Goldman Sachs economist Pierfrancesco Mei published a note on March 26 estimating that the current oil price surge will reduce U.S. payroll growth by roughly 10,000 jobs per month through the end of 2026.
The bank also expects the unemployment rate to rise 0.2 percentage points in total to 4.6% by Q3 2026. Higher oil prices account for about half of that increase.
Goldman cross-checked its estimates against the Federal Reserve‘s FRB/US model and academic research, finding close alignment across all three approaches.
Why this oil shock hits differently than past ones
Goldman’s first conclusion is that the U.S. economy is far less sensitive to oil shocks than it was in the 1970s and 1980s. Using oil supply shocks constructed by economist Diego Känzig, the bank estimates that a 10% increase in oil prices today has roughly one-third the impact on unemployment and payroll growth compared to the 1975-1999 period.
Känzig’s method isolates oil supply news from broader economic conditions by measuring oil futures price movements in narrow windows around OPEC production announcements.
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Two structural shifts explain the difference. First, the oil intensity of U.S. GDP has fallen significantly. That reduces the drag on consumer spending and non-energy capital investment when prices rise.
Second, the shale revolution since 2010 created a domestic energy sector that generates an offsetting boost to investment and hiring when oil prices increase.
That offset is smaller this time, however. Significant improvements in extraction productivity in recent years mean that job gains in oil extraction will likely be more limited even if production expands.
Goldman also does not expect a meaningful increase in energy capital spending, which limits the boost to support industries such as oil machinery manufacturing and pipeline construction.
Goldman’s oil price baseline and the unemployment math
Goldman’s commodities strategists expect Brent crude to average $105 per barrel in March and $115 in April, before declining to $80 by Q4 2026. That baseline reflects an expectation that flows of oil through the Strait of Hormuz will remain very low for approximately six weeks.
Under that path, Goldman estimates the oil shock alone will raise the unemployment rate by 0.1 percentage points. The remaining 0.1 percentage point rise reflects job growth that is already running too slow to absorb labor supply growth.
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Combined, these two factors underpin Goldman’s forecast of 4.6% unemployment by Q3 2026.
The bank also modeled two more severe scenarios. In the adverse case, where Brent peaks at $140, the oil shock contributes 0.2 percentage points to unemployment. In the severely adverse scenario, where Brent peaks at $160, the contribution rises to 0.3 percentage points.
Where the job losses are concentrated
Goldman’s industry-level breakdown identifies where the pain lands:
- Leisure and hospitality: The largest single drag, at roughly 5,000 jobs per month. Higher energy prices erode real disposable income, leading consumers to cut back on dining, travel, and entertainment first.
- Retail trade: Approximately 2,000 jobs per month. Weaker consumer spending flows through to lower demand for goods and staffing.
- Arts and entertainment, accommodation and food services: The sharpest declines in hiring rates among all industries studied, consistent with consumers pulling back on discretionary categories.
- Healthcare and housing: Largely insulated. These categories represent more essential spending and show smaller effects in Goldman’s model.
Goldman notes that the upward pressure on unemployment primarily reflects lower hiring rather than a significant rise in layoffs. The layoff contribution is described as modest, consistent with a slowdown in job creation rather than a wave of firings.
What this means for the broader labor market
The bank is clear that the U.S. is not facing a 1970s-style oil shock. The structural changes in the economy mean the damage is more contained.
But the combination of a slower-growing job market and an oil-driven hit to consumer spending is enough to push unemployment meaningfully higher by mid-year. Goldman’s own GDP forecast has already been revised down, with unemployment and inflation forecasts revised up.
The net payroll estimate of minus 10,000 jobs per month accounts for both the losses in consumer-facing industries and the modest gains expected in the energy sector. Even with those energy gains, the drag from weaker discretionary spending outweighs the offset.
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