It could be a rough 2026 for Virginia’s economy, with unemployment expected to rise and the economy slow, according to a report from 鶹ƽ Weldon Cooper Center for Public Service. That should turn around in 2027, however. (Illustration by Tobias Wilbur, University Communications)
Virginia’s economy is expected to slow, unemployment to rise, housing prices to fall slightly, and rents to increase in 2026, according to a quarterly economic forecast from the University of Virginia’s Weldon Cooper Center for Public Service.
predicts Virginia’s economic performance, which slowed during 2025, will continue that trajectory for the next year before beginning to rebound in 2027 and beyond.
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“Virginia’s economy expanded by 1.5% in 2025, marking a period of continued modest economic growth,” the study states. “This performance is below the national level and influenced by both broader national conditions and the commonwealth’s exposure to recent economic and policy developments, particularly its close ties with the federal government.”
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João Ferreira is the acting director of the Weldon Cooper Center’s Center for Economic and Policy Studies. (Photo by Matt Riley, University Communications)
“The big take is that Virginia, for many months and contrary to what was normal, underperformed the economy of the rest of the U.S. in 2025,” said João Ferreira, acting director of the Weldon Cooper Center’s Center for Economic and Policy Studies. “That, of course, has to do with the fact that Virginia is more exposed to federal workforce reduction and … the dependency of federal contractors. For every $8 in spending on federal contracts, $1 is spent in Virginia.”
Here are some areas where the forecast shows some economic decline in 2026.
The forecast is based on Moody’s national projections and recent economic data, with a focus on employment, real GDP, population growth and inflation.
Although the economy is expected to slow, the state is not facing recessionary pressure, Ferreira said.
Experts at 鶹ƽ Weldon Cooper Center are predicting a rise in unemployment through 2026, followed by a leveling off and slight decline in 2027. (Illustration by Tashi Samphel, University Communications)
“We are not in a recession,” Ferreira said. “We are still seeing growth in the economic activity. It just comes with difficulties in terms of the labor market and the potential reduction in the number of jobs in 2026.”
Sectors that experienced job losses in 2025 and are expected to see further job losses in 2026 include government employment, professional services, and manufacturing. The forecast projects continued growth in health care services and construction.
The median listing price of a home in Virginia reached $446,000 in 2025 and is predicted to decrease by 1% in 2026 before rebounding in 2027. Rents rose by 3.5% in 2025 and will likely rise by 3.4% in 2026 and 3.7% in 2027, the report forecast.
Weldon Cooper Center research shows how housing prices in Virginia have risen over the past few years as compared to the state’s GDP and Virginians’ wages. (Illustration by Tashi Samphel, University Communications)
Ferreira said historical trends show Virginia’s economy usually rebounds from a slump within a year or two. The economic forecast includes that trend when predicting rebounds in 2027 and after.
“Of course, this will depend on the policies that happen throughout this year,” he said. “We started doing this forecast two weeks ago, and now we have a different international situation (with the Iran war), and things evolve. That’s why we put out these quarterly forecasts, to make sure that we are current. As the situation moves forward, there will also be changes.”
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