While Youngkin celebrates Virginia’s labor force gains, economists warn of future unemployment

Gov. Glenn Youngkin says he feels good about the state’s employment landscape.

In an announcement Tuesday, the governor celebrated that Virginia added 7,100 more jobs in January 2025, according to data from the U.S. Bureau of Labor Statistics (BLS).

“More Virginians are working than ever in the commonwealth as jobs and opportunity continue to expand in Virginia,” Youngkin said in a statement. “This performance underscores the success of our pro-business policies and our ongoing focus on workforce development, which are providing Virginia companies the talent they need to grow and Virginians with the opportunities to succeed.”

However, there are signs of trouble on the horizon, with rampant headlines about federal agencies’ closures and layoffs, as well as President Donald Trump’s proposed tariffs that could upend other industries.

“It’s the calm before the storm,” economist Bob McNab, director of Old Dominion University’s Dragas Center for Economic Analysis and Policy, said this week. He predicts the number of unemployed workers in the commonwealth will grow this year in reaction to federal workers’ layoffs and fewer federal contracts in certain sectors.

Already, the state’s unemployment rate rose a tenth of a point to 3% in January, compared to 2.9% in December 2024 and 2.8% in January 2024, according to data reported this week by the Virginia Department of Workforce Development and Advancement, the state agency also known as Virginia Works. And last week, the number of Virginians filing for unemployment rose more than 40% compared to the week before.

Most economists are waiting to see what comes when February’s numbers come out, which will reflect the Trump effect more clearly, but McNab, who produces statewide and Hampton Roads economic forecasts, is fairly sure what’s coming. “What we’re going to see over the coming months is that the federal layoffs and the reduction in federal contracts are going to accelerate job losses, first in the federal government sector, and then in other sectors as contracts are interrupted or terminated.”

In spite of federal judges pausing some agencies’ closures and federal workforce layoffs, impacted Virginians are on edge.

“Given that some agencies have been shuttered entirely and others are working on reduced staff, and there are reduction in force plans that are being quoted, at some point, one would be reasonably expect that we would see federal employment decrease,” McNab said.

Job, labor force increases — for now

However, the numbers looked fine for January. As usual, Virginia’s seasonally adjusted unemployment rate of 3% was below the national rate of 4%. The number of employed Virginians increased to more than 4.28 million in January. The private sector saw an increase of  2,300 jobs to about 3.5 million total, while public sector jobs increased by 4,800 to 770,800. Within that sector, federal government jobs increased by 400 — a bump that’s not likely to last in next month’s reports.

In the governor’s announcement Tuesday, he noted that total nonfarm payroll in Virginia has increased by 276,400 jobs since 2022, “with more than 70,000 future hires expected based on company announcements.”

Education and health services saw the state’s largest gains of 5,000 jobs from December 2024 to January, and construction saw the most losses at 2,900 lost jobs, and trade, transportation and utilities following with 2,100 lost jobs.

Christopher M. Herrington, associate professor of economics at Virginia Commonwealth University, found January’s unemployment report for Virginia to be par for the course.

“It looks pretty stable,” he said. “There’s nothing there that looks surprising or concerning, but that comes with a huge grain of salt, [because] that was the January report.

“I think we all know that a lot of the things that people are anxious about right now, having tariffs and federal layoffs and the associated spillover effects from that, didn’t start till February. So I’m hesitant to read too much into one report. I think I’m much more interested in seeing what happens with with the subsequent unemployment reports over the next few months.”

Eric Scorsone, executive director of the University of Virginia’s Weldon Cooper Center for Public Service, found the initial unemployment claims filed during the week that ended March 8 to be more interesting than the unemployment rate. Virginia saw 4,036 initial claims filed that week, 40% above the previous week and 81% higher than the same week in 2024.

“I do think that’s more reflective of what’s likely going to happen,” Scorsone said. “Four thousand still isn’t a lot if you compare that to COVID or other times. It’s still a low number, but [it is] up a lot.”

Most of those job losses were in the fields of manufacturing; professional, scientific and technical services; administrative and support and waste management; retail, health care and social assistance, according to Virginia Works’ report March 14.

And yet, the numbers don’t quite capture the feeling of precarity among those whose livelihoods are connected to the federal government, whether in the public or private sector.

“What I’m worried about right now is that there’s this pall of uncertainty that seems to be hanging over everything just because policy levels at the federal level have been so rapid and so back and forth,” says Herrington. “My concern is that both consumers and businesses are getting anxious about all of these policy changes and that they’re going to pull back on spending and investment and take this wait-and-see approach until things settle down and that’s where I think there’s much more potential for the economy as a whole to slow down.”

And then there are the tariffs.

The president has stayed in the news with his on-and-off tariff wars, while leaving businesses in suspense about their length and potential economic impact.

It’s too early, according to McNab, to say whether Trump’s tariffs will affect Virginia’s manufacturing industry. The United States’ 25% tariffs on steel and aluminum imports went into effect earlier this month. Additional, 25% tariffs on imports from Mexico and Canada are scheduled to go into effect in April, along with a 10% tariff on oil and energy products from Canada. Imports from China face a 20% tariff. Last week, Trump threatened to place a 200% tariff on EU countries’ wines and other alcoholic products, causing worry among retailers.

“Employers see the tariffs are coming and anticipate higher production costs and thus reduce employment in anticipation of those effects, or [this is a] temporary aberration,” McNab said.

David Bieri, an associate professor for Virginia Tech’s School of Public and International Affairs, said Tuesday that implementing the tariffs as they are structured right now is not “going to lead to a tremendous amount of job creation in the United States, simple as that.”

On the other hand, Bieri stressed he’s not pessimistic about the U.S. economy, pointing out that it survived an unprecedented pandemic. “If today’s conditions are the best predictor of tomorrow’s conditions, we can say, “Yeah, things are looking pretty good.'”