Paradoxes of fright. (Comment).

HE'S the owner of a local marketing firm and not exactly hurting for dough. But this year, for the first time, he's looking at a drop in billings from a year ago. Normally upbeat, the guy sounds tired and resigned. There is some business, he explained last week. But it's short-term stuff. No one is willing to commit beyond a few months, at best. And none of the work involves new or expanding activity -- it's just covering the existing bases.

The recession may be over but the economy is still stuck in mud. Instead of looking out 12 months, 24 months and beyond, business owners are just trying to get through the quarter -- not unlike a poker player who folds without even asking for new cards.

If you just look at the numbers, things don't appear that bleak. First quarter gross domestic product grew at an annual rate of 5.6 percent -- a far quicker turnaround than during the post-recession period in the early 1990s. Productivity is up, debt is being pared down, and first quarter corporate profits were up 7.1 percent from a year ago. Add to this the ever-reliable consumer, who continues to buy houses and automobiles at a pace no one had anticipated.

It's a picture that should lead to borrowing and growing and hiring. My marketing buddy should be getting calls from all over town.

But it's not close to happening. One dispiriting sign last week: Hilton Hotels Corp., among the more bullish companies after Sept. 11, lowered its second-quarter revenue forecast because soft demand is bringing down room rates. Hilton, along with other hotel companies, had seen a strong jump in activity after the terrorist attacks and there were projections of a 2-3 percent increase industry-wide in hotel room revenue. But business has slowed and just last week PricewaterhouseCoopers revised its forecast. It now expects a 0.7 percent decline for the year.

So why all the gloom -- or as a Wall Street Journal headline last week asked, "With Profits Up, Why the Sad Face?"

Chalk it up to a case of nagging insecurity. Businesspeople can accommodate lots of distress -- fire, flood, defective merchandise, fickle shoppers -- but the one thing that paralyzes them is fear of the unknown. Normally, the unknown should be considered an opportunity for future riches. These days it's a source of sleepless nights -- not the best way to grow a business.

That, of course, explains a lot of things: why stocks continue a slow-but-steady decline, why gold prices are perking up, why investment managers are suggesting that their clients hold onto cash, and why the market for initial public offerings remains more miss than hit.

There are all sorts of reasons to fear the unknown -- starting with the possibility (or certainty, if you believe the Bush people) of another terrorist attack, one that could be far deadlier than the events of 9/11. But fear comes in less traumatic guises, ranging from the ongoing corporate governance mess to widening federal budget deficits. All of it sends a negative signal, a reason to hunker down rather than take a chance.

Conventional thinking insists that things will settle down in a few weeks, a few months -- you pick the time. Conventional thinking also projects a vibrant economy down the road, with new technologies coming on line and a global presence that is second to none. California and L.A. in particular are a big part of that optimism.

Those are nice thoughts. For the moment, though, my marketing friend is losing business and rosy projections offer scant comfort.

Mark Lacter is editor of the Business Journal.