Nine months into the second Trump administration, Washington — as in the city and its suburbs, rather than the seat of federal government — is in considerably weaker shape than it was a year ago, a new analysis found.
Since summer of last year, the region’s unemployment rate increased over eight times as fast as the national unemployment rate, as the region’s faltering private sector has struggled to absorb thousands of laid-off federal workers, reported researchers with the Metropolitan Washington Council of Governments, a nonprofit association of jurisdictions in the region, and Brookings Metro, a Washington think tank.
The city’s unemployment rate is now nearly 6 percent, well above the national rate as well as the rate in the Virginia and Maryland suburbs. But while unemployment in the region as a whole is still below the national average of just over 4 percent, the report says, this would soon change “if rates continue to rise at such a rapid pace.”
Though a substantial majority of federal jobs are outside the capital region, no area of the country is more reliant on government work than Washington. With the mass layoffs and cancellations of thousands of federal grants and contracts, many of them recommended by the Department of Government Efficiency and later solidified by Congress, the region has taken a disproportionate hit.
The analysis, as well as a report recently released by the D.C. Chamber of Commerce, found that private sector job growth and entrepreneurial activity in the region have stagnated this year. The job categories that have seen new hires — construction, hospitality and health care — do not align with the skills of many former federal employees who are now looking for work.
Even as the supply of workers has ballooned, the demand for them has not: Job listings in the region lag other metro areas around the country, the Brookings report found, and postings for internships have dropped by 36 percent over the past year. According to a recent survey by the D.C. Policy Center, expectations from business owners and executives about the short-term business outlook of the city have become “quite pessimistic” compared to early 2025.
In a possible sign of this turmoil, the Brookings report found that the year-over-year increase in active home sales listings in the D.C. area was double that of other large metro areas.
In the early days of the Trump administration, when federal job cuts seemed to rise by the day, local leaders emphasized that the capital was moving away from its dependence on federal work, toward jobs in fields like artificial intelligence and quantum computing. But this report has little consolation to offer on that point: After a period of marked success in attracting venture capital money, the stream of investment dollars into the region slowed sharply as 2025 unfolded.
Last year “was actually an amazing year for venture capital flow,” said Tracy Hadden Loh, a fellow at Brookings Metro and one of the report’s authors. “So what happened in between 2024 and 2025?”
Campbell Robertson reports for The Times on Delaware, the District of Columbia, Kentucky, Maryland, Ohio, Pennsylvania, Virginia and West Virginia.
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