THOMASVILLE, N.C. -- Thomasville Furniture Industries Inc. had never seen a month like April. Orders arriving at the 86-year-old manufacturer of quality wood furniture soared to record heights, well above the moderately optimistic levels its forecasters had predicted. Thomasville Furniture's plants, the economic engine of this town of 17,000, hummed along prosperously, the scent of varnish and sawdust in the air. Looking over internal reports that came to his fourth-floor office each morning by 11, company President Frederick Starr thought the future was well in hand.

Then came May.

"It wasn't subtle," recalled Starr. "It was like going out and falling through the ice." New orders dropped sharply from April levels. In June they were low again and remained stubbornly depressed through the remainder of the summer. The company found itself thrust into a disturbing new world, overstocked with capacity, people and optimism.

Growing numbers of U.S. companies are in this fix today as the nation's economy teeters toward recession. The country is running low on a crucial commodity known as business confidence, leading many executives to face up to difficult choices about how to trim their operations, cut production and prepare for a cold spell.

The Conference Board, a New York research group, last month released a quarterly survey of about 1,000 chief executives showing more pessimism than at any point since 1980. Its key index, a statistical averaging called the Measure of Business Confidence, had fallen from 48 in the second quarter of 1990 to 40 in the third quarter.

Numbers like that might seem to suggest that confidence is spread uniformly through boardrooms across the country. In the real world, it bunches up unevenly, depending on a host of factors at any one company that include macro-economic forecasts, confidential sales figures, the economic health of the industry and the region, experience the last time around and seat-of-the-pants judgment calls of top managers and executives.

Sifting through them is an intellectual challenge whose complexity business schools can only scratch at. How do you settle on a picture of the future 12 months away when almost every economist has different assumptions? How do you deal with economic indicators that offer only a look through the rear-view mirror, an at-best blurry view of how things were a few weeks or months earlier? How do you evaluate industry gossip? How do you cut back, yet keep the company nimble enough to spring back when better times arrive?

Gulf Crisis Looms The process is hard enough in normal times. Today, the United States has hanging over it the possibility of full-blown war in the Persian Gulf, which could re-scramble such basic considerations as employment, federal spending, the cost of oil and consumer confidence. It also brings in uncertainty that, to some companies, is worse than any squeeze that war itself might bring.

Said Nicholas Pappas, an executive vice president at Du Pont Co. who is closely involved in internal forecasting: "It's better to face up to the bad news and swallow it ... rather than living with an uncertain world."

Uncertain as that world is, some U.S. companies still have confidence in large supply, while others have almost run dry. Even within an individual industry, wide discrepancies can exist. One firm may opt to be confident; another, looking at essentially the same set of facts, may turn tail. Still others remain blase', believing that their niches or even their entire industry is immune -- makers of household consumables, for example, know that people brush their teeth or wash their clothes with equal frequency in goods times or bad.

One other group that remains confident of its own future: consultants and management-conference organizers, people who sell advice to companies groping their way through this thicket of imponderables. "I feel like a funeral parlor director during the time of the plague," joked Haskel Benishay, a Northwestern University professor of economics who lectures on these subjects at conferences..

Such was the depth of decisions facing Thomasville Furniture earlier this year. Whatever tack it took would have wide impact. It has 26 factories and 8,000 employees. With sales of $430 million in 1989, it is a significant player in the economy of North Carolina. Its effect on the town whose name it shares is nearly immeasurable. Founded in 1904, the company employs roughly half of the town's work force. It contributes to many charities and capital drives. In the town square stands a giant dining room chair, a salute to furniture's role in the local well-being.

Said Pete Hinshaw, a local carpet cleaner: "This whole town is furniture."

In the 11 plants that Thomasville operates in or near the town, wood is dried, carved, sanded, varnished, polished and assembled into dining room sets, beds and other furniture that grace the company's 450 or so "galleries," or retailing outlets.

Work now proceeds apace, but some employees view the future with trepidation, especially having just lived through an unsuccessful takeover bid by the Belzberg family of Canada. "I believe it will get worse before it gets better," said Brenda G. Johnson, an assistant supervisor in a chair-making plant. "This Iraq and Kuwait thing is hurting everybody."

Thomasville Furniture navigates seas of the national economy that are more recession-churned than most. People are quick to put off furniture purchases in bad times. The industry's sales also are highly dependent on real estate. "Housing sales and resales trigger more demand than any other single factor, by far," said Henry Howard, business editor of the High Point, N.C.-based trade weekly Furniture Today.

The furniture industry as a whole enjoyed a boom in the mid- to late-1980s, but for the past two years it has been taking a beating, tracking the declines in the residential real estate industry. Thomasville Furniture itself managed to enter 1990 in strong shape. Analyst Barbara Allen of the New York securities firm Kidder, Peabody & Co. credits continuing plant modernization and consumer recognition. "Thomasville has a very well-known brand name in an industry that doesn't have many," she said.

Starr, the company president, said he still doesn't know what hit in May. Perhaps consumer concern that an election was drawing near, perhaps worries over interest rates. Whatever the cause, something had to be done. In Monday meetings in the company's boardroom, he and his managers sat down to puzzle it out.

These were not entirely unfamiliar waters. Starr, 57, had been with the company when it was rocked by the 1973-75 recession and again in 1981-82. It managed then to make it through without layoffs (though the company closed three plants in 1979 and 1980). Certain lessons had been learned over the years. Dips in furniture sales would follow dips in housing by 12 to 13 months. People who did continue to buy would go downscale, choosing upholstered furniture rather than Thomasville's more costly core line of wood products.

In the Monday meetings there was no shortage of information to work with, but it was not always consistent: forecasts of national trends from the economics staff of Armstrong World Industries Inc., Thomasville's parent company; housing construction numbers; industry forecasts from the Furniture Manufacturers Association.

The company gathered anecdotal evidence, trying, in Starr's words, "to put people and voices with what you're seeing statistically." It paid special attention to reports from the galleries and accounts of "traffic" -- how many people were coming in for a look. "All of a sudden we were hearing, 'It's slowed down, traffic is spotty,' " Starr said.

But the company's most valuable analytical tool was something chillingly unambiguous. "The best indicator of what's going on every day is your orders," said Charles O'Brien, the company's general manager for manufacturing. New orders have remained something more than 10 percent below the first half's figures.

A 1990 Advantage Further complicating the job is the fact that the company is shooting at a moving target: It takes six months for a production batch to flow through the system. "We're trying to gauge right now what the consumer's going to buy, say, next May," said Starr.

One advantage Starr and his team have over past downturns: advanced computer programs. Financial officers ran complex "modeling" programs on a desktop machine, calculating likely profits if the company were to suffer a 10, 15 or 20 percent reduction in sales.

From all this came a best guess about the future, that 1991 would be a year of "flat" growth, but by no means a Depression-style tailspin. Therefore, the company must be ready to return to full steam not too far in the future.

"We really do not want to close plants... . We've got great plants, great people. You can't get them back if you close them," said Starr.

The company considered, but rejected, ideas to fight back by branching into new product lines -- they would likely be poorly thought-out and unsuccessful, it was concluded. It also rejected suggestions to increase advertising and engage in "special pricing" to increase sales.

A new operational plan gradually emerged. It stressed that the company stick with what it knew and accelerate programs to improve quality and lower costs. But first, things had to be wound down a bit. On June 1, the company declared a hiring freeze on salaried jobs.

Planners drafted schedules month by month to shutter selected plants for short periods. This would match demand with supply more closely and reduce the financial burden of carrying huge stocks of furniture sitting unsold in warehouses. To date, the company's 26 plants have lost on average eight to nine days of operation each.

This approach served to spread the cutbacks among Thomasville Furniture's employees, many of whom view the company as a lifelong partner -- earlier this year, 102 were honored for reaching the 20-year mark. No one was fired.

Managers also decided that national advertising could be "judiciously" trimmed. Capital spending was scrutinized as well. Here there was limited room to maneuver because the company wanted to preserve capacity and because it had recently completed a $100 million modernization program. But cuts were made: Replacement of a plant floor damaged by the wheels of forklifts, for example, was spread out over three years, rather than one.

Thomasville Furniture also shifted production toward lower-cost items that do better in hard times, notably upholstered furniture and non-assembled furniture.

Complicating the ability to plan was Iraq's invasion of Kuwait. General manager O'Brien recalls hearing the news on his car radio and noting to himself both the human cost and the likely economic impact to his business. Transportation expenses would rise and petroleum-based materials such as varnish would increase in price.

In September, the company found it wasn't getting the financial results it needed from its steps to date. So Thomasville Furniture announced layoffs of 110 workers, all of them new hires still on 90-day probation. That has held the line, for the time being at least. In the third quarter, sales were $102 million, compared with $108 million in the same quarter of 1989, and the company remained profitable.

Starr maintains that in some respects the experience since May has been positive, prodding his company to do difficult things it should have been doing anyway. It has stepped up programs to reduce production and distribution time, to improve quality, to reduce managerial overhead. When the troubles end, said Starr, "I'm convinced that Thomasville is going to be a substantially stronger company."