Goldman Sachs has a mixed message on oil prices and jobs

Goldman Sachs economist Pierfrancesco Mei published a note on March 26 estimating that rising oil prices will reduce US wage growth by about 10,000 jobs per month until the end of 2026.

The bank also expects the unemployment rate to rise 0.2 percentage points overall to 4.6% in Q3 2026. Higher oil prices account for about half of that increase.

Goldman checked its estimates against the Federal Reserve’s FRB/US model and academic research, finding a close match in all three methods.

Goldman’s first conclusion is that the U.S. economy is less vulnerable to oil shocks than it was in the 1970s and 1980s. Using oil supply models built by economist Diego Känzig, the bank estimates that a 10% increase in oil prices today has about a third of the impact on unemployment and wage growth compared to the period 1975-1999.

The Känzig method separates oil supply issues from broader economic conditions by measuring future oil price movements in narrow windows around OPEC production announcements.

AgainEconomy:

Two structural changes explain the difference. First, the oil component of US GDP has fallen significantly. That reduces the drag on consumer spending and capital investment that isn’t strong when prices rise.

Second, the shale revolution since 2010 has created a domestic energy sector that creates financial and employment incentives as oil prices increase.

However, this time is short. Significant improvements in manufacturing output in recent years mean that job gains in the oil industry are likely to be limited even as production increases.

Goldman also does not expect a meaningful increase in energy spending, which reduces the ability to support industries such as oil rigs and pipeline construction.

Goldman product experts expect Brent crude to average $ 105 per barrel in March and $ 115 in April, before falling to $ 80 in Q4 2026. That basic fact shows the expectation that the flow of oil through the Strait of Hormuz will remain very low for about six weeks.

Under that path, Goldman estimates that the oil shock alone will raise the unemployment rate by 0.1 percent. The remaining 0.1 percent increase reflects job growth that is already moving too slowly to absorb growth in the labor supply.

Combined, these two factors confirm Goldman’s forecast of 4.6% unemployment in Q3 2026.

The bank has also modeled two power levels. In the worst case scenario, where Brent is above $140, the oil shock contributes 0.2 percent to unemployment. In the worst-case scenario, where Brent is above $160, the contribution rises to 0.3 percent.

Goldman’s industry-level breakdown shows where the pain is coming:

• Entertainment and hospitality: The biggest draw, at about 5,000 jobs a month. High energy prices erode real incomes, causing consumers to cut back on food, travel and entertainment first.

• Retail business: About 2,000 jobs per month. Reduced consumer spending flows down to demand for goods and labor.

• Arts and entertainment, accommodation and food services: The biggest drop in rental rates among all industries studied, consistent with consumers opting out of discretionary models.

• Health care and housing: Very insulated. These shares represent a significant investment and show little impact on Goldman’s model.

Goldman notes that the high unemployment rate is more a reflection of low employment rather than a sharp rise in layoffs. Job growth is described as modest, consistent with a decline in job creation rather than a boom.

The bank is clear that the US is not facing a 1970s-style oil crisis. Structural changes in the economy mean that damages are more accessible.

But the combination of a slower-growing job market and oil consumption in line with consumer spending is enough to raise unemployment markedly by mid-year. Goldman’s GDP forecast has been updated, and the unemployment and inflation forecasts have been updated.

The estimate of gross earnings of less than 10,000 jobs per month accounts for losses in consumer-facing industries and modest gains expected in the energy sector. Even with that energy gain, the drag of less discretionary spending outweighs the savings.

Related: Goldman Sachs revises recession risks for 2026

This story was published by TheStreet on March 27, 2026, where it first appeared in the Economy section. Add TheStreet as a Favorite Source by clicking here.