The hundreds of civil war gravestones in Culpeper cemetery tell of the town’s bloody history. Halfway between the opposing capitals of Richmond and Washington, it saw more battles than anywhere else in the United States. Today this town in the foothills of Virginia’s Blue Ridge mountains is a battlefield of a different kind.

In 10 days’ time Virginia, which last November voted for a Democratic presidential candidate for the first time since 1964, goes to the polls for a governor in the first electoral test of the Obama presidency.

This contest between Bob McDonnell, a Republican, and Creigh Deeds, a Democrat, is seen as a key to next year’s mid-term elections.

With polls showing Barack Obama’s popularity falling faster than any president for the past 50 years during the first year in office, the prospect in Virginia is not looking good for the Democrats.

McDonnell, 55, a former state attorney-general, is 12 points ahead in the polls. Many independents who turned out for Obama last year say they will stay at home. Republicans, angry about the economy and “big government”, threaten to turn out in large numbers.

In the Raven Hill coffee bar people sit at laptops, surfing the internet in a hunt for work. Shirley Goinns, 58, lost her job as an administrative assistant in a building firm six months ago and her daughter was laid off a month later. “We’re devastated right now,” she said. “And all we see is the government bailing out big business.”

The downturn is the worst since the depression of the 1930s; unemployment rose to a 26-year high of 9.8% last month. McDonnell is capitalising on this with a New Job, New Virginia tour, which on Thursday saw him in Culpeper visiting a building company.

No sector in Virginia has been harder hit than housing, one of the biggest employers in the state. Anthony Clatterbuck, owner of Graystone Homes, told McDonnell his firm has gone from building 42 houses a year to four or five and he has been forced to cut jobs from 38 to 13. “We’re trying to survive,” he said. “Many friends have gone out of business.”

McDonnell promised that as governor he would lower taxes, cut regulation and provide more incentives for small businesses: “The government has been bailing out big business but not helping small business, which create 75% of jobs.”

His ratings have been boosted by disillusion with Obama. “We don’t want to be like Europe where the government runs healthcare and everything and even tells you what doctor you can go to,” said Raymond Bender, who runs an old people’s home.

“I think the Republicans may be heading for a landslide,” said Larry Sabato, professor of politics at the University of Virginia. “Last year 3.7m people voted here, which broke all records. This time I’m expecting 2.2m, which means losing 1.5m voters, mainly Democrat.”

Women and African-Americans, who turned out in large numbers to elect Obama, seem reluctant to vote. “I’m expecting a really low turnout,” said Karen O’Connor, director of the Women & Politics institute at the American University in Washington. “Women voted for Obama because they wanted healthcare and to get out of Iraq. We still don’t have a healthcare package and are still in Iraq and getting deeper in another war in Afghanistan.”

She said the Virginia race had failed to enthuse voters. “I would normally have about 10 students volunteering in the campaign, this time I don’t have one,” she said. “It’s like ugh, who really cares?”

Some are doing more than staying at home. Sheila Johnson, co-founder of Black Entertainment Television and a Democrat donor, has been appearing in television advertisements endorsing McDonnell.

“Bob McDonnell has the best ideas to grow our economy and create jobs,” she said. “He’s a bipartisan leader who gets results.”

Deeds, 51, thought he had been handed victory when The Washington Post uncovered a thesis his rival had written while a graduate student at televangelist Pat Robertson’s Regent University. McDonnell, then 34, argued that allowing women to work was “detrimental” to the family.

Deeds made this a centrepiece of his campaign, denouncing it in every speech. But the tactic backfired. Voters have been angered at what they see as negative campaigning.

Moreover, in rural Virginia McDonnell’s thesis found some support. “I probably agree with him,” said Kim Hailstone, a housewife. “I think motherhood has been denigrated — what can be more important than being able to shape future generations?”

With defeat in Virginia looking imminent the White House has belatedly turned out its big guns. Bill Clinton appeared last Tuesday, although the event was poorly attended, and this week Obama will hold a rally in part of the state with many black voters.

White House officials are resigned to defeat. Already they are engaged in damage limitation. They have begun blaming Deeds for an ineffective campaign. One official pointed out that the party in office has not won a Virginia governor’s race for more than 30 years.

The Republicans have been quick to scent blood. “A lot of my friends in Congress will say, yes, it is very important that Republicans win in Virginia because it will throw some momentum for the big elections in 2010,” said McDonnell.

“I’ll let them decide how important that is — I’m just focused on winning.”

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