The champion has been dethroned.
Virginia, which last year was CNBC’s “best state for business,” and which has occupied the No. 1 spot a record six times, has been demoted in this year’s rankings to fourth place.
It’s the state’s worst showing since 2018.
This is an awkward moment for Virginia Republicans. In his 2021 campaign for governor, Glenn Youngkin often dinged Democrats for costing the state its No. 1 rating and promised to build a “rip-roaring economy” in the state. When Virginia returned to the top spot last year, Youngkin rightfully crowed about the accomplishment.
When this year’s rankings came out Thursday, Youngkin was noticeably silent, and it was Democrats who were blasting in-boxes with statements about how President Donald Trump is to blame. There was no need for that kind of finger-pointing, though, because CNBC itself had already done that. It directly pinned Virginia’s slide on Trump, primarily (but not entirely) because the state has (or rather, had) so many federal workers, many of whom are now losing their jobs under Trump’s cutbacks. Only California has more federal workers; only Maryland and Hawaii have a higher percentage of their workforce devoted to federal jobs.
Youngkin has emphasized that Virginia has lots of other jobs available that those former federal workers could take, but CNBC quotes experts who are more skeptical. Private-sector hiring in Virginia has slowed, CNBC says. Meanwhile, economist Eric Scorsone, executive director of the Weldon Cooper Center for Public Service at the University of Virginia, tells CNBC that there’s often not a great match between the jobs available and the people looking for work.
“Virginia’s federal workforce is different than, say, other states. Our workforce tends to be highly educated, professional executive level,” he told CNBC. “Many of the jobs that are open may be in different sectors, like health care. You can’t just easily move into a health care job if that’s not your area of expertise.”
The full impact of those cuts hasn’t hit yet; some workers took buyouts so are still getting paid and not actively looking for work yet. However, Virginia is one of just three states in May whose unemployment rate was rising, according to the Bureau of Labor Statistics. A Wallet Hub report that came out Thursday, shortly after the CNBC rankings, said that Virginia’s unemployment claims last week were 5.8% higher than the week before — and 32.44% higher than this time last year.
“Virginia is still a business powerhouse,” CNBC said, but with “with economic anxiety rising, Virginia’s economic situation is just shaky enough to take it down a few pegs.”
Those are the big headlines, and they’re not good ones. However, there’s more to Virginia’s slide in the rankings that deserves some attention. Here’s the big thing to know: CNBC changes its criteria every year. That means the rankings aren’t consistent over time. Each year, CNBC adds (or subtracts) new metrics that it uses and reorders their weight based on overall changes in the economy. Yes, Virginia fell from first to fourth, but it wasn’t on the same measurement scale.
To truly say Virginia fell, we’d need to know how Virginia would have scored last year using this year’s new metrics — or how it would have scored this year using last year’s scale. We don’t know those things, though, because the details of CNBC’s algorithm are proprietary, a fancy way of saying company secrets. There are good reasons for CNBC to change its system over time — the economy does change and what was valued at one time may not be so valued today — but when we start making political judgments based on these rankings, we need to understand that it’s not a consistent scorecard. Democrats may well be right in some of their criticisms of Trump, Youngkin or anyone else, but the reasons for Virginia’s drop in the ranking are more complicated than “Trump did this to us.”
Bringing facts into a political debate is a lot like taking a knife to the proverbial gunfight, but let’s review some of those facts anyway.
1. CNBC added measures that now hurt Virginia
When CNBC launched its rankings in 2007, it used 40 measures, spread over 10 broad categories. By last year, it was up to 218. This year it has 135.
We don’t know exactly what all those measures are, but CNBC has told us some things, so we know that some of these measures are ones that specifically disadvantage Virginia. Most notably, CNBC says: “New in 2025, we measure the states’ tariff risks by considering the importance of international trade in relation to their overall economy, their dependence on trade with China in particular, and the potential costs of increased tariffs. We also consider the role of federal spending and employment in each state’s economy, and their overall dependence on federal dollars.”
Virginia is an export-driven state so is more vulnerable to retaliatory tariffs than some other states. And, as we know, it has an unusually high percentage of federal workers. CNBC understandably wants to take these factors into account, but the point for us is that these are essentially negative marks for Virginia in 2025 — and weren’t in the 2024 scorecard. How would Virginia have scored last year if these measures were included? That’s impossible to say; tariffs weren’t really a factor last year — and federal employment might have been considered something of a plus before since it’s always been pretty stable (or growing).
To whatever extent tariffs are hurting America’s economy, Trump is very much to blame, so that’s fair game for policy debate, but if one party is going to use these CNBC rankings as a political talking point, then let’s talk further about how those rankings came to be.
2. CNBC reordered the weight of categories in ways that hurt Virginia
Not only did CNBC add new measures, it reordered the weighting of its 10 main categories. There’s nothing nefarious about this; it’s something CNBC has done every year to account for economic changes. That first year, the most important category was “cost of doing business.” Now that’s down to fourth place.
Last year, infrastructure was the most heavily weighted category, with the overall economy third. This year, CNBC promoted the economy to its top category and bumped it from 14% of the total score to 17.8%. CNBC said it did so because “particularly in uncertain times, companies are seeking states with stable finances and solid economies.” That is an increase, but it’s also not as if the weight changed from 14% to, say, 40%. All these weighting changes seem somewhat marginal. That change of three percentage points for the economy category was the biggest; many others involved changes of less than one percentage point.
The problem for Virginia is that those tariff measures CNBC added go under the “economy” category — so it added what amounts to a negative measure for Virginia and then increased the weight of that category. No wonder then that Virginia fell from 11th in the economy category last year to 14th this year.
But wait, this is about to get more complicated: Even with these negative scores added, Virginia still scored more points in the economy category this year (266) than it did last year (227). The difference is that last year that was 227 out of a possible 350 points (64.8%) and this year was 266 out of a possible 445 (59.7%).
Whatever the weighting, the bottom line is the same: CNBC deems Trump’s tariffs and his government cutbacks to be a drag on the Virginia economy. While Democrats are eager to capitalize on this, the basic facts aren’t partisan ones: Virginia’s export economy is very sensitive to retaliatory tariffs, and the federal government is a major employer in the state. Tamper with either of those two things and the state’s economy can suffer.
3. CNBC’s other changes also tend to disadvantage Virginia
The weight of all 10 of CNBC’s categories changed, some up, some down. Generally speaking, the categories where Virginia’s ranking declined were the categories that gained more weight, while the few categories where Virginia’s ranking improved were in categories that CNBC devalued. There is only one category (technology and innovation) where Virginia improved in the rankings and the category gained more weight.
There are two ways to look at this: One, you can blame CNBC for coming up with rules that make Virginia look bad. Or, you can look at this as CNBC simply readjusting to reflect a changing economic reality. If you look at it that way, the headline for this section shouldn’t be about CNBC at all but rather “economy changes in ways that disadvantage Virginia.”
4. Virginia’s overall score declined by -1%
While the attention is obviously on the rankings — “We’re No.1! We’re No. 1! No, wait, we’re not No. 1 anymore.” — another way to look at the CNBC report is to look at each state’s overall score. A state can score more points than the year before and still fall in the ratings if other states rose faster. Conversely, a state could score fewer points and rise. Everything is relative.
One thing that CNBC has kept consistent is the total number of points (2,500 maximum possible), so that makes things easier to measure. Overall, Virginia’s score went down from 1,595 points last year to 1,578 this year. That’s -1%.
Nobody wants a minus but you can decide whether that decline is really a big deal. You might even argue that it’s pretty good given how CNBC now takes into account some metrics that work against Virginia.
The problem is that the states nearest us in the rankings all grew their scores while Virginia’s was shrinking. North Carolina (who Virginia almost tied with last year) grew its score by 1.3%. Texas, now in second place, grew by 1.5%. The big story is Florida, which grew its score by 7.3%.
Of course, there’s also an argument to be made that we shouldn’t get hung up on the specific rankings, which toggle up and down each year, and focus instead on how it’s generally the same group of states (including us) relatively near the top and the same group near the bottom. Three of the top five states in this year’s rankings (North Carolina, Texas and Virginia) and seven of the top 10 were in the top five and top 10 in those first rankings in 2007 even though there are more than three times as many measures now. With that kind of consistency, does it really matter what the actual standings are, except for purposes of bragging rights?
These rankings may be like those annual rankings of “best colleges.” The schools hate those because they find them simplistic but are still eager to advertise when they do well: They like the attention when it benefits them. Same here.
5. Beware of drawing sweeping political conclusions
I think it’s fair to conclude that Trump’s policies have hurt Virginia. After all, that’s not my conclusion; that’s CNBC’s conclusion. They know their data better than anyone. However, there’s always the temptation to look at state governance and declare that one party produces better economic results than the other. That may be true, but I’d caution against using this report as the sole data point.
North Carolina, the new No. 1, is a very purple state that has a Democratic governor and a Republican legislature.
Texas and Florida, the new No. 2 and No. 3, are quite Republican.
However, so are many of the states at the bottom of the list. I’d argue that while governance matters, the basic economic characteristics of a state matters more. Texas just has a lot more going for it than Mississippi, no matter which party is in charge.
The most improved state, soaring from No. 40 to No. 15, is that classic Democratic bastion, Massachusetts. CNBC attributes this to the general lay of the land there: “Massachusetts was able to make that U-turn thanks to its relative independence from Washington.” Even with Trump’s battles with Harvard, Massachusetts has less exposure to potential federal cuts as other states, CNBC says. What pulls Virginia down sends Massachusetts soaring.
6. Virginia’s strength is in education and infrastructure
Let’s look at the CNBC rankings a different way: In which categories does Virginia score well and in which ones does it fare less well?
Virginia ranked first in education last year and ranked first in education again this year. Virginia’s educational system is certainly uneven — here’s where I must point out how many rural schools struggle to do things that are customary in more affluent suburban schools — but overall the state’s education system gets an A-plus score from CNBC. One challenge, which I’ve written about before, is that Virginia’s colleges educate a lot of students who become future workers for other states. Nearly half of our college graduates are out of state within five years or so after graduation. We export too much talent, which is likely why Virginia’s workforce score fell, but let’s not get ahead of ourselves.
Another category where Virginia excels is infrastructure. It rose from third place last year to second place this year and now ranks only behind Ohio.
Of note: One of the new measures was “large-scale computing power.” We don’t know the specific score on that, but it seems safe to conclude that Virginia’s profusion of data centers counts as a plus (likely much to the chagrin of data center critics). That also likely means the solar farms in Southside (which help power those data centers) also count as a plus, at least indirectly.
7. Virginia’s biggest weakness is the cost of doing business
Virginia’s biggest economic engine is Northern Virginia, and Northern Virginia is expensive. That’s a problem. CNBC’s cost of doing business also includes utility rates. The website Choose Energy, drawing on goverment statistics, ranks Virginia 25th in the nation for electricity prices. There’s plenty of debate about utility rates but what’s not in dispute is that, because of growing demand from data centers, Virginia now imports more electricity than any other state and that power is typically more expensive than what we produce in-state. Furthermore, the General Assembly’s research arm forecasts that energy demand will triple by 2040, so if energy production doesn’t keep up with that, prices will surely rise.
The cost of doing business is separate from the cost of living but the two are obviously related (for CNBC’s business-oriented purposes, the former counts more than the latter). Last year Virginia ranked 24th in the cost of doing business category; this year it sank to 31st. Under cost of living, Virginia slipped from 19th to 21st.
Our main economic rival, North Carolina, isn’t all that great, either, but does rank better than us — 21st. Tennessee, an economic rival for Southwest Virginia, ranks 10th. While not every part of Virginia is expensive — Northern Virginia is uniquely expensive — this is still how Virginia balances out. Our next governor needs to figure out how to make Virginia a less expensive place to do business, but that’s not as easy as simply signing an executive order.
8. Virginia’s other big weaknesses
We’ve already addressed these: Virginia fell from 11th to 14th for the economy and from ninth to 14th for workforce. It’s unclear why Virginia’s workforce score went down, but the economy score went down because of tariffs and federal cutbacks. More on these to come.
9. The political consequences
It’s hard to read this report as anything but bad news for Virginia Republicans. This is one of those “live by the sword, die by the sword” moments. They made a big deal of the state’s rankings before, so it’s hard to discount those new rankings now. Most people aren’t going to read through all these details (but I appreciate those of you who do!).
So much of politics is predictable — Democrats say bad things about Republicans, Republicans say bad things about Democrats. The power of the CNBC report is that here’s a reputable outside source (and one that specializes in business, which ought to be a Republican stronghold) that essentially validates a key Democratic argument: Trump’s policies are hurting Virginia.
This makes it hard for Republican Winsome Earle-Sears to run a gubernatorial campaign on the theme of “keep a good thing going” when here’s a credible report that says the good times are becoming less good. The fact that CNBC ranks Virginia so low on “cost of doing business” and “cost of living” plays right into Democrat Abigail Spanberger’s emphasis on affordability (even if Republicans do contend that it’s Democratic policies that are making the state less affordable).
10. The policy consequences
These are more complex and therefore, to me, at least, the more interesting fall-out from this year’s rankings. Virginia can’t do anything about national tariff policies or the reductions in the federal workforce. It can — over time — do something to grow a bigger private sector workforce, particularly in Northern Virginia. How, though, will it do that? One reason for the high cost of doing business in Northern Virginia is the high cost for land. Reducing that is good for buyers but not for sellers. How do we navigate that? If computing power is now an economic measure, how does that fit into how we approach data centers? And we can’t talk about data centers without talking about energy — where is that going to come from? It’s easy for a politician to say, “Oh, we need more of this particular type of energy,” but much harder to actually build that energy source, be it solar or natural gas or something else, when just about everything draws some kind of local opposition. We all want the lights to come on, but none of us want a solar farm or a gas plant or a nuclear plant next door. And with Virginia’s workforce ratings sinking, how do we persuade more college graduates to stay in the state? That’s easy — we need more jobs and more housing, and those things are harder.
There’s a lot here that our next governor will have to deal with, no matter who she is. Unfortunately, as I wrote Thursday, we don’t know nearly enough about where Spanberger stands on these issues but we know almost nothing about what Earle-Sears would do.
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