(The Center Square) – Virginia’s economy is projected to grow in 2026 even as employment declines for a second straight year, according to a new forecast from the University of Virginia.

The August forecast from the Weldon Cooper Center for Public Service projects Virginia’s real gross domestic product will grow 0.5% this year while employment falls by about 18,050 jobs.

Virginia lost about 9,100 jobs during the first half of 2026, according to preliminary federal data cited in the report. The Cooper Center projects the total loss will reach about 18,050 jobs by the end of the year.

The report projects employment will decline 0.4% in 2026 before returning to growth in 2027.

Virginia’s economy is also expected to grow more slowly than the nation. The report projects U.S. real GDP growth of 2.1% this year, compared with 0.5% in Virginia.

The Cooper Center said the combination of economic growth and declining employment points to productivity and output gains rather than broad hiring.

Job losses have varied by industry.

Professional services, Virginia’s largest private-sector employer, lost about 9,500 jobs between December and June, according to the report. Manufacturing lost about 4,400 jobs during the same period, while administrative support lost about 4,900.

Retail added about 4,500 jobs during the first half of the year, while healthcare added about 2,800.

Government employment has also moved in different directions.

Virginia lost about 22,000 federal jobs in 2025, according to the report. Between December and June, federal employment fell by another 2,900 jobs while local government added about 9,400 and state government added about 1,700.

The Cooper Center projects total government employment will finish 2026 higher than it began the year.

Virginia’s labor force has also declined. The report estimates the civilian labor force fell by nearly 68,000 people between early 2025 and June 2026. The Cooper Center said the shrinking labor force helps explain why the unemployment rate has risen less than employment has fallen.

Virginia’s unemployment rate is projected to remain around 3.9% through late 2026.

Looking ahead, the Cooper Center projects Virginia employment will grow 0.6% in 2027 and 1.1% in 2028. Real GDP growth is projected at 1.4% in 2027 and 1.6% in 2028.

The Cooper Center’s forecasting model uses more than 300 variables and draws on federal and Virginia economic data, along with national projections from Moody’s Analytics.

This post was originally published on The Center Square.