SALEM, Ore. (AP) -- An expert says Oregon is in for a long, "shallow" recession but recovery should begin by the second half of 2009.

In his new quarterly forecast, State Economist Tom Potiowsky predicts the slowdown will mean a decrease of $120 million in state general fund revenue, or a drop of 1 percent from his previous forecast.

Potiowsky calls it a relatively small decrease. And state lawmakers said Thursday that state tax collections are still high enough that the state won't have to make cuts in school spending or other state services next year.

Potiowsky says Oregon's recession isn't as severe as in states hit harder by home foreclosures, declining home values and higher energy costs.

Still, Potiowsky said, the key risks to Oregon's economy continue to be housing, financial markets, energy and inflation. Single-family building permits for January through July of this year are down 62 percent compared to last year, he said.

That's having an effect on several key job sectors, he said.

The wood products industry is expected to lose jobs at a rate of 7.7 percent in 2008 and 2.1 percent in 2009. As the housing market improves into 2010, wood products employment should grow by 1.8 percent, he said.

Construction employment also is projected to fall by 7.3 percent in 2008 and 2.7 percent in 2009 before beginning a turnaround in later part of 2009, with job growth of 1.5 percent expected by 2010, he said.

Although job losses are spread across many sectors, private education, health services, wholesale trade and business services still posted "mild" job gains, he said.