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Virginia likely to slow to under 2% growth in 2025, ODU economist warns
Summary
Professor Bob McNabb told a Virginia Senate subcommittee that tariffs, falling container bookings and reductions in federal employment make a downturn likely this year and could push Virginia growth below 1% if current federal policies persist.
Professor Bob McNabb, chair of the Department of Economics at Old Dominion University, told a Virginia Senate subcommittee that state growth is at risk as federal policy shifts, trade disruptions and weakening labor indicators converge.
"If we think about the data that we have, we have essentially 3 types of data before us, lagging indicators, contemporaneous indicators, and forward looking indicators," McNabb said as he summarized national and Virginia data trends. He said national first‑quarter real GDP declined slightly and that a more recent surge in imports — driven in part by attempts to avoid higher tariffs — temporarily raised inventories that are now likely to be run down.
McNabb said forward‑looking container bookings remain down by double digits year‑over‑year, a signal he called an "upcoming supply chain shock" that could materialize in late summer and fall if tariff uncertainty continues. That disruption, he said, would raise prices and shortages as inventories deplete.
The economist also flagged labor‑market shifts. He noted that job openings nationally have fallen from a peak of roughly 12.1 million in late 2021 to about 7.2 million in March 2025, and that job quits are lower than before COVID‑19 — a sign workers are less willing to change jobs. For Virginia he said job openings in the latest available state data (February) were about 228,000 and that the state showed signs of weakening in March, including year‑over‑year increases in initial and continued unemployment claims.
Inflation and monetary policy add to the risks, McNabb said. He described a dilemma facing the Federal Reserve as bond yields have risen despite the Fed maintaining higher rates; markets are pricing in greater risk and inflation expectations have climbed amid tariff uncertainty. "At the end of the day, we will no longer be able to achieve more than 2% growth in 2025," McNabb said, adding that he would "not be surprised if we see a downturn in jobs and individual employment this year with GDP growth less than 1% for Virginia."
McNabb emphasized Virginia's exposure to federal workforce and defense spending. He said Virginia ranks third among states in the absolute number of federal civilian employees (excluding D.C.) and that federal and military employment is concentrated in Northern Virginia, Richmond and Hampton Roads. He calculated that the average federal civilian wage in Virginia is about 1.6 times the private‑sector wage statewide, and higher in some localities, meaning that "for every federal civilian job lost in the Commonwealth, you need 1.6 private sector jobs to make up the lost wages," not counting federal benefits.
McNabb closed by urging caution: economic data are lagged and policy changes are occurring rapidly. He said positive monthly job reports can mask underlying trends and that the full impact of tariffs and federal workforce reductions may appear in the months ahead.
The subcommittee took no formal action during the presentation; members asked a few follow‑up questions before moving to the next agenda item.
