Virginia Economy · Labor Market

Virginia Unemployment Rate Decreases Amidst Shrinking Labor Force

Virginia's unemployment rate saw a slight dip in August to 3.6%, continuing a downward trend, however, the state's labor force participation rate reached a record low.

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Virginia's unemployment rate dipped slightly in August to 3.6%, marking the second consecutive monthly decline, but the state's labor force continues to shrink as more workers drop out of the job market entirely.

The unemployment rate declined by 0.1% from July, and almost 5,000 fewer Virginians were unemployed than the previous month. The rate had previously declined by 0.1% from 3.8% in June to 3.7% in July. The U.S. unemployment rate fell to 4.1% in August.

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UVa forecasts loss of 18,050 jobs in Virginia this year

MICHAEL MARTZ Richmond Times-Dispatch

Good news for Virginia's economy, right?

Not so much, according to Bob McNab, chairman of economics at Old Dominion University in Norfolk.

"If people are giving up on looking for work, does that signal a strong economy?" NcNab asked.

Virginia's labor participation rate dropped to a record low of 62.8% in August, as the number of people working or looking for work fell by 7,400 from the previous month and more than 15,000 since June. Compared with the previous year, almost 53,000 fewer Virginians were working, according to the latest household survey results released Friday by the U.S. Bureau of Labor Statistics.

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Boxes on a conveyor belt move through the Crutchfield Corporation's Charlottesville-area distribution facility on Friday, Feb. 23, 2024.

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The unemployment rate represents the percentage of people in the labor force who are unemployed, so the lower rate "looks like good news until you realize that these people are leaving the labor force," McNab said.

While the number of unemployed Virginians declined in August, it is still nearly 10,000 higher than a year earlier.

The monthly federal survey of business establishments tells a similar story.

Virginia gained about 5,600 workers in August from the previous month, according to the establishment survey released last week, but that's 37,800 fewer than a year earlier.

"You really have to step back and ask, 'How are we doing compared to a year earlier?'" McNab said.

A notable example is the professional and business services sector, which is a major source of payroll income tax revenue for the state budget. The sector gained 4,100 jobs in August from July, but it lost 14,700 compared to a year earlier. The sector includes private contractors who perform work for the federal government, which has reduced contract spending since President Donald Trump took office 20 months ago.

Bob McNab

McNab

The Trump administration also has slashed the federal civilian workforce, which is another big part of Virginia's economy, especially in Northern Virginia and Hampton Roads. The number of government jobs fell by 2,100 from July to August and by 11,200 from the previous year. Those numbers are generally driven by reductions in federal employment that have been partly offset by gains in state and local government jobs.

Manufacturing picked up about 800 jobs in August, but was down by 4,000 from a year earlier. Construction also gained 2,400 jobs from month to month but had lost 4,200 from year to year. Financial services lost 1,000 jobs from July to August and 4,000 from the previous year.

Jobs in education and health services, which have generally led the state economy, were flat in August compared to the previous month, but up by 2,800 from a year earlier.

On the positive side, jobs were up in leisure and hospitality services, as well as trade, transportation and utilities, both on a monthly and annual basis.

McNab sees a number of potential reasons for Virginia's declining labor participation.

One is premature retirements, driven by buyouts that the Trump administration offered to federal workers to shrink the government labor force.

Another is immigration policy, which has discouraged legal immigration as well as workers who come to the U.S. without documentation; dampened international travel; and reduced international student enrollment in Virginia colleges and universities.

Finally, McNab said, the number of "disaffected workers" has increased, including those who lost jobs because of expanded use of artificial intelligence and simply stopped looking for work.

"I would suspect it is a combination of all three," he said.

Michael Martz (804) 649-6964

mmartz@timesdispatch.com