A survey of Northern Virginia business leaders found high levels of uncertainty after months of turmoil from tariff policies and federal job cuts.
The Northern Virginia Chamber of Commerce (NVC) and communications agency Pinkston released a Q2 Business Leader Survey yesterday (Tuesday) that collected feedback from business organizations in Fairfax, Falls Church, Reston and other locations around Northern Virginia.
NVC President and CEO Julie Coons told FFXnow that federal workforce cuts and tariffs will likely have long-term impacts on Northern Virginia’s economy.
“Our economy is being reordered by the reduction in federal spending and procurement,” Coons said.
The survey of business leaders found that 59% of them believe Northern Virginia’s economy is likely to decline over the next six months, while only 21% said they believe it will grow.
Those surveyed said the issues they anticipate will most likely affect business growth are federal agency layoffs, inflation and tariffs.
Around 50% of respondents said they believe the Trump administration’s increased taxes on imported goods is likely to cause their companies to decline, while only around 15% expect their companies to grow as a result of the tariff policies.
Around 43% said they believe their company’s capital spending is likely to decline over the next six months — an abrupt reversal from a survey taken at the beginning of the year, when 50% of regional business leaders expected to expand their staff and spend more capital, Coons says.
Earlier economic projections predicted that the impact of the federal job losses on Fairfax could be worse than Covid, but Coons says the main difference is that Fairfax can’t expect federal assistance to mitigate the impact of job losses.
“When we think about Covid or BRAC, the distinction I would make is, in both of those circumstances, there was federal transition money that supported many communities and us as well,” Coons said. “This time, there will not be federal transition money.”
Like Covid, the federal job cuts will have a disproportionate impact on the hospitality sector, Coons says. Roughly 70% of the hotel industry in the region is driven directly or indirectly through federal spending.
“We think about it in tourism, but it’s not the same economic impact as corporate business — which has revolved heavily around government meetings — and the federal government engaging hotels for meeting space, training, bringing employees in,” Coons said. “That accounts for 70%. If you think about that alone, you can think about the ripple effect from that.”
The silver lining, Coons hopes, is that the increased unreliability of federal spending could motivate Fairfax County to do more to diversify its economy.
“We’re really rallying the business leadership of the region to say we need to lean in, because in every crisis, there is opportunity,” Coons said.
Coons argues that Northern Virginia should leverage its strengths in cybersecurity and artificial intelligence, while recognizing that the reason those industries have flourished in the region has largely been because of its connection to the federal government.
“Has the federal government help to drive the growth of that and specialization? Yes. But is the government the only customer? Of course not,” Coons said. “This is a chance to grow civilian business and bring new market players to the region. Yes, the federal government has largely been the primary driver for our success. We really leveraged it and benefited, but we need to pivot.”
While the region has a highly skilled workforce that would be a benefit to private companies, Coons predicts Fairfax County could begin to see an exodus this summer.
“Unfortunately, we’re going to see out migration in this region over the summer when school lets out and that’s going to be hard for us to counter,” Coons said. “When will this really start to show up in unemployment numbers? When do we see that real precipitous drop? That’s probably going to be rolling into the fall.”
New unemployment data from March showed that 3.2% of Fairfax’s labor market — or approximately 57,839 workers — were unemployed.
Analysts from the Fairfax County Economic Development Authority previously warned the Board of Supervisors that the drawn-out process of the federal layoffs means the actual impact might not show up on Fairfax County’s unemployment data until June.
Suggesting a disparity in views of their individual situation compared to the dire economic predictions overall, 54% of business leaders said they remain optimistic about their company’s performance over the next six months, despite 65% reporting pessimisim about the future of the national economy.
“I’m actually optimistic,” Coons said. “We have the most amazing workforce. We have committed business leaders and committed elected and appointed officials. It’s going to be challenging, but there’s always opportunity and we’re going to get there. It’s going to be hard, but we’ll get there.”
