April unemployment in Virginia remains steady, but report predicts job losses

Virginia’s labor market last year was worse than previously thought, and economists expect the situation to deteriorate further in 2026.

Revised data from the Bureau of Labor Statistics show the state lost 10,400 jobs in 2025, as opposed to previous estimates that showed the market was near stagnant. The latest forecast now projects an even steeper decline this year, with about 17,800 jobs expected to be lost — roughly 7,500 more than earlier estimates.

In its quarterly economic forecast released Tuesday, the University of Virginia‘s Weldon Cooper Center for Public Service said the revised data point to a deeper slowdown.

“A labor market already contracting in mid-2025 has less room to absorb further pressure from federal workforce adjustments, weaker hiring and slower national growth,” economists wrote in the report.

Also on Tuesday, the Federal Reserve Bank of Richmond released an April snapshot of the state’s economy, showing a mild year-over-year slowdown.

Virginia’s total payroll employment saw little change in April, increasing by just 600 jobs, while the unemployment rate held steady at 3.8%. But on a year-over-year basis, employment declined by 37,800 jobs, or 0.9%, a contrast to modest national growth of 0.2% over the same period.

The state’s unemployment rate in April was still lower than the national rate of 4.3%, also unchanged from March. Virginia’s labor force participation rate decreased by 0.2% to 63.4% in April compared to March.

Virginia’s unemployment rate rose from 2.9% in mid-2024 to 3.6% by December 2025 and 3.7% in early 2026, the report said. Weldon Cooper economists project the unemployment rate will continue to rise through the rest of the year, reaching about 4.7% by December, before peaking in early 2027 and gradually declining.

The healthcare sector is projected to add another 3,500 jobs in 2026 after gaining 9,100 in 2025. Transportation and warehousing is also expected to grow, adding about 2,700 jobs this year.

Weldon Cooper’s February forecast projected modest real GDP growth, but the latest outlook now shows Virginia’s economy contracting by 0.2% in 2026, roughly $3 billion less in annual GDP.

The center predicts that job losses will be concentrated in the first part of the year, reflecting the carryover effects of late 2025. Although conditions are projected to stabilize later in the year, they aren’t expected to offset the initial decline. Also, while recovery is expected in 2027, when employment is projected to grow by 0.9%, economists said this should be interpreted as normalization rather than rapid acceleration.

On the other hand, several key industries are expected to continue shedding jobs. Manufacturing remains under pressure, while government employment is projected to decline by another 4,700 jobs in 2026 after a 6,000-job decline in 2025. According to the Office of Personnel Management, about 317,000 federal employees left their jobs in 2025, much of this tied to staffing cuts under the Trump administration.

Weldon Cooper expects professional services to also decline further, after losing 17,000 jobs in 2025, with another 4,800 job losses projected this year. The sector is closely tied to federal contracting and private sector demand and is beginning to face pressure from artificial intelligence, which is reshaping some routine and analytical jobs.

“Weakness in this sector, therefore, has broader implications for income growth and regional labor markets, especially in Northern Virginia,” according to the center’s report.

Arts, entertainment and recreation is expected to experience the largest percentage decline in 2026, with a 5.3% employment reduction.

Weldon Cooper researchers expect a more mixed picture for the housing market, with average home values projected to rise slightly from about $447,000 in 2025 to $449,000 in 2026, a 0.4% increase. But sales are expected to decline by 2.6% in 2026, with further decreases projected in 2027. After a 7.8% drop in 2025, new construction permits are expected to decline another 7.3% this year and 2.3% in 2027.