Goldman Sachs is sounding a new alarm: the U.S. economy is slipping, and the war in Iran is making it worse. The bank raised its 12-month recession probability to 25% Thursday—up 5 percentage points— after a brutal February jobs report and surging oil prices forced economists to tear up their forecasts.
It’s a striking signal from Wall Street’s most closely watched research desk, and it comes at a moment when the Trump administration’s twin bets—on tariffs and military engagement in the Middle East—are colliding with a labor market that was already showing cracks.
The jobs number that rattled Wall Street
February payrolls fell by 92,000 — a number that Goldman economist David Mericle called a “reminder that job growth is still too low.” The bank’s estimate of underlying job creation sits barely above zero, trailing even the 70,000 jobs-per-month breakeven rate needed just to keep pace with new labor market entrants. Job openings, meanwhile, are still falling.
The unemployment rate ticked up to 4.44% last month, and Goldman now expects it to reach 4.6% by the third quarter. An unusual revision to the labor force participation rate—down 0.4 percentage points, reflecting updated Census data showing more retired Americans than previously counted—deepened the picture of a softening workforce.
