The Washington area economy is not in a recession, but widespread public fears about a recession "could become a self-fulfilling prophecy," according to a report yesterday by the Metropolitan Washington Council of Governments.

The area still has the lowest unemployment rate in the country and is creating new jobs and fostering new commercial and residential construction, said Robert E. Griffiths, director of metropolitan development for the council.

But damaging the economy is the public's belief that the situation is worse than it appears , Griffiths said.

"Part of it is this recession psychology," Griffiths said. "If people think things will get worse, they will."

"The slide since January 1990 reflects a lot of our concerns, about real estate, the savings and loan crisis, bankruptcies," Griffiths said. "Businesses facing this uncertainty are holding back future expansion plans. If we believe we are in a recession, it could become a self-fulfilling prophecy."

The area's economy is still growing, though not as strongly as in recent years, with job growth plummeting from 20,000 jobs in June to only about 1,000 in August. Construction has fallen off steeply, particularly in Northern Virginia, and housing sales in almost all local suburbs have declined, the report said.

"We're not in a recession, but we're not growing, either," Griffiths said.

Other private economists agreed yesterday that the economy is not in a recession, but said a further slowdown in spending could push it over the edge.

"We might be real close," said Stephen Fuller, chairman of the deparment of urban planning and real estate development at George Washington University. "You usually don't know until after it's started."

Several factors could tip the local economy into a recession, Griffiths said. If the nation falls into a recession, if a federal budget compromise is not reached, if Christmas retail sales are down or if people continue to believe that a recession exists, there could be trouble ahead, he said.

The recession psychology shows up among government workers worried about furloughs and other employees concerned about holding onto their jobs, keeping them away from stores and making businesses wary of expanding.

"Given the nature of the federal budget," said Richard Groner, chief of labor market information for the District, "there's not a government employee in the area {who's} going to go out and buy a new car or any other type of long-term indebtedness. It just kind of feeds on itself."

Fuller said a recession -- if there is one -- would not become apparent until early next year.

"I wait that long because I think it's going to depend in part on what happens to the retail trade during the holidays," Fuller said. "If people are as discouraged as we think then, that shows up in their shopping patterns."

Fuller said that instead of buying a bicycle or electronic game, people might "do something simpler for the holidays, give meaningful gifts instead of expensive ones. That tips the scale. This is a consumer-driven economy."

The economists said it is difficult to measure when a local economy enters a recession. When measuring a national recession, economists generally look for two consecutive quarters of negative growth of purchases of the nation's goods and services.

However, local purchases are harder to measure, so economists consider a decline in jobs as an indicator of a local recession.

According to Griffiths's figures, only 1,000 more jobs were created in the area in August. That rate dropped from 20,000 in June and 11,000 in July, Griffiths said. If that figure becomes negative -- meaning the total number of jobs actually declines -- the economy could be in a recession. Figures for September will not be available for several weeks.

New commercial construction in the area during the second quarter decreased 12 percent, the council said, the third consecutive quarter of decline. However, developers started work on 71 projects that will provide 4.6 million square feet of new space, the council said.

Griffiths said that although real estate activity has dropped from its height two years ago, it is still at 1985 levels, which were considered good at that time. He added that federal spending locally is still high, and that there are still many jobs for architects, consultants and engineers.

Griffiths predicted that growth will continue to be flat through the rest of the year and that a lot depends on Christmas holiday sales.

"I think people are not spending the money," Groner said. "Federal workers are talking about furloughs, all the regional governments are going to have to tighten up their belts. It begins to feed on itself."