Virginia enters June without a state budget for the next fiscal year — now less than a month away — a state legislature seemingly stalemated over data center taxation and a governor who is at odds with many in her own party on some key issues.
It’s easy to focus on all that drama with a capital “D.” In the proverbial story of the forest and trees, all those are trees, or many even just the thorny underbrush. Here’s perhaps what we really should be focusing on: Virginia’s economy has problems.
The state lost jobs in 2025 and is on track to lose even more this year. While the federal job reductions that are concentrated in Northern Virginia account for much of this, they’re not solely responsible. Almost every sector of the economy has seen declining employment, with the losses in manufacturing being among the steepest. The state’s gross domestic product is shrinking, which doesn’t officially define a recession but can sure be part of one.
These trends pose both political challenges (particularly for Republican members of Congress who must defend President Donald Trump’s handling of the economy in the upcoming midterms) but also policy ones for both parties. Trump’s tariffs, federal cutbacks and Iran war are certainly his doing, but the impacts of an aging society and the adoption of artificial intelligence know no political bounds.
The data I’m about to discuss is hardly secret. Some of it was presented recently by state Secretary of Finance Mark Sickles to legislators on the Senate Finance Committee in Richmond; other parts came from the regular economic forecast from the Weldon Cooper Center for Public Service at the University of Virginia. Here’s a summary of both, with data from other sources mixed in, as noted.
Virginia is losing jobs
Revised employment data shows that Virginia lost 10,400 jobs in 2025 and is on track to lose another 17,800 jobs in 2026, according to the Weldon Cooper Center. Sickles presented the numbers sliced a different way: Virginia has lost 41,900 jobs since the start of the current fiscal year on July 1, 2025. Why the difference? That’s because the Weldon Cooper Center says Virginia’s job growth in 2025 was concentrated toward the beginning of the year. The state lost more than 30,000 jobs in the second half of 2025, the center says, but the yearlong tally came up lower because of job growth early in the calendar year.
Whichever way you look at things, this is not good. Virginia hasn’t lost jobs in a non-pandemic year since 2009, when the country was in the Great Recession and every state lost jobs, according to the Bureau of Labor Statistics.
Trump’s policies have had a unique impact on Virginia
In 2024, Virginia ranked 10th in the country for job growth, according to BLS data compiled by the Seidman Research Institute at Arizona State University. In 2025, it fell to 38th — and into the negative range.
What happened? Trump took office.
That’s not a political judgment; that’s just a chronological fact. However, it’s also a cause and effect. Trump vowed to cut the size of the federal workforce and was true to his word. Those cuts had a disproportionate impact on Virginia (especially Northern Virginia). Of the 41,900 jobs lost in the current fiscal year, the single biggest category has been federal government jobs: 19,100 in all, according to the Bureau of Labor Statistics. Before we point too many fingers at Trump, though, consider this:
Even if there had been no federal job cuts, Virginia would have still lost jobs
The second biggest category of job losses has been in “professional services” — 14,800, according to the BLS. “Professional Services is closely tied to federal contracting and private sector demand,” the Weldon Cooper Center says, so as government jobs go down, so do professional services jobs.
However, even if Trump had made no changes in the federal workforce, the professional services category would have lost some jobs anyway, Weldon Cooper says. That’s because professional services “is one of the sectors most exposed to the early reorganization of routine, analytical, and client-support tasks associated with artificial intelligence.”
What we don’t know from this data, but maybe should know, is just how many jobs AI is eliminating (and how many it’s creating and where).
There’s another reason Virginia lost jobs, though.
Virginia is losing manufacturing jobs
Trump came to office promising to restore manufacturing jobs. He has not. That’s not necessarily his fault, though. You can argue about the impact of tariffs on manufacturing, but the reality is that since the arrival of the information age, presidents of both parties have vowed to “bring back manufacturing,” and none have truly succeeded.
That’s because they’re battling global forces that are bigger and stronger than some mere executive order. There is foreign competition, to be sure. However, there’s also the increased mechanization of manufacturing jobs. Some of that is driven by the profit motive (machines don’t unionize, machines don’t call in sick, machines don’t complain) but also by demography: We’re looking at a future with fewer workers, so industry has to adjust. Technology provides the solution.
Whatever the reason, the number of manufacturing jobs in the U.S. has declined from 12,875,000 when Trump took office again in January 2025 to 12,596,000 in April 2026. In Virginia, we’ve lost 8,700 manufacturing jobs over the fiscal year; that’s the category with the third-biggest decline, behind federal government jobs and professional services. On a percentage basis, manufacturing has declined faster (-3.9%) than all but one other category, and that’s a small one (agriculture, silviculture and mining, -6.9%).
Both the national trend and the state trend here are new. Under Trump’s first term and under Joe Biden’s term, there were at least marginal gains in manufacturing jobs both nationally and in Virginia. Now we’re seeing actual declines for the first time since the Great Recession.
That brings us to this:
Most job sectors are losing jobs; only three show any growth
Only three economic sectors in Virginia show growth over the past fiscal year: local government, state government and education/health services. Of those three, local government has added more jobs than any other sector in the state. For those who want to see robust private sector growth, that’s not a good trend.
According to the Bureau of Labor Statistics, the only non-government job sector with employment growth in Virginia is education/health (which is basically read as health). We’ll have more to say about healthcare jobs shortly.
So far, I’ve just dealt with facts — things that are documented from the recent past. Now, we turn to forecasts, specifically the one from the Weldon Cooper Center.
Forecast: Virginia will lose almost twice as many jobs in 2026 as it did in 2025
After a strong start last year, Virginia wound up losing 0.2% of its jobs in 2025, the Weldon Cooper Center says. It now forecasts the state’s employment will shrink 0.4% this year. “This would mark the second consecutive year of employment contraction,” the center says. That hasn’t happened in Virginia since the Great Recession years of 2008-2009, although the job losses then were steeper (-1.31% in 2008, -2.87% in 2009).
If there’s any good news, it’s that the worst may already be behind us. Weldon Cooper says job losses this year “are expected to be concentrated in the first part of the year, reflecting the carryover effects of late-2025 weakness. Conditions are projected to stabilize later in the year, but not enough to offset the initial decline, and such a recovery will depend on the change in the national economic environment. While a recovery is expected in 2027, when employment is projected to grow by 0.9%, it should be interpreted as normalization rather than rapid acceleration.”
If that forecast proves true, the projected job growth in 2027 would still be the slowest job growth in Virginia since 2016, according to the Bureau of Labor Statistics.
Forecast: Manufacturing will lose more jobs than any other sector in 2026
The Weldon Cooper Center sees 5,700 manufacturing jobs in Virginia going away this year, more than the 4,800 professional services jobs expected to go away and the 4,700 government jobs projected to disappear. (Here’s where we run into a bit of statistical apples and oranges: The Weldon Cooper Center data combines all government jobs into a single category. However, it advises that federal job losses are expected to drive that number and won’t be offset by increased hiring by state and local governments.)
It’s hard to generate much sympathy in some parts of the state for government jobs, and even private contractor jobs, in Northern Virginia going away, but all parts of the ideological spectrum like to talk up manufacturing, and it’s clearly under pressure from multiple fronts: tariffs, trade and technology.
Forecast: The main job growth will be from healthcare, but even that will slow
Healthcare is where the action is, job-wise, a reflection of an aging society that requires more care. In 2025, healthcare added 9,100 jobs in Virginia. Weldon Cooper says healthcare will still add more jobs than any other sector this year, but the expansion will slow to 3,500 jobs.
Construction will see another 1,300 jobs — but that’s also a slowdown from 5,100 jobs last year.
By contrast, transportation and warehousing is expected to see job growth accelerate — from 1,400 jobs last year to 2,700 this year.
Forecast: Virginia’s gross domestic product will shrink
The Weldon Cooper Center sees the state’s GDP shrinking by 0.2% this year before rebounding to 2.0% growth next year.
My assessment: Challenges for both parties ahead
The immediate challenge is for Republican incumbents in this fall’s congressional races. Midterms are rarely kind to the party in power, which puts Republicans on the defensive. Bad economic news always hurts incumbents, no matter which party, so look for Democrats to spend a lot of time hitting Republicans on the economy. That’s easy political fodder, but harder policy.
In Virginia, given these numbers, it seems clear that Democrats, being the majority party, need to really focus on the economy. They can blame this slowdown on Trump, but blame doesn’t fix the problem: Virginia is losing jobs, and those losses aren’t just in government jobs. Gov. Abigail Spanberger, in particular, needs to be an economic development governor. One complication is that much of the economic growth Virginia is seeing right now is in the form of data centers, which many in her party would like to curtail. They may have good reasons for doing so (energy demands, for instance), but critics fear that slowing down data centers will send a signal to other sectors that Virginia is no longer “open for business.”
Whatever the policy solutions, these are the numbers, and numbers don’t care about parties.
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