Virginia’s economy slowing amid Trump-fueled uncertainty

The Trump administration’s mass federal layoffs are hurting Virginia’s economic growth. 

Ricardo Ortiz lost his job last week as bar manager for the Lost Dog Cafe after the Arlington restaurant suddenly closed. 

The news took Ortiz, who’d only worked for the business for about five weeks, by surprise. But for Ortiz, who is 57 and has worked in the service industry for 39 years, the restaurant closing is a sign of the times as the Washington, DC region has taken an economic hit since President Donald Trump returned to the White House.

“As soon as this administration took over, the amount of business in the DMV has dropped significantly,” Ortiz, who lives in Maryland, said. “There’s a lot of restaurants that are in trouble.” 

Ortiz’s experience captures in miniature something that’s happening more broadly across the region and in Virginia. 

OpenTable data showed a decline in foot traffic to DC restaurants after Trump deployed federal troops across the city. Officials from Northern Virginia to Hampton Roads have worried that Trump’s pugnacious stance to Canada would hurt tourism from America’s neighbor to the north. And Trump’s mass layoffs of federal workers has loomed even larger over Virginia’s workforce and economy. 

“People that live in the DMV that have been laid off and stuff like that, well, they don’t have the money to go out as much anymore,” Ortiz said. 

The effects of Trump’s mass layoffs are being felt far beyond the dining rooms of restaurants in the DC region.

Economists at the University of Virginia’s Weldon Cooper Center for Public Service believe VIrignia’s economy is slowing and can expect weak growth due in part to Trump’s federal layoffs, according to a quarterly forecast released last week. 

“Historically, Virginia has been kind of very similar to the nation, or maybe even better than the nation, and what we’re seeing now is Virginia sort of underperforming the nation, at least for the time being,” Eric Scorsone, Weldon Cooper’s executive director, said on a press call Monday. 

Weldon Cooper forecasts that many of the effects of the federal layoffs and firings will be felt at the end of this year and into 2026. That’s in part because many of those firings are being contested in court and may not come to fruition until later. Earlier this month, a federal judge in San Francisco blocked Trump’s firing of federal workers during the government shutdown. 

The shutdown itself could also cause economic pain to federal workers the longer they go without getting paid. Those missed paychecks translate into fewer trips to the store and fewer nights out. 

“The longer this goes on, obviously, the bigger impact it could have,” Scorsone said. 

Weldon Cooper expects Virginia’s unemployment rate of 3.6% to rise to 4.1% by the end of the year, which isn’t as bad as things got during the pandemic, but is still a cause for concern. 

“It’s not as bad as it has been historically, perhaps, but still, it’s increasing,” Scorsone said. 

Weldon Cooper forecasts by the end of 2025, Virginia will lose 7,600 government jobs, which include federal, state, and local government employees. Federal job losses are being offset by increases in local government hiring, Scorsone said. 

Virginia is home to about 200,000 federal workers. Professional, scientific, and technical services jobs, which are closely tied to federal contracting, are expected to decrease by 6,600 by the end of the year. 

“The federal government is downsizing,” Scorsone said. “That’s very clear.” 

The challenge for Virginia is attracting companies that can make up for the federal job losses.

“The region does face some challenges now in shifting to private sector jobs that can fill that hole,” Scorsone said. “So I think that is a challenge for NOVA in particular.”