com)

Money & Liquidity

M2 (WATCH): $22.7T — monitor YoY momentum
ON RRP (WARNING): $965M — essentially depleted

RecessionPulse take: RRP depletion tends to indicate excess liquidity has been absorbed and the marginal cushion is thinner than it was when RRP was large. It doesn’t cause a recession by itself, but it can make markets more sensitive to funding stress.

Household credit stress (WATCH/WARNING)

Credit card delinquency 2.9% (WATCH)
Debt service ratio 11.3% (WATCH)
Savings rate 3.6% (WARNING)

Interpretation: The combination of low savings + rising delinquencies is a classic “consumer vulnerability” setup. It makes the economy less resilient if labor income slows or energy prices spike again.

Market Indicators (risk appetite vs macro reality)

Equities (SAFE): S&P 500 7,473, NASDAQ 26,344, Dow 50,580 — Near highs

This is the other half of the divergence: “Wall Street strong / Main Street pessimistic.” The Wall Street Journal highlighted the unusual gap between booming markets and historically depressed consumer sentiment. (wsj.com)

Valuation (WATCH/DANGER via ratios):

S&P P/E 22x (WATCH)
NASDAQ P/E 30x (WATCH)
NASDAQ/GDP 0.827 (DANGER), S&P/GDP 0.2346 (WARNING)

RecessionPulse take: Valuation isn’t a timing tool, but expensive markets + deteriorating leading labor signals raises downside asymmetry: if growth disappoints, there’s more air-pocket risk.

Credit spreads (SAFE): HY OAS 278 bps — Tight

Tight spreads remain a powerful “risk-on / no imminent default wave” message.

Volatility (SAFE): VIX 16.8

Low vol suggests complacency rather than stress—consistent with tight spreads and loose NFCI.

Yield curve (WATCH): 2s10s 0.43, 2s30s 1.02 — Steepening after inversion

Steepening after an inversion can be interpreted two ways:

Healthy re-steepening from growth optimism, or
A late-cycle “Fed cuts are coming because growth is weakening” dynamic.

Given your GDP slowing (2.0% QoQ saar WATCH) and deterioration in temp help/freight/sentiment, this steepening leans closer to late-cycle normalization rather than a fresh acceleration.

Freight / Goods cycle (DANGER): Freight Transportation Index 1.5

This is consistent with a soft goods economy. As a cross-check, the Cass Freight Index (shipments) was down 4.4% y/y in April 2026, though it showed modest sequential improvement m/m and SA m/m. (cassinfo.com)

RecessionPulse take: Freight is still a risk signal, but the m/m stabilization is something to monitor for a possible second-half inflection.

Conclusion & Outlook

This week’s recession risk: Elevated but not imminent.

The best “recession is close” arguments on your dashboard are:
1. Temporary help (DANGER) — a classic early labor leading indicator
2. Freight (DANGER) — goods-cycle weakness
3. Consumer sentiment (DANGER) — now confirmed by UMich final May at 44.8 (sca.isr.umich.edu)
4. Household fragility — savings 3.6% (WARNING) plus rising delinquencies
The best “soft landing / slow growth” arguments are:
1. Initial claims 209K (SAFE) remains inconsistent with broad layoffs (datatrack.trendforce.com)
2. Sahm Rule 0.13 (SAFE) and low insured unemployment (SAFE)
3. Loose financial conditions (NFCI -0.52, SAFE) (recessionpulse.com)
4. Tight HY spreads (SAFE) and low VIX (SAFE)

Base case (next 8–16 weeks)

A slow-growth, high-dispersion economy: solid large-cap market leadership and decent headline stability, but ongoing deterioration at the margins (temp work, lower quits, weak sentiment, household cushion).

What would change the call to “high” recession risk

A sustained rise in initial claims (e.g., a move toward the mid-200Ks+ with an up-trending 4-week average)
Unemployment rising meaningfully above 4.3% alongside declining payroll breadth
Credit spreads widening meaningfully from ~278 bps and/or NFCI moving back toward zero (tightening)
Hard consumption rolling over in retail/services data following the sentiment collapse

If you want, I can convert this into a standardized RecessionPulse scorecard (with a one-line “signal” and “trend” for each indicator) for consistent week-to-week tracking.

Weekly Recession Report — May 24, 2026