Is the US in a Recession in 2026? Live Probability and Indicator Synthesis
NBER has not declared a recession. The last NBER-dated recession was the two-month COVID recession of February-April 2020. Real-time indicators remain in the healthy zone, with all four primary signals positive. The New York Fed yield-curve model puts the probability of recession beginning within the next 12 months at roughly 14%.
Four Primary Real-Time Signals
Sahm Rule
GREENThe three-month moving average of unemployment now sits fractionally (0.07 pp) below its own 12-month low, far below the recession trigger. The reading was elevated in 2024 and has since receded as the unemployment rate stabilised; it eased further to -0.07 in August as unemployment held at 4.1%. A sustained renewed rise in unemployment would be needed to approach the 0.50 threshold again.
10Y-2Y Yield Curve
GREENThe yield curve inverted for roughly two years before re-steepening. The 10Y-2Y spread narrowed through mid-September, bottoming at +0.20 pp on 21 September after the Federal Reserve's 16 September rate increase lifted short-end yields, then recovered to +0.41 pp by 30 September 2026. Historically recessions have sometimes begun as the curve re-steepens from inversion, so the signal is still watched even when positive.
Initial Jobless Claims (4-wk avg)
GREENAt 200,000 (week ending 26 September 2026) the 4-week moving average is consistent with a low-hire, low-fire labour market, and has eased every week through September from 207,500 in late August. The latest single week was 197,000, down 1,000 from 198,000 in each of the prior two weeks, while continuing claims eased to 1,701,000 (week ending 19 September) with the insured unemployment rate holding historically low at 1.1%. There is no published recessionary level for this series: across the eight recession onsets since 1967 the 4-week average at the NBER peak month ranged from 210,000 to 438,000, so what matters is the rate of change, not a line.
ISM Manufacturing PMI
GREENManufacturing PMI registered 54.5 in September, down 0.1 point from August's 54.6 and a ninth consecutive month of expansion. New orders strengthened to 55.3 (from 53.7) and backlogs rose to 56.4, while production eased to 56.7 (from 58.3) and employment improved to 52.7. The exception is the prices index, up 6.8 points to 77.9. ISM reads the headline as consistent with 2.4% annualised real GDP growth, so manufacturing remains a positive contributor rather than a drag.
Yield-Curve Recession Model
The most widely cited formal model is the New York Fed's yield-curve model, which applies a probit to the 10-year minus 3-month Treasury spread to estimate the probability of recession over the next 12 months. The method is the one Arturo Estrella and Frederic Mishkin set out in The Yield Curve as a Predictor of U.S. Recessions (New York Fed, Current Issues in Economics and Finance, 1996). As of its September 2026 release (based on data through August 2026) the model reads 13.88%, down from the series peak of 70.9% in May 2024, which is when the deep 2023 inversion reached the end of the model's twelve-month lag. Two caveats belong next to that number. Against its own published history since 1960 the series averages 15.3% and has a median of 9.1%, so 14% is an ordinary reading rather than a low one. And its pre-recession record is patchy: it never reached 30% in the year before the 1973-75, 2001 or 2020 recessions, so a low reading here is not evidence that a downturn cannot start. Professional-forecaster surveys also exist, but they are subjective and paywalled, so only the publicly published model is cited here.
What Would Trigger a 2026 Recession Call?
Four developments would materially increase the probability of NBER eventually declaring a 2026 recession:
- Sahm rule rises back toward 0.50. At -0.07 as of the August 2026 print, the indicator has retreated below zero and far clear of its trigger, but a renewed and sustained rise in unemployment would close that gap. It has flagged every US recession since 1970 in real time.
- Initial claims turn up sharply. The 4-week moving average at 200,000 eased rather than rose through September. No published level marks the boundary, and the eight onsets since 1967 ran anywhere from 210,000 to 438,000, so the tell is a rapid multi-week acceleration rather than any particular number.
- ISM PMI rolls back into contraction. Manufacturing eased to 54.5 in September but stayed above 50, and services remain positive, so the goods economy is no longer a drag. A renewed manufacturing break below 50 alongside softening services would signal the broad-based decline NBER requires.
- Credit spreads widen sharply. At roughly 270 bps, high-yield spreads are healthy. A rapid widening above 500-600 bps would signal a credit stress event that typically precedes or accompanies recession.
What Would Confirm a Soft Landing?
Three developments would significantly reduce recession probability:
- Inflation resumes cooling. The September 2026 hike and dot plot were driven by inflation staying around 3.4%, above the 2% goal. If disinflation resumes, the Fed could pause its rate increases and eventually cut, easing financial conditions and lowering debt-service costs for variable-rate borrowers.
- Unemployment holds around 4.1%. The labour-market softening has so far proved gradual; if unemployment troughs near current levels the Sahm rule stays well clear of its threshold, as it already is at -0.07.
- Manufacturing expansion holds and broadens. ISM manufacturing held above 50 at 54.5 in September; sustaining that alongside continued services growth would keep the goods-and-services picture aligned and reduce the risk of a broad-based contraction.
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This page is reviewed against the latest FRED, BLS, ISM, and Conference Board releases on a roughly monthly cadence. The “Last verified” badge at the top reflects the most recent review. For daily updates to the underlying series, visit fred.stlouisfed.org.
Frequently Asked Questions
Is the US in a recession in 2026?
As of 2 October 2026, NBER has not declared a recession. The last NBER-dated recession was the two-month COVID recession of February-April 2020. The hard indicators remain healthy: the Sahm rule at -0.07 sits far below the 0.50 trigger; the 10Y-2Y yield curve is positive at +0.41 pp; initial claims keep easing, with the 4-week average at 200k; and ISM manufacturing eased to 54.5 in September but held a ninth straight month above 50. The August jobs report firmed up after a soft summer: nonfarm payrolls rebounded 162,000, well above the roughly 53,000 expected, while unemployment held at 4.1%. The soft data has gone the other way. Conference Board consumer confidence fell 6.7 points to 81.9 in September and the Expectations Index fell to 63.6, well below the 80 line the Conference Board associates with recession ahead and the weakest reading in over a decade. The New York Fed yield-curve model puts 12-month recession probability near 14%, which is close to the average reading in that model's own 66-year history rather than a notably low one.
When will the next recession happen?
No economist can reliably predict when recessions will begin. As of 2 October 2026, the indicators point to continued expansion rather than imminent recession: the New York Fed yield-curve model puts 12-month recession probability near 14%, meaning roughly an 86% probability of no recession over that horizon. The developments that could tip the balance include a renewed rise in the Sahm rule back toward 0.50, a sustained and accelerating rise in initial claims, a credit-market stress event, or a geopolitical supply shock. The Fed raised rates in September to fight inflation rather than cut, but with the target range still well below its 2023 peak it would retain room to reverse course and cut if the labour market deteriorated.
Will the Fed cut rates in 2026?
The Fed has moved the other way. At its 15-16 September 2026 meeting the FOMC raised the target range by 25 basis points to 3.75-4.00%, its first rate increase since July 2023, after holding at 3.50-3.75% through the first half of the year. The move was a response to inflation still running around 3.4%, above the 2% goal, and the September Summary of Economic Projections dot plot showed the median official expecting one more 25-basis-point hike before year-end. So a 2026 cut is not the base case; the near-term bias is toward one further increase. The target range nonetheless remains well below its 5.25-5.50% 2023 peak, so if the labour market deteriorated sharply the Fed would still have room to change course and cut, which would likely cushion or shorten a recession.
Who declares when a recession ends?
The NBER Business Cycle Dating Committee declares both the start (peak) and end (trough) of US recessions. The declaration of a recession's end is called a 'trough announcement.' Like the peak announcement, it comes retrospectively - typically 12-21 months after the actual trough - once sufficient data has accumulated to confirm the turning point. During the recession itself, real-time indicators like the Sahm rule and jobless claims provide the best available signal of whether conditions are improving.