Recession Probability vs Unemployment
NY Fed Recession Probability (12-months-ahead, derived from 10Y-3M Treasury spread) measures forward recession risk from yield curve dynamics. Unemployment Rate (U3, FRED UNRATE) measures realized labor market slack.
Also known as: CVRP, Convex Recession Probability (CVRP, CRPI, recession probability, recession index) · Unemployment Rate (U3) (unemployment, U3, jobless rate)
Why This Comparison Matters
NY Fed Recession Probability (12-months-ahead, derived from 10Y-3M Treasury spread) measures forward recession risk from yield curve dynamics. Unemployment Rate (U3, FRED UNRATE) measures realized labor market slack. April 2026: NY Fed recession probability approximately 18.8 percent (down from 20.7 percent February 2026 reading; declining trend). Unemployment rate approximately 4.3 percent (Sahm Rule triggered July 2024 but no recession 21+ months later). Recession probability is forward (yield curve embeds expectations); unemployment is contemporaneous-to-lagged. Combined: recession risk moderate (~19 percent) + unemployment moderately elevated. Yield curve has re-steepened from 2022-2023 inversion lowering forward recession probability. Late-cycle but not recessionary.
The April 2026 Configuration
NY Fed Recession Probability: ~18.8% (April 4, 2026, using March 2026 data). Down from 20.7% February 2026. Declining trend reflects yield curve re-steepening (10Y-3M spread positive again).
Unemployment rate (U3): ~4.3% (April 2026). Up from 3.5% September 2022 cycle low. Sahm Rule triggered July 2024 (3-month MA 0.5pp above 12-month MA low). Has been triggered for 21+ months without recession (longest period without recession after Sahm trigger in 54-year history).
10Y-3M Treasury spread (NY Fed model input): currently positive ~70bp (10Y 4.31% minus 3M ~3.55%). Compares to peak inversion -150bp+ in 2023.
The combined April 2026 reading: forward recession probability moderate (19%) + unemployment elevated but stable (4.3%). Late-cycle expansion. Sahm Rule false positive territory. Recession not imminent per yield curve model but elevated risk.
Long-Term Range and Recent Trajectory
NY Fed recession probability range: 0% to 70% historical. Above 30% historically preceded recessions (12-month lead). Above 50% near-certain. Below 10% economic expansion.
2022-2023 spike: peaked at 70%+ June 2023 reflecting -150bp 10Y-3M inversion. Highest since 1981. Historical model would have signaled recession Q3 2024-Q1 2025. Did not arrive.
2024-2026 normalization: declined from 70%+ to 18.8% currently. Reflects yield curve re-steepening + persistent economic resilience. NY Fed model probability has fallen ~50 percentage points without recession arriving.
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Frequently Asked Questions
What is the April 2026 NY Fed recession probability vs unemployment configuration?+
NY Fed recession probability ~18.8% (April 2026, declining from 20.7% February). Unemployment ~4.3% (up from 3.5% September 2022 low). Sahm Rule triggered July 2024, has been triggered 21+ months without recession (longest in 54-year history). 10Y-3M spread positive ~70bp (recovered from -150bp peak inversion 2023). Late-cycle expansion. Soft-landing trajectory.
How does the NY Fed model work?+
NY Fed Recession Probability uses 10Y-3M Treasury spread to predict recession 12 months ahead. Regression of recession indicator on yield curve spread historical 1959-present. Inversion (long below short) implies expected Fed cuts = weakness expected. -150bp = ~70% probability. Currently +70bp = 18.8% probability. Released monthly first week.
Why has Sahm Rule trigger not produced recession?+
21+ months since July 2024 trigger without recession is unprecedented. 1948-2024: every Sahm trigger preceded recession. April 2026: longest divergence in 54-year history. Reasons: (1) labor force expansion 3-4M workers (immigration + post-pandemic) raised U3 without job losses, (2) services-driven economy less recession-prone, (3) AI capex ~$300B+ annual + fiscal support sustained demand, (4) Fed easing room from 5.25-5.50% peak.
How do recessions historically progress in unemployment?+
2008-09 GFC: U3 4.6% to 10.0% peak. +540bp rise. 2020 COVID: U3 3.5% to 14.7% peak (sudden shock). 2001 dot-com: U3 3.9% to 6.3%. +240bp. 1990-91: U3 5.0% to 7.8%. +280bp. April 2026: U3 3.5% to 4.3% +80bp. Slow grinding rise without recession-style spike. Pattern more consistent with healthy adjustment than recession.
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