Virginia drops in America's Top States for Business rankings. Federal job cuts are a big reason

Federal job cuts disportionately affect Virginia’s economy, a major factor in this year’s competitiveness study

Glenn Youngkin, who said he supports the cuts, has launched an initiative to connect displaced government workers with private sector jobs

Some economists are skeptical

Kevin Lamarque | Reuteix months into his second term in office, President Trump has begun to fundamentally change the relationship between the federal government and the states

In the cess, he has shaken up CNBC's annual competitiveness ranking, America's Top States for

Economy is the heaviest weighted category in the study under this year's methodology as more states pitch themselves as safe havens in a potential downturn

That hits The Old Dominion where it s

The federal government accounted for more than 144,000 jobs in Virginia last year, according to the Congressional Re Service

That is a larger percentage of the workforce than any state except Maryland and Hawaii

And that doesn't include Virginians who work for federal contractors, or commute to federal jobs elsewhere in the D

More coverage of the 2025 America's Top States for See the full list of America's Top States for 2025Methodology: How we chose America's Top States for in 2025North Carolina is America's Top State for in 2025 led by economy, workforceAlaska is America's Worst State for as oil prices sinkMassachusetts is America's Most Imved State for Virginia drops in rankings, taking hit from Trump's federal job cutsIn May, Virginia was one of only three states whose unemployment rate rose from the prior month, according to the U

Bureau of Labor Statistics

But the slowdown — and the fact that many of the federal job cuts have yet to be reflected in the official numbers — concerns University of Virginia economist Eric Scorsone, Executive Director of the Weldon Cooper Center for Public Service. "Virginia has been an economy, historically, that is pretty resilient," he said. "But now, we're seeing something quite different, where Virginia is seeing some job losses, or at least job stagnation, whereas the nation as a whole is still creating jobs. "The Center's most recent forecast, published in April, calls for the state to lose 32,000 jobs this year, with the job losses accelerating as the year goes on

While Scorsone said those job losses will occur primarily in the federal sector, he also sees a ripple effect. "Things leisure and accommodations," he said. "As people lose jobs, they're going to spend less on those things, [and] maybe in retail," he added. 'Virginia has jobs,' Governor Youngkin insistsVirginia Governor Glenn Youngkin speaks during a special announcement where he unveiled a new support resource package for federal workers and moted Virginia's over 250,000 open jobs, reaffirming that Virginia is open for and competing to win across the nation, at Capital One's campus in McLean, VA on February 24, 2025

Valerie Plesch | The Washington Post | Getty ImagesGov

Glenn Youngkin, a Republican, says the state can absorb those federal job cuts

In February, the state launched a web site, VirginiaHasJobs

Com, targeting displaced workers with job listings and other resources from across the state. "We have 250,000 open jobs posted that are unfilled

And so, there's a great opportunity for folks to find a new opportunity, new job, new career," Youngkin said on CNBC's "Squawk Box" on April 15

That still would appear to be more than enough for the federal workers ly to be displaced

But Scorsone said it is not that simple. "Virginia's federal workforce is different than, say, other states

Our workforce tends to be highly educated, fessional executive level," he said. "Many of the jobs that are open may be in different sectors, health care

You can't just easily move into a health care job if that's not your area of expertise," he added

In his CNBC appearance in April, Youngkin acknowledged the lihood that the state will lose jobs, and that the private sector alternatives will not be an exact fit for many displaced government employees. "Listen, they're not perfect matches," he said. "They're high paying, good jobs that require someone to possibly get some retraining or re-skilling, or go into a new field, but they're really good jobs. " Youngkin said the budget cuts, and job losses, are necessary. "We need to rein in spending and re-establish fiscal reality back into the federal government," he said, adding that Virginia goes into the upheaval from a position of strength. "We're seeing record surpluses in our budgets

We're able to use those surpluses to reduce taxes and invest in education and law enforcement and other investments in development," Youngkin said

Indeed, Virginia is still a powerhouse, with the top Education ranking in the CNBC study, and the second best rating for Infrastructure

Over time, no state has performed better than Virginia in the CNBC rankings