The bad news for Kenneth A. Gibson, the thrice-elected mayor of Newark, is that he is campaigning under a cloud, having been indicted just five weeks before the mayoralty election for conspiracy, neglect of official duty, misconduct in office and theft by deception.

The good news for Gibson is that his major opponent in the election--City Council President Earl Harris--is campaigning under the same cloud, indicted on the same counts.

The two were in court in April. Side by side they pleaded not guilty to charges that they cheated the city out of $115,000 by creating a "no-show" job for a former city councilman, a security chief in his 80s. The security chief, Michael (Mickey) Bontempo, who lives in Florida, also pleaded not guilty.

Has the Gibson campaign been shattered? Has the indictment delivered the coup de grace? Not in New Jersey.

Gibson's indictment, according to political observers, has strengthened his campaign, and serves as a rallying point. The 132 charges, which include two counts for every check received by the aged security chief, are viewed in some quarters as overkill by the prosecutors. The Gibson campaign team insists that a poll of 800 voters shows that Gibson's popularity increased after the indictment.

"It's not a cloud," says the mayor, relaxing in the shabby splendor of Newark's water-damaged beaux arts City Hall. "The indictment that came down is not one that presents the traditional political problem. The traditional political problem relates to corruption type charges . . . bid-rigging . . . graft . . . uh, kickbacks, all those kind of things.

"This indictment relates to none of those items. It relates to the question of whether or not a man I gave a job to worked for his pay. And frankly, all of the people I spoke to about the indictments, voters, say that they don't believe we've done anything wrong and that they'll continue to support us."

The mayor's campaign manager echoes the statement.

"The people feel it's a shafting," said Clarence Coggins. "A mayor of a big city, why would he risk the whole thing giving some slob a job he don't get a dime out of? The voters are not as ignorant as some people think they are."

Unfortunate Jersey, the banana peel of political vaudeville, long has been plagued by what people think. The previous mayor of Newark, Hugh Addonizio, defeated by Gibson in 1970, went to jail, convicted of extorting $240,000.

This very week, The Newark Star-Ledger carried a front-page story informing the voters that New Jersey had more wiretaps, 139, than any other state for the fourth year in a row.

This is the sort of news that makes folks think that Jersey may be, perhaps, corrupt. Jersey boosters insist that perception itself is fraud.

"There is not more corruption in Jersey," said political consultant Dan Horgan, formerly political director of the Democratic National Committee and now campaign manager for one of the candidates in the New Jersey Democratic gubernatorial primary.

"Jersey is just much more serious about chasing people, I think, and the record supports this fact . . . that Jersey is blessed with serious prosecutors who move heaven and earth to uncover corruption, a game of can-you-beat-this, with each successive attorney general attempting to beat the one in front."

Gibson's regime, coming into Newark in the wake of the race riots of the late 1960s, had been seen as an antidote to corruption, an honest administration headed by a determined civil engineer who had spent 11 years in night school for his degree.

Recent years have diminished the glow. In 1980 there was a federal investigation into alleged violations of tax laws and diversion of campaign funds, although there never was an indictment. The same year there were reports that Gibson, 49, had a private meeting with two Abscam investigators in an Atlantic City hotel. He was not indicted in the Abscam probe.

This year, before his indictment, Gibson, facing reduced federal funding, high crime and a shrinking tax base, was thought to be facing a rough local race May 11, although his popularity still was high.

In the governor's race last year Gibson finished third in the Democratic primary, but 40 percent of his support came from Essex County (Newark). In the street, around City Hall, there still are indications of his popularity as he strolls around. He's a handshaker, a hugger, beefy and athletic, a comfortable fellow to approach. Ladies like to squeeze him.

"Hey, mayor, gimme some sugar," a woman at City Hall greets him, moving in.

The criminal indictment, some now claim, has only increased Gibson's popularity in the largest city in New Jersey. The mayor, at any rate, does not seem to be hiding from it.

The Bontempo incident came to light last July. Vandals caused $2 million in damage to pipelines at a Newark watershed, bringing an inquiry into the security chief's whereabouts. He was about 1,500 miles south of New Jersey. Gibson said it was no big thing.

Bontempo "served the city of Newark for more than 40 years, and I gave him a perk, if you will," he was quoted as saying at the time.

More recently, Gibson took an advertisement in the weekly Italian Tribune defending not only defends Bontempo's job but presenting him as an equal-opportunity employer.

"I am mayor of all the people and I take great pride in using the talents of all residents, whatever their age or ethnic background," the ad reads. "The elderly in particular have great talents which can be used in the best interests of all of us."

"The arrogance," said mayoral candidate Junius Williams, a lawyer who, with Newark tax assessor Joseph Frisina and Earl Harris, complete the slate for the nonpartisan race. "He's taken the position that he can do anything he wants."

The position Gibson takes, and has taken throughout the seven-month grand jury investigation, is that this indictment is "a political hatchet job." He will not say who he feels might be out to get him. That would be a violation of the gag order he is under in the case, he says.

But he does claim that the Essex County proseuctor "had already prejudged the case," and notes that the prosecutor is related to the Democratic county chairman. Neither the prosecutor nor the Democratic chairman returned calls.

Gibson also acknowledged reports he had disagreements with the Essex County Democratic leadership.

"When I ran for governor in the last Democratic primary, all the Democratic leadership in this county--and the governor, who was from this county, and the attorney general, who were from this county, were in a contest . . . . They asked me to get out of the race late in the campaign and support their candidate and I refused," he said.

" . . . We had a conflict in the very beginning of the present tenure of the Democratic chairman when I supported someone else . . . . They also asked me to support Shapiro," referring to Peter Shapiro, Democratic county executive, who's up for reelection in June, after the May mayoralty race.

He has not, he adds, given any thought to his career should his candidacy fail. The question amuses him.

"What am I going to do for a living if I lose?" he said, laughing. "I'm not gonna lose."