Goldman Sachs Projects Unemployment Rising to 4.6% Amid Oil Shock, Weak Job Growth

Ten thousand jobs per month, lost to an oil price shock, stacked on top of an economy already generating payrolls too slowly to keep unemployment stable. Goldman Sachs economist Pierfrancesco Mei quantified that double drag in a note dated March 26, and economist Jessica Rindels amplified it through the firm's official account: U.S. unemployment will reach 4.6% by the third quarter of 2026, up 0.2 percentage points from February's 4.4%.

Mei's note is direct about the compounding forces. "We expect the unemployment rate to rise 0.2 percentage point in total to 4.6% by the third quarter, partly because of this impact from the oil shock and partly because job growth is already running at a pace that we think is a bit too slow to keep up with labor supply growth," the note states.

Goldman estimates the economy's monthly break-even for job creation, the pace needed just to hold unemployment flat, at roughly 70,000 positions, declining toward 50,000 by year-end as immigration has fallen from a peak annualized rate of approximately 3.5 million to around 500,000. That structural shift lowers the threshold, but the economy has been reliably missing even the reduced bar.

Operation Epic Fury, the Iran military engagement that began in late February 2026, accounts for roughly half the projected unemployment rise. Brent crude climbed from approximately $71 at the start of the conflict to $101 by late March, briefly touching $110, and national gasoline prices are up approximately 26% year-over-year. Goldman estimates the surge will cut roughly 10,000 payroll jobs per month through the end of 2026, a figure consistent with the Federal Reserve's FRB/US model and independent academic research. This time, there is no offsetting shale hiring boom: U.S. oil producers are leaner and more automated than in previous cycles, and no energy-sector employment surge is expected to cushion the broader labor market.

The backdrop entering the conflict was already poor. February nonfarm payrolls fell by 92,000, the third job loss in five months and well below the consensus estimate of 59,000, before being revised further down to -133,000 in the subsequent BLS release. Real GDP grew at just 0.7% annualized in Q4 2025.

Goldman has raised its 12-month U.S. recession probability to 30%, up from 25% in mid-March. EY-Parthenon Chief Economist Gregory Daco places those odds at 40%. Chief U.S. Economist David Mericle is nonetheless holding Goldman's forecast for two 25-basis-point Federal Reserve rate cuts in September and December 2026, bringing the federal funds rate to 3.00%-3.25%. That call sits sharply against current market pricing, which assigns approximately a 45% probability to a Fed rate hike this year. Goldman's argument: supply-side oil shocks rarely prompt tightening.

For Goldman's own workforce, a 30% recession probability flowing through into client behavior is not abstract. Defensive client positioning delays M&A mandates, tightens credit appetite, and compresses deal timelines, all of which feed into revenue visibility and, eventually, bonus pool calculations. Hiring approval cycles lengthen; internal mobility replaces external searches. Wage pressure at the associate and VP levels eases when unemployment is moving in the wrong direction.

The April 3 jobs report added 178,000 positions and brought unemployment down to 4.3%, providing near-term relief. Goldman's Q3 2026 projection, however, reflects cumulative oil-shock drag and a structural labor supply dynamic that a single strong monthly print does not resolve.