(Oil Price) – The oil shock will soon show up where it usually does—jobs.
Goldman Sachs warned that higher crude prices could cost the U.S. labor market around 10,000 jobs per month through the rest of the year, as elevated energy costs ripple through the broader economy. The hit comes even after accounting for gains in the oil patch.
Higher prices used to mean that a hiring boom in shale was soon to follow. Not this time, according to a Thursday note to Goldman clients.
Today’s U.S. oil producers are leaner, more automated, and far less willing to chase growth at any cost than they were a decade ago. Even with Brent crude comfortably above $100 per barrel, the industry is not adding to its headcount the way it did in previous boom cycles. Efficiency gains have capped the upside for employment, even with increased revenue.
Higher fuel costs bleed into everything. The costs trickle down into transport, manufacturing, food, and services. Consumers pull back. Businesses delay hiring. The knock-on effect of the current price rally will spread quickly, and likely outweigh whatever incremental hiring comes out of the energy sector, Goldman said.
Unfortunately, the U.S. economy was already showing signs of cooling before the latest surge in oil prices tied to the Middle East conflict. Now, energy is acting as an added drag rather than a tailwind.
Goldman estimates that roughly 10,000 fewer jobs will be added per month through the end of the year. That doesn’t signal collapse, but it certainly points to a steady erosion in labor market momentum. If oil prices stay elevated, that erosion will compound.
The Fed is taking a wait-and-see approach, at least for now, supported by policymakers who are signaling that the inflationary impact of the war may be temporary, but their assumption is risky. Energy-driven inflation has a way of sticking around longer than expected, especially when supply disruptions are physical, not just speculative.
By Julianne Geiger for Oilprice.com
