The blues envelopes this sprawling city like a dense, suspended cloud. In almost every neighborhood, the South Side, West Side and North Side, the wailing cry and moaning lament of the blues is shouted in slickly decorated lounges and dimly lit bars.

For more than half a century Chicago has been the blues capital, the city where hundreds of thousands of Afro-Americans have migrated from Mississippi, Louisiana, Tennessee and Arkansas over the last two generations in search of jobs in the steel mills and stock yards. And in this great migration came thousands of blues singers who wanted to test their mettle against the best.

Eminent performers such as Muddy Waters, Sunnyland Slim, Little Brother Montgomery, Jr. Wells, Buddy. Guy and James Cotton still live here. But most can't afford to work here. The wages are too low.

It's a case of supply and demand. This city has more blues clubs and performers per square foot than any other place -- and not enough people to listen.

Times have not always been so tight. A decade ago, the blues revival was in full swing. Bluesmen from both city and country were lionized and played to huge, worshipful audiences in nightclubs and at outdoor festivals. British groups like the Beatles and Rolling Stones drew directly upon the blues for material and added the azure and teal shades of the blues to pop music. White Americans like the Paul Butterfield Blues Band and Mike Bollmfield group dipped deeply into the blues bag.

But the good times dried up. First, it was soul that was big. Now it's disco. And many bluesmen, resentful of their plight, aren't working.

Still, on Friday and Saturday nights the clubs here are crowded with people out for a night on the town -- people who've chosen the blues over a movie, concert or play.

At Buddy Guy's Checkerboard Lounge on the South Side recently, the atmosphere crackled with jangling guitar and percing harmonica sounds. The audience was a swirling mixture of middle-aged, blue collar blacks, white urban graduate students and young professors from the nearby University of Chicago, callow undergraduates affecting the look of poverty, and hip professionals.

A man in a gray tweed jacket, rimless spectacles, and blond hair parted down the middle slaps the backs of several black men perched at the bar. They all know each other. Soon, like many others, he goes out and returns with an order of barbecue from one of the many hickory smoke pits on the avenue.

"Yeah, we get a lot of different people in here," says Guy, who's tending bar in the place he's owned for six years. "Sometimes we get visitors from places like Tokyo or Paris. They just want to say they've been here in Chicago and heard the real thing."

At about that time, a representative of "the real thing," Jr. Wells, a 5-foot-7, 137-pound dynamo of a harmonica player and blues shouter, steps on the bandstand, joining the group led by Phil Guy, Buddy's brother. His highcrowned beaver hat gives him the look of Little Lord Fauntleroy.

As if enacting a ritual, Wells, 44, methodically unrolls a swath of denim cloth with pockets for his array of various-sized harmonicas. He selects one and the group eases into a slow, grinding blues. Wells moans:

"Hey, baby, I'm going to will my love to you/Everything's going to be all right/I ain't never gonna let you go."

He throws his head back on the last line, pokes out his lips and makes a "woof, woof, woof" sound like a playful puppy. The audience screams for more, so Wells delivers "Come On In This House."

The harmonica man leaves almost immediately for Theresa's, a prominent bar farther south, where he works full time. He stops by the Checkerboard frequently to see his pal, Buddy -- they used to perform together -- and sit in.

Not as famous as B.B. King or Bobby Bland, Wells has nonetheless shaped his own personal style and created a loyal following in his 33 years of performing.

"The white kids say I'm going commerical," he smiles, flashing a gold cap on a front tooth. "I say there's no limitation to the blues. I just want to express my feelings through my music. It's a scuffle out here. The blues aren't as popular as they were back in the '60s."

A decade ago, Wells and Guy led a band that attracted fans all over the country. They toured Europe and had some listeners in Japan.

It was the height of the blues boom. Urban white students at universities in Michigan, Wisconsin, New York and California produced blues festivals featuring many backwoods bluesmen, some of whom hadn't been heard from in years.

Blues magazines sprang up. Scholars turned their attention to the music. Blues performers were working so much they couldn't fill all the requests for their time. A few white performers made millions imitating black blues singers.

But times have changed. Like an ebbing tide, the blues receded to the Afro-American sections of Chicago, Detroit, Houston, New Orleans and other industrial cities with large black populations. The blues aren't heard very much on radio or at festivals these days.

"Chicago has gone dry," says Wells."There're so many musicians out of work. I put some of it on the blacks. They should support their own musicians. Most of the people who come to hear us at the festivals and the clubs are white."

His is a common complaint -- that blacks play the blues, but whites support it. No one has made a formal study of this trend, but there is no disputing it. Many young blacks see the blues as a painful reminder of a servile past; others say the spirit of the blues, rural in tone and introspective in outlook, doesn't reflect the feelings of contemporary blacks.

But no pat explanation fits. Even as Jr. Wells stood talking in Theresa's, his home base for 22 years, the Saturday night crowd was largely black, people in their 30s and 40s who'd put on their stepping-out clothes, ordered a scotch or a bourbon, and were having a good time doing the boogie and the grind.

Theresa Needham, owner of the club, says her business has remained steady because most of her customers are older. "But it's a different thing with those clubs that depend on the youngsters," she says.

Guy, a first-rate guitarist and singer who performs frequently at his club, says, "I've been able to keep my head above water. Willie Dixon told me the other day that even though the club isn't doing a million, at least it's known in Tokyo. And it's giving some work to some musicians.

"In the '60s our music did well with the white market. But then clubs started closing all over Chicago, especially after the riots. Lots of clubs were burned. That's one reason why I opened this place -- so we'd all have some place to work."

Guy emphasizes that the blues scene has been hurt by the death of two Chicago record companies, Chess and Vee-Jay.

"The other companies don't bother with us," says Guy. "It's like people who come in here. They might order the same beer for months. Then they'll switch to something else. People nowadays want to hear disco music on the radio."

Willie Dixon, whose 1,000 songs, including "Hoochie Coochie Man," "Little Red Rooster" and "Seventh Son" make him one of the most prolific blues songwriters, says, "Radio stations segregate the blues. They want to keep black people ignorant of their past. And black people don't communicate enough with each other. That's why we don't get along as well as we should."

Dixon, 63, has started writing songs that make social commentary. He just produced an album with a cover showing the world as an egg being hatched by a Caucasian dove ensnarled by a snake.

"The dove tries to keep peace, but the snake won't let it," says Dixon with a soft smile. "Whites create create cars, but cars cause pollution.

"The blues was made for us to communicate with each other. The blues is a beautiful feeling. I like the blues because I grew up with it. And other people like it -- I just came back from playing a blues festival in Mexico City."

The imposing Dixon, who is 6-foot-2 and 239 pounds, is one of the fortunate. The royalties from his songs help support him and his family. He also operates a workshop on the West Side. Musicians come by on Saturday afternoon to exchange information and play with each other.

Jim O'Neal, editor of Living Blues, a magazine published here, points out that most bluesmen have to work day jobs in order to earn a living. Playing music at night is necessary for their emotional well-being but useless for buying groceries.

"The biggest problem is that records don't get airplay, and not many companies are recording blues now," he explains. "I guess there's nothing definite that looks good. Willie Dixon has plans to organize musicians to picket the radio stations, but I'm not sure how much good that'll do."

Bluesmen have known dry spells before and they've always managed to hold out until times got better. They nurtured and refined their art during the Depression years of the 1930s, when most people were trying to forget the blues. They also kept cool in the 1950s while witnessing the dilution of their art by popular musicians playing rhythm and blues.

However, bluesmen may be facing their most formidable challenge. The blues is more probably a music of the past -- of a time when America was dominated by small town and farm life, slow-moving communications and easy-going lifestyles. B.B. King and Bobby Bland may smooth over the rought edges of their music by singing more ballads than blues and adding string ensembles to their background, but they still don't attract the large audiences of blacks commanded by Earth, Wind and Fire or the O'Jays.

Unlike the hippies of the '60s, who prided themselves on listening to nothing but pure blues played by black musicians, white youngsters in 1978-79 are buying in record numbers a blues record cut by John Belushi and Dan Akroyd (they call themselves the Blues Brothers), of "Saturday Night Live" fame. The record is the fastest selling LP in the 41-year history of Atlantic Records.

Nevertheless, bluesmen keep playing, hoping their time will come again. Maybe it will -- who could have predicted the unexpected blues boom of the 1960s?

Says Buddy Guy: "I just love this kind of music, and I plan to keep on no matter what happens."