Norfolk, Feb. 05, 2026 (GLOBE NEWSWIRE) -- Virginia’s economy is facing increasing headwinds and growth in Hampton Roads is projected to slow according to the 2026 Annual Economic Forecast presented by economists from the Dragas Center for Economic Analysis and Policy in the Strome College of Business at Old Dominion University on January 28.
More than 350 of the region’s business and community leaders gathered in Chartway Arena to hear how Bob McNab, Ph.D., professor and chair of the Department of Economics and director of the Dragas Center for Economic Analysis and Policy, and Vinod Agarwal, Ph.D., a professor of economics and director of the Economic Forecasting Project, view the economic prospects for the coming year.
Rising inflation, consumer pessimism, slowed job growth, lack of housing inventory and the negative impacts of tariffs were primary topics of the event.
“Virginia’s economic growth was lower in 2025 due to reductions in federal civilian employment, higher tariffs and policy uncertainty,” said Dr. McNab.
He explained that, while some figures show the United States economy growing, the real story lies in the distribution of wealth. For households in the top 30% of consumers earning more than $130,000, wages and consumption outpaced inflation. The other 70% of consumers, however, are spending more than they are bringing in or just breaking even.
“Moody’s (a financial intelligence company) says that Virginia is already in a recession. Data suggests that we may be on the cusp of one. Growth was slow in 2025 and will continue to slow in 2026. The impacts of changes in federal civilian employment policy, trade policy and immigration policy — all that comes together with policy uncertainty and strain growth in Virginia and make the budget conditions deteriorate as we move farther into this year,” he said.
The rising prices of essential items, like electricity and coffee, are keeping consumer sentiment — a key indicator of the health of the economy — low, he added. The price of coffee, for instance, rose 20% in 2025.
Employment figures were not promising. Employment growth, which had been on the rise, is now slowing, according to the Bureau of Labor Statistics. In 2025, over 6,000 federal civilian jobs were lost in Hampton Roads, and more than 23,000 were lost throughout Virginia. In October alone, the federal civilian workforce lost 179,000 workers nationally in the wake of the deferred resignation program.
“We can see that Virginia actually starts shedding people out of the labor force in February 2025, and that continued through the remainder of the year. This looks much more like a recession for Virginia in terms of labor markets than anything else,” he said, pointing to a chart in his presentation.
Employers are also becoming reticent about hiring, he said, noting that 2025 had the weakest job growth since the pandemic.
Dr. Agarwal discussed the Hampton Roads economy, focusing on the housing supply needs of the workforce and the outlook for the defense industry.
“The housing market has a supply problem. Inventories are way below the normal average. What we need to do is to develop a basic housing strategy and move towards reforming zoning regulations,” he said. “We need to promote high density, more mixed developments and reduce regulatory burdens that increase the cost of living.”
He said that defense spending in the area will rise, which is good for the Hampton Roads economy, but has a downside.
“To really grow this economy, the private sector needs to step in,” he said. “We need to diversify the economy and go into areas of growth where there is a competitive advantage or where we see good potential.”
Joy Vann Old Dominion University 757-683-6479 jvann@odu.edu
