UVA experts see rising costs, falling employment for Virginia

Virginia’s 2026 economy is predicted to be weaker than anticipated, with rising prices, increasing unemployment and continuing job losses, according to a quarterly economic forecast from the University of Virginia’s Weldon Cooper Center for Public Service.

Predictions are based on revised 2025 figures that show the state’s economy slowed more than previously anticipated. Instead of moving through 2025 with near-flat employment, the commonwealth is now estimated to have lost 10,400 jobs.

The government, professional services and manufacturing sectors lost the most jobs in 2025, according to the report, and will likely continue to see job losses in 2026.

“It shows that the slowdown in Virginia began earlier and was deeper than previously reported,” the report states. “It changes the starting point for 2026. 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.”

“Virginia’s reliance on federal employment and federal spending remains an important part of the forecast,” said João Ferreira, interim director of the Center for Economic & Policy Studies. “The impact is mostly concentrated in professional services and direct government jobs, but it can also be seen in local consumer spending. This explains why Virginia’s forecast is weaker than the national forecast in 2026, even though the national economy remains in positive territory.”

João Ferreira, acting director of the Weldon Cooper Center’s Center for Economic and Policy Studies, says spending cuts and layoffs at the federal level may affect Virginia’s employment and consumer spending. (Photo by Matt Riley, University Communications)

Key findings outlined in the report include:

• Virginia is projected to lose 17,800 jobs in 2026.
• Prices increased by 2.4% in 2025 and are projected to rise by 2.6% in 2026. That’s below the national forecast, but prices continue to rise while labor market conditions weaken.
• In 2026, average home values are expected to rise slightly to $449,000, rents are expected to increase about 3.4% and permits to construct new housing will drop by 7.3%, after decreasing 7.5% in 2025.
• Virginia’s gross domestic product, the sum of all goods and services produced within the state, is expected to decline by 0.2%. That’s significant because it is expected to occur along with job losses and rising unemployment.

Economic conditions are projected to stabilize later in the year, but not enough to offset declines. Recovery, the report notes, depends on national-level economic changes.

The Weldon Cooper Center provides nonpartisan data, research services and training programs to local communities, state government agencies and public sector leaders, which policymakers and elected officials use to make decisions.

The center’s forecast model incorporates national macroeconomic assumptions with Virginia-specific indicators. The model uses national data from Moody’s Analytics and more than 30 additional data sources to tailor projections to the commonwealth.