Is slight rise in Virginia unemployment ‘calm before storm?’

Virginia’s unemployment rate numbers are on a slight rise, according to data from the state’s Department of Workforce Development and Advancement, also known as Virginia Works.

The state agency reports that Virginia’s seasonally adjusted unemployment rate in March rose a tenth of a percentage point to 3.2 % compared to 3.1% in February and 2.8% from a year ago. Household survey data collected in March shows the labor force decreased by 9,752 to 4,586,386 as the number of unemployed residents increased by 5,029 to 145,441.

The largest job loss occurred in professional and business services, which dropped 4,400 from February to 805,300. Federal government jobs decreased by 4,100 to 192,000, although state government employment increased by 1,000 to 161,800 and local government employment increased by 700 to 408,900 over the month. Tens of thousands of federal jobs losses have been announced under the current Trump Administration, which has made moves to slash federal spending and federal jobs.

Information and miscellaneous service jobs both declined by 300, with information jobs dropping to 70,200 and miscellaneous services jobs dipping to 204,500. Mining and logging remained unchanged.

“As one might expect, we’re now starting to see the impacts of federal layoffs in unemployment data,” said economist Bob McNab, director of Old Dominion University‘s Dragas Center for Economic Analysis and Policy, said of the newly released data.

McNab also speculated that federal contracts that have either been reduced or terminated outright would land in the “professional and business services” category in terms of providing support to government activities in Northern Virginia. He said these employment drops are what has been expected to show up in the data, considering all of the recent news about the federal government workforce reductions.

“We would expect, I think it’s a reasonable expectation, that these losses will continue in coming months, if not accelerate, given what we’ve seen in terms of proposals to reduce the the Health and Human Services budget significantly, to reduce the National Oceanic and Atmospheric Administration’s operations significantly,” McNab said. “And so we would expect as those agency cuts filter through, we would expect unemployment from federal government employees to increase, and then among the contractors supporting those employees to increase as well.”

Statewide, the number of employed residents decreased 14,781 to 4,440,945.

Virginia’s nonagricultural employment increased by 5,900 to 4,271,400. This is a 48,300 increase since March 2024. March also saw private sector employment increase by 8,300 to 3,508,700. The largest job gains in March from February were in construction (up 7,200 to 226,100), education and health services (up 2,200 to 632,400) and trade, transportation and utilities (up 1,600 to 680,400.)

In an April 18 news release, Gov. Glenn Youngkin emphasized the improvements in nonfarm payroll.

“Nonfarm payrolls added nearly 6,000 jobs,” said Youngkin in a statement. “This job growth reflects businesses hiring as Virginians continue to find opportunities. Virginia has jobs, and we’re committed to strengthening the business environment so that everyone can find a path to success right here in the commonwealth.”

While McNab saw the increase in construction jobs as “welcome and a sign of vitality for the Virginia economy,” he cautioned equating these increases to the loss of federal jobs.

“I think there’s a note of concern in that we’re gaining jobs that typically pay less than jobs we’re losing on average,” McNab said.

The Virginia labor force participation rate — the proportion of the civilian population ages 16 and older that is employed or actively looking for work — declined 0.2% in March to 65.5.%

Secretary of Labor Bryan Slater said in the governor’s release that “the decline in labor force participation and employment suggests some Virginians may be sitting on the sidelines. Our focus remains on re-engaging jobseekers and connecting them to the training and resources they need to thrive in today’s job market.”

While much of the report was positive, McNab cautioned it was a “calm before the storm.”

“Because the impact of federal government layoffs, contract reductions and the impact of tariffs have yet to materialize,” McNab said. “So the soft data is telling us these impacts are coming. We believe the impacts are coming. We’re starting to get the first signs of those impacts, but they have yet to fully come into view.”