In Tuesday’s column, I looked at three recent economic reports that detailed how Virginia’s economy is slowing down, primarily due to President Donald Trump’s federal workforce reductions and tariff policies that have raised prices and reduced trade through the Port of Virginia.
The key figure: Virginia’s gross domestic product grew by 6.2% in 2024 but fell to 1.7% so far this year — a drop from No. 6 in the country to No. 34.
Furthermore, our two biggest economic engines — Northern Virginia and Hampton Roads — are now losing jobs.
If you want more figures, you can read my column or the reports themselves, which come from the Brookings Institution, Old Dominion University’s Dragas Center for Economic Analysis and Policy and the University of Virginia’s Weldon Cooper Center for Public Service.
Tuesday’s column dealt with what has actually happened. Now we come to what economists predict will happen based on what they’ve seen so far. That’s obviously more debatable, but all these forecasts grow out of what economics document is already going on.
The job growth in our fastest-growing job sector may start to slow or reverse due to One Big Beautiful Bill
Virginia’s fastest-growing job sector has been “health care and social assistance,” which added 23,900 jobs over the past year, almost as many as the second and third fastest-growing sectors combined (local government and mining/logging/construction).
That job growth may not continue, at least not at the same rate.
In his presentation to the Senate Finance Committee, ODU’s Robert McNab noted that the Norfolk-based Sentara health care system recently announced it’s eliminating 400 positions — 220 layoffs and 180 open positions that won’t be filled. About two-thirds of those positions are in Virginia.
These may not be the last reductions in the health-related workforce, McNab said. “Those are likely to accelerate in the coming months as the impact of the One Big Beautiful Bill become more apparent in the health care environment, which providers say is more challenging than before.”
Forecast says Virginia will lose jobs overall this year
The ODU report shows Virginia is still on the plus side of job growth, but the University of Virginia report predicts it won’t stay there. Many of the federal job cuts haven’t shown up in the stats yet because some workers took buy-outs and remained on the federal books through September. Once they kick in, “Virginia is expected to shed 1,800 jobs in 2025,” the Weldon Cooper Center report says. If that’s so, that would be the first time Virginia has lost jobs since the pandemic year of 2020 and the first time it would have lost jobs in a non-pandemic year since 2010, when Virginia was still coming out of the Great Recession.
Unemployment in Virginia is rising — and expected to rise more
Those job losses are expected to continue into 2026, according to the Weldon Cooper Center report. Virginia’s unemployment rate is currently 3.9%, but is rising fastest in Northern Virginia, where federal jobs have been concentrated. The Weldon Cooper report predicts that it will rise to 4.1% by year’s end and then continue on to 5.0% in mid-2026, the highest it’s been since the pandemic. At that point, Virginia’s unemployment, which usually runs below the national average, is expected to be higher than the national average. The last time Virginia’s unemployment rate was that high in a non-pandemic year was 2014, when it was 5.1%, a decline from a high of 7.3% in 2010 during the Great Recession.
Virginia employment to face “continuous stagnation” in 2026
The Weldon Cooper Center report sees little job growth happening in Virginia in 2016. “Recovery is expected to begin in late 2026, with a net gain of only 2,200 jobs, effectively resulting in 0.1% employment growth,” the report says. It categorizes this as “continuous stagnation.”
The state’s economy will improve in 2027, but not by much
The Weldon Cooper Center sees economic growth in the state picking up a little in 2027, with unemployment dropping to 3.9% — still higher than the 2.8% the state had in 2023 or the 2.9% it had in 2024.
Virginia will not enter a recession
If there’s any good news in these forecasts, it’s this: Virginia is not expected to fall into a recession. The Weldon Cooper Center sees Virginia’s gross domestic product growing by 0.6% this year. Outside of the pandemic, that would be the slowest GDP growth Virginia has seen since 2014, when it was absolutely flat at 0.0%.
Virginia’s GDP has typically grown faster than the nation as a whole. That won’t be true for the next few years, Weldon Cooper says. It sees Virginia’s GDP growth at 1.0% for 2026 and 1.7% for 2027, with the former being below the projected national rate and the latter being tied.
Overall, the forecast sees slow economic growth nationally, with Virginia being hit hard because of its reliance on the government and international trade.
What this means
It means our next governor, whoever she is, will have to spend more time on economic development than she might otherwise have done. The Weldon Cooper Center forecast covers 2026 and 2027; that’s half of the next governor’s term. It does not sound as if it will be a particularly happy one. Northern Virginia, in particular, will need to rebuild its economy to be less dependent on the federal government. As cities such as Danville and Martinsville can attest, that’s a decades-long project — although at least the federal government hasn’t gone out of business entirely, the way major employers in those cities did.
The next governor will also likely face spending constraints. State revenues have so far been running ahead of projections — through September, they were running 7.9% ahead of the forecasts for the fiscal year-to-date. That will provide a healthy cushion for the next governor, and the General Assembly, but we’ve seen before that surpluses can dissipate quickly. With the federal government reducing or eliminating some programs, that will put more responsibility on the states. Philosophically, that might be a good thing, but it will put pressure on state budgets.
Both candidates for governor have said they want to get rid of the car tax. I’ve written before that this is exceedingly unlikely. The uncertainty in the state’s economic forecast makes this even more unlikely. The reason why the state hasn’t done away with the car tax is that it’s not a state tax; it’s a local tax. Any locality could get rid of it right now, but none have because they need the revenue. All plans for doing away with the car tax have involved the state keeping localities whole by funding them out of the state’s surplus. This economic forecast does not give any encouragement that the state will have the funds available to cover the expense of the car tax. Vote for whoever you want, but don’t vote for them with the expectation that they’ll do away with the car tax. Instead, we ought to be voting for whichever candidate we think is best-prepared to navigate this new economic terrain.
Where the candidates stand
All six candidates for statewide office, and many candidates for the House of Delegates and local offices, have responded to our issues questionnaire. You can see their answers on our Voter Guide.
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