The labor market landscape in the commonwealth has been experiencing significant shifts in 2025 due to a combination of real-time changes in economic, policy, and sector-specific factors.

1. Potential job losses in the overall economy due to federal workforce cuts.

Many regions in Virginia rely heavily on federal government employment for their economic stability. Since the beginning of 2025, there have been significant federal workforce reductions along with canceled federal contracts. This has led to a consistent decline in total employment levels in the federal government as well as related sectors since January. The unemployment rate in Virginia, currently 3.4%, has gone up consistently for the past five months. We expect to understand the full scope of job losses by this fall as many of the laid-off federal employees are still on the federal government’s payroll, depending on their termination agreements. As a result, we could see an increased pool of job seekers competing for a limited number of available jobs in the economy, leading to a tough job market.

2. Return-to-office mandates could have an impact on the housing preferences of the population.

Population distribution and economic growth across Virginia have seen significant impacts from remote work. This year, many workplaces have implemented stricter return-to-office mandates that require employees to work from the office more often than the flexible work schedules prompted by the COVID-19 pandemic. We do not have the population data for 2025 yet, which will help us fully understand the scope of any resulting migration patterns. One of its consequences could be the increase in demand for housing closer to job centers. This would signal a reversal from the trend seen over the past few years with more people moving farther into the exurbs and rural regions of Virginia while continuing to work for employers in major city centers. This could also cause more churn in the labor market from employees looking for alternate job opportunities that offer more flexibility.

3. Certain job sectors are expected to continue to see job growth as well as attract employers and investments.

The Government sector has lost more than 7,000 jobs since December 2024, and this count is expected to increase once more data becomes available. On the other hand, the Construction sector has experienced significant gains in employment levels this year. The Professional & Business Services sector in Virginia experienced losses in association with the federal workforce cuts but is starting to see signs of recovery. At the same time, the Education & Health Services sector is expected to see continued growth in employment levels this year.

For more information on housing, demographic and economic trends in Virginia, be sure to check out Virginia REALTORS^® other Economic Insights blogs and our Data page.