There are signs a full-blown recession will be in bloom by Election Day, which normally is bad for the incumbent. In this case, there's no incumbent president so it's less clear whether the candidate from the incumbent's party will necessarily suffer. It may depend on who that nominee is. Huckabee is probably the least vulnerable because his populist agenda represents a clear break from Bush policies. The other GOP candidates will probably find the economy a tougher issue to face no matter which Democrat is the nominee.
While the Democrats are in control of Congress, they should be able to blame the Republicans for the economy going South, especially if the public perception is that the recession was caused by excesses in the financial sector, including mortgages.