Virginia's Ranking Declines Amid Federal Workforce Reductions
Virginia, long celebrated as a top contender in America's economic landscape, has taken a noticeable step back in CNBC’s 2025 Top States for Business rankings. After consistently securing a spot in the top three over the past five years and reigning as #1 in 2024, the state has slipped to fourth place — its lowest ranking since 2018.
Federal Job Cuts Shake Virginia’s Economy
The primary factor driving this decline stems from a significant shake-up in the federal workforce. Virginia’s economy is uniquely intertwined with federal government employment. According to the Congressional Research Service, over 144,000 federal jobs were based in Virginia last year—second only to Maryland and the District of Columbia in proportional workforce impact. This figure balloons to nearly 300,000 when federal contractors and commuters in the D.C. metropolitan area are counted.
Against the backdrop of the Biden administration’s aggressive federal workforce reductions, Virginia faces direct economic headwinds. The state's Economy ranking dropped from 11th to 14th in the CNBC study, which heavily weighed economic resilience this year.
Economic Ripples Beyond Federal Employment
The consequences extend beyond job numbers. Experts like University of Virginia economist Eric Scorsone warn that these federal job losses will ripple through sectors such as retail, leisure, and accommodations, as unemployed workers reduce discretionary spending.
“Historically, Virginia has demonstrated economic resilience,” Scorsone notes. “But this marks a shift. Where the nationwide trend is continued job growth, Virginia is now experiencing stagnation or losses, primarily in the federal sector, which then affect related industries.”
The Weldon Cooper Center’s April forecast anticipates Virginia losing nearly 32,000 jobs this year, with challenges intensifying as 2025 progresses.
Governor Youngkin’s Vision: Bridging Federal Cuts with Private Sector Opportunities
Republican Governor Glenn Youngkin, while endorsing the necessity of federal budget cuts for fiscal responsibility, has taken proactive steps to cushion the blow for displaced workers. In February, his administration launched a dedicated portal featuring nearly 200,000 current job openings across Virginia, focusing on connecting former federal employees with opportunities in the private sector.
Youngkin emphasizes the state’s robust business climate, highlighting vacancies in diverse fields and urging federal workers to consider retraining and skill development. He acknowledges, however, the challenges in matching skillsets: “These aren't perfect matches; many federal job roles are highly specialized. Transitioning may require retraining, but these are quality, well-paid positions.”
Youngkin further highlights the state's fiscal health, with record budget surpluses enabling tax cuts and investments in education, law enforcement, and economic development—factors that underpin Virginia’s overall business competitiveness despite recent setbacks.
Education and Infrastructure Remain Strengths
While the economic score weakened, Virginia continues to shine in other critical areas of CNBC’s rankings. The state holds the top spot for Education and ranks second in Infrastructure, maintaining a strong foundation to support long-term growth and innovation.
Broader Implications for the Region and U.S. Economy
Virginia’s experience underscores a larger national narrative around the consequences of downsizing the federal workforce, particularly in states deeply dependent on government roles. It prompts important questions:
- How can states diversify economies reliant on federal employment to enhance resilience?
- What policies can facilitate smoother transitions for highly specialized federal workers into private sectors?
- Are federal cuts sufficiently balanced against local economic impacts?
As some economists voice caution, urging a careful watch on Virginia’s evolving labor market, policymakers nationwide must grapple with balancing federal fiscal priorities with regional economic stability.
Editor’s Note
The 2025 ranking shift for Virginia is more than a statistical blip—it reflects the complex interplay between federal policy changes and state-level economic health. While the drop may signal challenges ahead, Virginia’s strengths in education and infrastructure, combined with strategic state initiatives, offer a roadmap for adaptation. The state’s journey raises critical considerations about economic diversification, workforce retraining, and the human impact of government restructuring—issues resonating beyond Virginia’s borders.
