Brief Review of 2025 Economic Forecast Accuracy

The 2025 forecasting cycle shows the value of updating the model as new information becomes available. In 2025, the central message remained consistent: Virginia’s economy was slowing, employment growth was weakening, and the Commonwealth was more exposed than the national economy to federal workforce and contracting adjustments. The February 2025 release presented a slightly positive baseline, but noted that employment growth was expected to slow and that government employment was a key source of uncertainty. By April 2025, the forecast had shifted more decisively toward labor market contraction. The August and October 2025 forecasts then refined the timing and scale of the slowdown as incoming data showed more resilience in the first half of the year, followed by growing weakness later in 2025 and particularly in 2026.

The forecast deviated most from actual outcomes in the April release, when the model projected a major loss in 2025. That estimate was made during a period of unusually high uncertainty, with  DOGE-related announcements pointing to hundreds of thousands of layoffs nationally, the financial market was at its annual low, and tariffs seemed poised to have broader impacts than ultimately resulted from their implementation. In short, losses did not materialize at that scale. However, the forecast was correct: Virginia’s employment growth was weakening, and the revised data now show that the Commonwealth job market had its worst year since the pandemic. The August forecast, which projected an annual loss of 11,700 jobs, was much closer to the current revised estimate of 10,400 jobs lost than the numbers released before the correction. This progression is important because it demonstrates the model’s  flexibility as the timing of federal actions, labor market data, and sectoral responses became clearer.

Looking across main indicators, the consistent expectation that Virginia would underperform the national economy in 2025 has been confirmed by the revised data. The unemployment rate also moved in the direction anticipated by the 2025 forecasts, rising steadily through 2025, although the precise year-end path differed because. labor force data indicates that many of those losing their jobs left the state or went into retirement. 

Real GDP remained positive in 2025, which is consistent with the forecast’s repeated emphasis on a slowdown rather than an immediate statewide recession. Inflation was also broadly in line with the forecast narrative: Virginia’s price growth remained below the national rate and did not become the main source of state-level weakness.

At the sector level, the forecast performed best in identifying the industries most likely to come under pressure. Government, Professional Services, and Manufacturing were repeatedly identified as sectors exposed to the slowdown, and the revised data confirm losses in all three. The main differences were in timing and scale. Professional Services weakened more sharply than the October forecast suggested, while Health Care Services and Construction performed better than early-year projections implied. These differences are useful for improving the forecast exercise. Overall, the 2025 forecast cycle should be read as a continuous improvement process: the model identified the slowdown early, updated the magnitude as new evidence arrived, and now incorporates revised data that clarify the depth and timing of the labor market adjustment.