The FWD #223 • 863 Words
Early data shows little impact from federal workforce changes, but the story isn’t over yet.
Virginia ranks second in the nation for federal civilian employees, with over 321,000 individuals representing approximately one in nine Virginia workers. The creation of the Department of Government Efficiency (DOGE) by the Trump administration has raised concerns about potential workforce reductions and their economic ripple effects. As policy debates continue, it’s critical to understand what current data tells us about impacts in Virginia.
Federal workers in Virginia
The federal workforce in Virginia is substantial both in size and economic influence. According to the UVa Weldon Cooper Center, Virginia hosts approximately 321,516 full-time federal civilian employees. When including part-time employees and 130,751 active-duty military personnel, the total reaches 475,713 workers.
This workforce is geographically concentrated, with Northern Virginia benefiting from proximity to Washington D.C. (approximately one in six civilian workers) and Hampton Roads supported by military installations and shipyards. The federal presence extends beyond these areas, with 77 of Virginia’s 133 localities exceeding the national average (3.2%) in federal employment share.
Federal employees in Virginia earn substantially more than average workers. The median income for federal civilian employees was $117,740 in 2023—nearly double the average for private-sector workers. These positions also require higher education, with 58.8% of federal employees holding at least a bachelor’s degree, compared to about 40% of the overall Virginia workforce.
The Richmond Federal Reserve notes that defense agencies dominate federal employment in Virginia. The Department of the Navy (31.4%), Department of Defense (19.5%), and Department of the Army (10.5%) account for over 60% of federal jobs in the state.
Unemployment claims show recent uptick
Recent unemployment data suggests the first tangible impacts of federal workforce changes may be emerging. Initial weekly unemployment claims in Virginia have been consistently higher in 2025 compared to previous years, with 2,881 claims filed in the ninth week of 2025 compared to 2,174 in 2024—a 32.5% increase.
More telling are the unemployment claims specifically from federal workers. While these typically numbered in the single digits weekly over the past three years, federal worker claims have risen dramatically in recent weeks—from just 5 claims in the first week of 2025 to 70 claims by week nine. The sixth week of 2025 saw 31 federal unemployment claims, compared to just 7 in the same week of 2024.
While these numbers remain small compared to Virginia’s total federal workforce, the sharp upward trend suggests initial DOGE impacts may be materializing.
Federal contractors feel early pressure
Beyond direct federal employment, Virginia leads the nation in federal contract dollars, with over $108 billion in 2024. The contractor workforce is substantial but difficult to quantify precisely. National estimates suggest nearly two contract/grant workers for every federal employee in civil service, the military, or USPS.
Early warning signs have appeared in the form of WARN notices from Arlington-based nonprofits that traditionally rely on federal grants. The American Institutes for Research (AIR) and Management Science for Health (MSH) have announced layoffs affecting 149 and 182 employees respectively.
Housing market remains resilient so far
The housing market in the Washington D.C. region shows no clear signs of distress from federal workforce changes. According to Bright MLS data for the week ending March 16, 2025, new pending contracts in the D.C. region increased 7.4% week-over-week and 1.5% year-over-year.
New listings increased 30.3% year-over-year, with 2,200 new listings in the greater DC region. The median list price of $620,000 was down 0.8% from the previous week but up 2.2% from last year.
Bright MLS Chief Economist (and former HousingForward board member) Lisa Sturtevant notes that “DOGE does not appear to be holding back buyers in the D.C. region” and that while the influx of new listings might relate to federal workforce changes, “it is still not clear.” Home prices are growing more slowly in the DC region compared to other areas, but there are “no signals at this point that DOGE and other federal government workforce changes are leading to major price declines.”
Potential long-term impacts on state revenue
The five Virginia localities with the highest concentration of federal workers—Fairfax County, Prince William County, Arlington County, Loudoun County, and Virginia Beach city—contribute disproportionately to state revenues:
- 48% of all state income tax revenues
- 35% of total state sales tax
- 40% of total recordation tax collected
Together, these five localities contributed more than $8.8 billion to the state budget in FY2024—about one-third of all General Fund revenue. (Figures based on the Virginia Tax Annual Report FY2024.)
Outlook remains uncertain
The full impact of DOGE-related workforce changes remains to be seen. Housing market reports note “uncertainty still clouds the outlook” with “confusion about the extent of the federal government layoffs.” Many provisional employees initially laid off have returned to their jobs, while other administration actions face legal challenges.
The rise in federal unemployment claims suggests early effects, but these remain small compared to the overall federal workforce in Virginia. Market analysts expect the upcoming spring will “provide the first material evidence of any housing market impacts” as federal workers adjust to job changes or return-to-office mandates.
For now, Virginia’s economy shows resilience, but state officials and economists will be watching closely as DOGE initiatives continue to unfold in the coming months.