CHARLESTON -- The faltering U.S. economy will drag West Virginia into a recession next year, but the Mountain State should weather the downturn better than the rest of the country, according to the annual West Virginia University forecast released Tuesday.

"We are right on the edge of recession and a big part of that story is the slowdown in the goods-producing sectors," said WVU economics professor George Hammond. "The silver lining on that cloud is that we're actually doing better than the national economy."

The forecast calls for a net loss of about 4,800, or 0.7 percent, of jobs from 2008 to 2009, Hammond said. "That generates a downturn in the state economy." Hammond predicts that downturn will be worse than the last two recessions in 2001 and the 1990s, but not as bad as recessions in the 1980s and 1970s.

The U.S. meanwhile, is expected to lose 1 percent of jobs next year, Hammond said.

"For the national economy, we're squarely in good stiff drink territory. We might be talking about a couple," Hammond said, adding that West Virginia probably should limit itself to a single belt.

The forecast calls for coal mining and oil and gas production to cushion the economic blow for West Virginia. Coal prices that had tripled over the past 12 to 18 months led to higher employment, though mining job growth has slowed and is expected to slow further as world demand slackens in a recession, Hammond said.

"Coal mining is still the big dog," he said.

Underscoring coal's importance is the contribution of severance taxes to West Virginia's fiscal 2009 revenue. Coal is the largest contributor to the state's severance tax, along with natural gas, timber and other natural resources.

"Severance tax collections are going to keep West Virginia in the black," Deputy Secretary of Revenue Mark Muchow said. Severance tax receipts are up $62.1 million, or 49 percent, thus far in fiscal 2009 and Muchow expects them to peak at $400 million this year because of higher coal prices.

The state started the fiscal year expecting coal to average $50 a ton, but now expects average prices of $75 a ton, Muchow said.

While personal income tax receipts are up $24 million, or 5 percent, so far, the state is projecting a slight decline due to the economy. Corporate taxes, sales taxes and interest income are already down, due to a combination of economic factors and tax cuts.

WVU's data, meanwhile, shows construction is losing jobs largely due to the decline in housing starts in the Eastern Panhandle. Manufacturing job losses are continuing as well, largely due to advantages enjoyed by foreign competitors and, Hammond said, from the effect of the nation's housing bust on its wood products and furniture manufacturers.

If the recession hits West Virginia less than the rest of the country, Hammond expects the state to close the per capita income gap between the state and the nation.

West Virginians' income is roughly 76 percent of the U.S. average and Hammond said it's likely to reach 77 percent next year.

"That's the U.S. economy coming back to West Virginia, not necessarily us catching up to them," Hammond said.

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