Virginia ranked third in the list of America’s Top States for Business in 2026 according to CNBC’s annual rankings. Considering this ranking, which incorporates many different categories, we look at the labor market in the Commonwealth that has been experiencing significant shifts since last year. These changes are mostly due to sector-specific factors and have been affecting the relative competitiveness of Virginia’s employment landscape.

1. Virginia’s job market has been slowing since the beginning of 2025.

Due to Virginia’s proximity to the nation’s capital, many regions have relied heavily on federal government employment historically. However, the significant federal workforce reductions and canceled federal contracts since the beginning of last year continue to affect employment levels across many industries. In the fifteen months of data that we have since January 2025, there was an increase in total jobs in only two months. The sectors to have been hit the hardest are Federal Government and Professional & Technical Services. The unemployment rate in Virginia, currently 3.8%, has been inching up as well. At the same time, the rate of continued unemployment claims also remains elevated, near levels seen last year. All these indicators point towards tough labor market conditions that many Virginians have had to grapple with over the past year and a half.

2. Virginia’s employment levels are suffering compared to neighboring states.

Migration data suggests that many Virginians tend to look at neighboring states in the Sun Belt region when considering relocation given their lower costs of living and ample housing options compared to Virginia. Now, even their employment levels seem to be trending favorably. In 2026, so far, Virginia has seen total employment levels go down by 10,800 jobs, almost a quarter of a percentage point decline. At the same time, North Carolina, South Caroline, Georgia, and Tennessee, have all seen an increase in total employment levels. While the sector makeup of these state’s total jobs varies, it is an important trend to follow to understand Virginia’s competitiveness to its neighboring states with regard to employment potential.

3. There has been regional variation in job growth across the Commonwealth.

So far this year, five out of the ten metro areas in Virginia have seen a modest increase in jobs. Charlottesville leads this list of jobs gains in metro areas, followed by Staunton. On the other hand, Hampton Roads saw the highest decline in total employment levels since the beginning of the year. Winchester and Northern Virginia saw job levels remain unchanged since the beginning of 2026. This regional variation highlights how the economic and policy factors affecting Virginia’s labor market have played out in different ways across the various metro regions.

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.