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Economists at Goldman Sachs warn that recession risks are rising as the fragile labor market collides with inflation pressures linked to the intensifying global conflict. The bank raised the odds of a 12-month recession to 25%, reflecting growing concern that slowing hiring, higher oil prices and ongoing policy uncertainty are weighing on economic momentum.
The shift underscores growing anxiety on Wall Street over policy uncertainty under President Trump; especially tariffs and geopolitical tensions; It comes at a time when growth has already begun to cool.
Employment report that shook the markets
February payrolls fell by 92,000; one economist described the figure as “a reminder that employment growth is still very low.”
The bank estimates that underlying job creation is nearly zero, falling short of the nearly 70,000 monthly jobs needed to keep pace with population growth. The fact that job opportunities are also on a downward trend strengthens the view that labor demand has softened.
New data from the Bureau of Labor Statistics showed job openings increased from 6.55 million in December to 6.95 million in January. Layoffs have also decreased, indicating that companies are still reluctant to aggressively reduce staff.
But hiring rates remain unchanged, underscoring an employment market that is seemingly stable but struggling to deliver sustainable growth.
The unemployment rate rose to about 4.4%, and Goldman now expects that rate to rise to 4.6% later this year. Downward revision in labor force participation; driven by updated population data showing more retirees; It darkened the employment picture even further.
Taken together, slowing hiring and demographic changes suggest the labor market may be losing momentum as broader economic risks intensify.
Oil prices have become the new economic joker
Supply risks are driving crude oil prices sharply higher as energy markets become increasingly volatile amid global conflicts. Analysts warn that disruptions to key shipping routes could push oil prices well above $100 a barrel, increasing inflationary pressures and weighing on household spending.
Even temporary supply shocks can spread rapidly through transportation, food, and production costs; Downside risks to growth are increasing.
Economic uncertainty is starting to impact households. A University of Michigan survey showed consumer confidence fell to a three-month low as concerns about rising gasoline prices grew.
Tariffs already appear to be in inflation
Goldman estimates that trade tariffs contribute more than 70 basis points to core inflation. Without these policy effects, underlying price growth would appear significantly more limited, suggesting that trade tensions are directly contributing to higher inflation.
High import costs and supply chain regulations continue to impact consumer prices, complicating the economic outlook.
Fed faces stagflation woes
Policymakers at the Federal Reserve face a tough tradeoff: inflation risks tied to energy prices and tariffs that require patience, versus a cooling labor market that advocates for rate cuts.
Goldman postponed its rate cut forecast to late 2026 and said rising price pressures could delay monetary expansion unless business conditions worsen significantly.
Growth was already slowing before tensions intensified
The overall economy entered the year on a weak basis. According to the U.S. Department of Commerce, GDP grew at an annualized rate of just 0.7% in the fourth quarter; well below previous forecasts and much slower than mid-year growth.
Exports, consumer spending and government spending were all revised lower; This underlined that momentum was weakening even before energy market volatility increased.
Goldman projects first-quarter GDP growth around 3.3%, but much of that reflects a temporary rebound after last year’s government shutdown. The bank expects growth to slow to roughly 2% in subsequent quarters; It’s close to what economists describe as a stalling speed.
Reasons for cautious optimism remain
Despite rising recession risks, Goldman’s fundamental case still calls for continued expansion. Productivity growth has averaged around 2.2% annually over the current cycle, while slowing rent growth is expected to push housing inflation to a lower level later this year.
Economists also note that earlier interest rate cuts could provide a policy buffer if employment weakens further; a stabilizing factor that helped limit the severity of past crises.
The full impact of the conflict on the U.S. economy and financial markets remains highly variable and uncertain. The longer the disruptions last, the greater the potential negative impact of increased uncertainty on business and consumer confidence, which will further negatively impact economic activity.
For now, the US economy faces a delicate balancing act; geopolitical risk, inflationary pressures and a labor market that is starting to show clearer signs of tension.
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14 essential strategies to maximize your Social Security and avoid costly mistakes
Social Security is a vital lifeline for many seniors, providing significant income support during retirement. At a time when inflation is at its highest level in four decades, Social Security’s inflation-adjusted benefits provide protection against rising costs.
Rising interest rates have disrupted many retirement portfolios and caused bond fund values to decline. In this volatile financial environment, Social Security can stabilize a typical stock-bond retirement portfolio. By implementing smart strategies, retirees can maximize their Social Security benefits and ensure a more secure financial future.
14 Essential Strategies to Maximize Your Social Security and Avoid Costly Mistakes
11 reasons to claim Social Security early
Deciding when to claim Social Security is often about maximizing your benefits. Financial planners generally recommend delaying your request for as long as possible to secure the highest monthly payment. Your benefit is based on your lifetime earnings, with full payout available at your full retirement age (FRA); this age is currently between 66 and 67 years old, depending on your year of birth. Claiming before FRA will result in a permanent decrease in your monthly earnings, while waiting after FRA will result in a permanent increase. But the decision isn’t just about maximizing the monthly check. Personal factors such as health, family circumstances and financial needs can play an important role in determining the right time to make a claim.
11 Reasons to Apply for Social Security Early
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John Dealbreuin came to the United States from a third world country without knowing anyone and with only $1,000; Guided by an immigrant dream. He reached his retirement number in 12 years.
he started Financial Freedom Countdown helping everyone think differently about financial challenges and live their best life. John lives in the San Francisco Bay Area and enjoys hiking and weight training.
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Platforms like Yield Street offer investment options art, legal, real estate, structured notes, venture capitaletc. They also have fixed income portfolios that span multiple asset classes with a single investment. Low minimums of $10,000.
