Rising oil prices could start weighing on the US labour market more than expected, with Goldman Sachs flagging a slowdown in hiring and a gradual rise in unemployment over the next two years.
In a note to clients on Thursday, Goldman Sachs said higher oil prices are likely to reduce payroll growth by around 10,000 jobs per month through the end of 2026. The estimate factors in the broader economic impact of oil supply shocks on employment and unemployment.
The bank noted that while oil price increases continue to dampen job growth and push unemployment higher, the impact is significantly lower than in earlier decades. Compared with the 1975–1999 period, the effect is now about one-third smaller, which Goldman attributed to lower oil dependence in US GDP and the expansion of domestic shale production.
The analysis aligns with projections from the Federal Reserve’s FRB/US model and existing academic research. Based on Goldman’s baseline oil price outlook, the current oil shock is expected to raise the unemployment rate by 0.1 percentage point. Overall, the bank expects unemployment to increase by 0.2 percentage points to reach 4.6% by the third quarter of 2026.
Goldman Sachs said the employment impact would largely come from slower hiring, along with a smaller contribution from increased layoffs. The pressure is expected to be more visible in sectors linked to discretionary spending.
Consumer-facing industries are likely to see the sharpest impact. The bank highlighted leisure and hospitality as particularly vulnerable, estimating job losses of around 5,000 per month. Retail trade, manufacturing, and education and health services are also expected to face pressure.
While higher oil prices have historically supported job creation in oil extraction and related industries, Goldman said gains in the sector may be limited this time. Improved efficiency in extraction means fewer workers are needed, even if production increases.
The warning comes as signs of cooling are already visible in the labour market. The unemployment rate has risen to 4.4% in February, while the economy shed 92,000 jobs in the latest nonfarm payrolls data. Job growth has also slowed sharply, with 181,000 jobs added last year compared to 1.4 million the previous year.
Goldman Sachs said the upward pressure on unemployment “primarily reflects lower hiring, with a smaller contribution from higher layoffs” in sectors most exposed to weaker consumer spending.