The ongoing military conflict involving the U.S. and Iran is significantly impacting the American labor market. Goldman Sachs has projected that the resulting oil price surge could reduce payroll growth by approximately 10,000 jobs each month for the remainder of the year. This effect will be predominantly felt in sectors such as restaurants, hotels, and retail across the nation.
In a research note released on Thursday, Goldman economist Pierfrancesco Mei elaborated on the correlation between escalating energy prices and the strain on the labor market. Earlier in the week, the bank's commodities strategists forecasted that Brent crude oil prices would average $105 in March, spike to $115 in April, and then gradually decline to $80 by the fourth quarter, contingent on substantial disruptions in supply through the Strait of Hormuz lasting around six weeks. In a more severe scenario, should the conflict intensify, Brent prices could potentially reach $140 per barrel.
The conflict between the U.S. and Israel against Iran shows little indication of reaching a swift resolution, even with President Trump expressing a desire to conclude military operations. White House press secretary Karoline Leavitt indicated that the conflict is anticipated to last four to six weeks, which aligns with Goldman’s forecast. Nevertheless, experts remain cautious; analysts at Brookings have cautioned that without authentic regime change, Iran could restore its capabilities and contribute to ongoing regional instability.
Where the jobs are disappearing
The job losses are not evenly distributed across the economy. Goldman’s sector-level analysis highlights that the leisure and hospitality industry is the most severely affected, with an estimated reduction of about 5,000 jobs per month. The retail sector is also experiencing a downturn, losing approximately 2,000 jobs monthly. When energy prices rise, consumers tend to cut back on non-essential expenditures first, leading to reductions in travel, dining out, and shopping trips, while continuing to prioritize essential costs like healthcare and housing. Consequently, the service economy, which primarily serves working-class individuals, feels the brunt of the oil price shock before other, less affected sectors do.
This situation is particularly challenging for Gen Z. A recent report from the Bank of America Institute highlights how escalating gas prices are influencing the spending habits of this demographic, compounding the difficulties they already face within a fluctuating economic landscape.
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