Goldman Sees Low-Income U.S. Income Growth Near Zero in 2026

For the bottom fifth of U.S. earners, higher gas prices and cuts to federal benefits are set to leave 2026 income growth near zero, even after tax cuts. Goldman Sachs said the strain will be most visible in household budgets that have little room to absorb another round of energy shocks.

Goldman economists Ronnie Walker, Alec Phillips and Joseph Briggs said gasoline prices had risen nearly 40% since the Iran war began, creating about a $140 billion annual hit to household incomes. They said the lowest-income quintile spends roughly four times as much on gasoline as a share of after-tax income as the top quintile, which makes the same price move land far harder on paychecks near the bottom of the income scale.

The bank also warned the pain will not stop at the pump. In its April analysis, Goldman said the bottom quintile faces tepid job growth, cuts to Medicaid and SNAP benefits, and greater exposure to the oil shock. Even if Brent crude falls to $80 a barrel by the end of 2026, Goldman said the drag from higher fuel costs would still amount to about $70 billion for the year. Chief U.S. economist David Mericle has said higher gas-price inflation will negate some of the benefit from tax cuts.

That matters for Goldman readers because the story is not just about inflation, it is about consumer health. The firm’s 2026 macro outlook still projects about 2.8% U.S. GDP growth, helped by tax cuts, real wage gains and rising wealth. But the burden is likely to be uneven, and that gap is exactly where credit stress, trade-down behavior and weaker demand at lower-income households usually start to show up first. For bankers covering consumer, retail, payments and lending, the question is not whether the economy grows, but who can keep spending when essentials rise faster than take-home pay.

The U.S. Energy Information Administration gives the squeeze a concrete shape. It forecasts retail gasoline prices averaging about $3.70 a gallon in 2026, up from $3.10 in 2025, and says prices could briefly near $4.30 a gallon in April. Separately, the Center on Budget and Policy Priorities has warned that pending SNAP changes could leave about 4 million people in a typical month losing some or all food benefits once fully implemented. Put together, the result is a simple budget story with big market implications: for many lower-income households, the gains from tax cuts may arrive already spent.