Virginia unemployment rate projected to rise in 2025, 2026

Economic pain could be avoided with better federal and state policies.

Virginia workers could be in even more trouble this year unless better policies are put in place to address the affordability crisis. 

That’s because fewer Virginians are expected to have jobs by the end of 2025, according to a quarterly forecast released last week by the University of Virginia’s Weldon Cooper Center for Public Service. Weldon Cooper predicts that Virginia’s July unemployment rate of 3.6% will rise to 4.2% by the end of the year and up to 4.6% in 2026 before edging down to 3.9% in 2027. 

Slowing economic growth is expected to put pressure on jobs that depend more on federal spending, which is under attack from the Trump administration’s austerity measures, according to Weldon Cooper. 

“We do expect 2026 to be weaker now: basically 0% job growth” said Eric Scorsone, Weldon Cooper’s executive director. “So, flat, which, you know, is not something you’d want. Generally, you’d want job growth.” 

The jobs under the most pressure are government jobs, which Weldon Cooper called “a cornerstone of Virginia’s labor market,” and professional, scientific, and technical services jobs that are shrinking for the first time in over a decade.

The number of Virginia government jobs actually increased from June to July by 4,200, according to the US Bureau of Labor Statistics. The growth was most likely spurred by local government hiring which has helped to offset the impact of federal layoffs, per the Weldon Cooper Center. 

Some federal workers are not employed but still getting severance pay. There are worries about what will happen after September when those payments stop and these workers officially file for unemployment. But the potential impacts to Virginia are hard to predict given that Trump’s firings of these workers have sometimes been followed by re-hirings or lawsuits that hold them up. 

“It’s a really chaotic situation,” Scorsone said on a call with reporters. 

More manufacturing jobs, which have been in decline for years, are also expected to disappear, having already taken hits from the shutdown of the Georgia-Pacific plywood mill in Emporia and Goodyear layoffs announced in Danville. 

Levi Goren, the research director at The Commonwealth Institute for Fiscal Analysis, notes that as Virginia’s unemployment rate has risen, there’s been a decline in the state’s labor force participation rate, which measures people who are actively working or looking for a job. Trump’s assault on immigrants could be playing a role in pushing people out of Virginia’s labor market. 

“I think it’s possible we’re seeing some impact of the immigration enforcement activities in terms of driving some immigrant workers out of the labor force,” Goren said, adding it could also reflect aging workers retiring.

While there are troubling signs of where Virginia’s economy could be headed, nothing is set in stone, Goren said. It would help Virginia if the federal cuts to jobs and contracts stopped, and at the state level there are many things that can be done to help workers and the economy, Goren said. 

Goren expects there will be legislation to address Virginia’s affordability crisis in the upcoming General Assembly session, including to raise the minimum wage and to strengthen collective bargaining rights. 

“The status quo is not good enough for a lot of Virginia families,” Goren said. “There’s a lot of folks struggling to make ends meet.”