The Trump administration’s downsizing of the federal government has been both dramatic and effective. As the global headquarters of the U.S. government, the DMV region is experiencing a disproportionate impact.
Brookings’ Amy Liu, Tracy Hadden Loh and Glencora Haskins reveal early warning signs for the region stemming from federal spending cuts.
National audiences should pay attention — not only because of the economic pain facing Maryland, Virginia, and D.C. residents, but also because of the downstream effects on the federal government itself.
Key takeaways from the inaugural analysis include that, since January 2025, the DMV region has shed federal jobs at a faster rate than the nation, while private sector job growth has plateaued. Also, the DMV region’s unemployment rate has increased more than three times that of the nation, with the share of unemployed suburban workers growing the most.
Additionally, after a strong year of venture capital activity, venture capital flows into the DMV region have slowed dramatically since January 2025, while continuing to grow nationally. Further, the number of homes for sale in the DMV region is up by 64% since last June, far surpassing the rate of change nationally and in other major metro areas.
Data on the DMV region’s popularity with business and leisure visitors show mixed signs of resilience and potential softness, and while both violent and property crime incidence are down year-over-year in the DMV, more households in the region are showing signs of financial distress.
Since January, the region has shed federal jobs at nearly twice the national rate. Federal employment nationwide declined by 2.5% in the first half of 2025, while the DMV lost 4.5% of its federal workforce — roughly 17,000 jobs in just six months. The private sector added 21,000 jobs over the same period, but that growth has plateaued and is concentrated in construction, hospitality, and health care — industries with little overlap in skills or experience with displaced federal employees.
Unemployment in the DMV has surged, rising three times faster than the national rate. The District recorded a jobless rate of 5.8%, the highest in the area, but the steepest increases have occurred in suburban Virginia counties, including Arlington, Alexandria, Fairfax, and Loudoun, where many federal workers live.
The report also notes a sharp collapse in internship postings, more than double the national decline, which limits opportunities for young people in the region to gain workplace skills.
Innovation trends provide little relief. After a strong year in 2024 that saw major venture capital deals for startups in Virginia and Maryland, growth capital flows into the DMV have fallen by more than 30 percent since January, even as investment activity continues to rise nationally.
Housing data shows the disruption clearly. The number of homes for sale across the region has jumped 64% compared with June 2024 — the steepest rise among major U.S. metropolitan areas. Nationally, the increase was just 29%.
The report offers mixed findings on tourism and travel. Passenger volumes through local airports are up this year compared to 2024, bucking national declines, and hotel revenues received an inauguration bump. Yet hotel performance in the spring and summer of 2025 underperformed compared to the previous year, raising questions as the city heads into the fall peak season.
Crime trends, while still a concern, are moving in a positive direction. Both violent and property crime are down year-over-year across the region, though the District and nearby suburbs such as Prince George’s County, Arlington, and Alexandria continue to report rates higher than other large metropolitan areas.
The strain is showing most clearly in household well-being. The Capital Area Food Bank’s 2025 Hunger Report found worsening food insecurity, and Federal Reserve data shows a rising share of residents with credit scores below 600, signaling deeper financial distress.
The federal government is propelled by the DMV region’s economic engine. The Brookings research concluded that a weakening of its talent pool — with specialized knowledge and a passion for service — and suppliers in related sectors — especially in defense, IT, and professional and technical services — could ultimately weaken the federal government’s own capacity.
Brookings researchers said that the federal retrenchment has left the capital region weaker than the nation in nearly every major category of economic health.
“In short, federal transformation is creating real turmoil in the DMV regional economy, at least in the near term,” the report stated.