The good news is that Virginians will continue to experience lower price growth on average than across the United States, but the bad news is that unemployment is expected to rise to the highest rate since 2021.
The Commonwealth‘s unemployment rate right now is at 3.2 percent, however, one in seven jobs are linked in some way to the federal government. President Donald Trump‘s federal staff cuts will significantly hit the state’s economy in 2025, according to UVA’s Weldon cooper Center for Public Services latest quarterly report.
The report predicts that Virginia will lose 32,000 jobs because of federal workforce layoffs, economic output will slow down and unemployment will reach 3.9 percent. Virginia‘s unemployment rate could go as high as 4.7 percent in 2026. Multiple sectors in Virginia are predicted to weaken with slower economic growth.
“We have several hundred thousand people in Virginia who work for contractors with the federal government, so they are not federal employees. Those companies could potentially be laying people off. And ultimately that spills over to other industries like retail, restaurants,” Cooper Center Executive Director Eric Scorsone told WTOP News.
The report and Scorsone warn that the fallout could drive individuals who lose their jobs out of Virginia.
“So it is important now to be looking at our assets and strengths beyond the federal government, looking at what opportunities we can seek out. And then providing for people who need help, because there certainly will be a lot of those,” Scorsone said.
The total value of goods and services in Virginia will remain positive and resilient in industries that are not affected by the federal cuts, but the labor market will become strained.
“The military may do OK. There is a potential focus on shipbuilding, which would favor Hampton Roads. So there are some positives like that, that will certainly offset some of the negatives,” Scorsone said.
After several years of moderate growth in Virginia, the state is predicted to stand out from the rest of the nation in 2025 and reflect a shrinking economy.
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Rebecca Barnabi
