Start talking to people about the state of the Vineyard economy, and you can detect an edginess, an air of concern that mirrors the condition of a nation in the midst of recession, war and ongoing fear of terrorism.

The Island, it seems, is not entirely immune.

From real estate offices to retail storefronts, people with their fingers on the pulse of Vineyard business say the economic outlook right now is uncertain, but tempered by the hope that tourists too frightened to fly will see the Island as a safe vacation spot, easily reachable by car and boat.

"The Vineyard had a terrible shoulder season," said Colette Kurelja, owner of Sunglasses and Then Some, which has outlets in both Vineyard Haven and Oak Bluffs. "Across the board, tourism kind of came to a halt after 9/11."

"It's a very difficult economic climate, a very scary time," Bob Skydell, owner of Offshore Ale in Oak Bluffs, told selectmen last week. "You see noticeable for-rent signs up and down Circuit avenue."

As for the Island's other cash crop - real estate - there are similar foreboding signs. Brokers say that in a market dominated by second-home sales, the recession has dragged sales down to a sluggish pace at best.

The latest land bank statistics show that the number of transactions in the last half of 2001 fell by 10 per cent while the total value of those deals rose by the same margin.

"That's the main story in the real estate business," said David Thompson, a broker with LandVest in Edgartown. "Look at the last three years. . . where you have the number of transactions getting lower and the dollar value getting higher, something's got to give. There's got to be a correction on the middle and lower end."

Tom Wallace, a realtor and owner of Wallace and Company in Edgartown, said some sellers are reducing asking prices. "Given the volume of real estate sales," he said, "it's not illogical that prices would ease back a little."

The notion of price-cutting fits a national pattern, where businesses have responded to the slow economy by offering discounts. Renee Balter, president of the Oak Bluffs Association, a civic and business organization, said Island businesses that do the same will stand a much better chance of weathering the recession.

"Restaurants that offer decent prices are doing extremely well," she said. "Ten years ago, there were plenty of off-season bargains in food, retail and at the inns. Now, we're going back to that as a mode to survive. The smart guys who are doing it know how to hang in there."

There are numerous examples. Cape Air, hurting for passengers like other airlines, is offering cut-rate fares to Boston packaged with hotel deals. Over at Offshore Ale, Mr. Skydell has launched two-for-one prices on Monday nights.

For Bickerton & Ripley Books in Edgartown, the traditional 20 per cent holiday discount pulled them out of an otherwise dismal fall. "It helped us escape some of the low sales other people may have experienced," said co-owner Marilyn Scheerbaum.

Mrs. Kurelja said Island businesses need to do even more cost-cutting, especially hotels and restaurants. "What are they going to do, still charge $300 a night and $28 a plate?" she said. "We need much more focus on the mid-range than on the high-end."

But while business may be able to squeeze their own profit margins, they can't do much about their customers' moods.

"In past Christmases, people would come in filled with joy and excitement," said Ms. Scheerbaum. "This year, there was a much more subdued response to the holidays. I felt a level of seriousness and concern."

At its worst, shopkeepers didn't feel much better. "Shoppers did not feel like shopping," said Ms. Scheerbaum. "Retailers didn't feel like retailing."

But nearly everyone queried on the Island economy said that while worries over war and terrorism had a negative impact over the fall, the Vineyard tourism industry could ultimately benefit from the troubled state of world events.

"The word on the street is that people aren't going to want to fly or travel as much. They'll do local trips," said Ms. Kurelja. "It might really benefit us. Martha's Vineyard is going to be busy this summer."

The Vineyard, these observers say, remains a popular destination and a solid real esate investment. "It's fair to say it's a changing market, but the Vineyard has not lost its appeal," said Mr. Wallace.

But for working people or the elderly, the Island's Teflon image is of little consequence when it comes to basic economic survival.

Ray LaPorte, Tisbury selectman and an investment broker, said the Vineyard economy is multi-tiered, and while the tourism and construction sectors will probably continue to flourish, not everyone's status is tied to those areas.

"Wages here are stagnant," Mr. LaPorte said. "And the Vineyard is not different from anywhere else in that personal debt is growing. Expenses here are high. The result is that people will flee the Vineyard for cheaper housing and lower cost of living."

The other victims in the current economic climate, he said, are the elderly, living on interest income from bank accounts. "They suffered an income cutback," he said, "and they're really caught."

Some small business owners are also suffering. Mr. Skydell said turnover of retail shops on Circuit avenue is rapid. "For anybody to go into one of these stores at the rents being charged, it's practically suicide," he said. "We've got 10 weeks of business, and you can't make it."

And businesses in Tisbury and Oak Bluffs are facing their own economic uncertainties.

"People are very apprehensive about the sewer coming online" in Oak Bluffs, said Mrs. Balter. "The question marks are, is it going to work and will it be on in time? What's the real cost going to be?

"If we don't have enough flow, it's going to cost a lot," she said.

Over in Tisbury, the big question is what impact the fire at the Tisbury Inn and Health Club will have on downtown business. "I see it in the morning when I go to work," said Mr. LaPorte. "Instead of 20 cars on Main street in front of the health club, it's totally empty."

Tisbury retailers may be in for a rough patch in the next year or two, and across the Island, Mrs. Balter said, people are fearful of a recession.But that fear is not anything close to panic. There's an abiding faith in the Island's ability to entice tourists no matter what.

"The Vineyard has been through thick and thin," said Mrs. Balter, "and we've always come out smelling like a rose."