Downturn Has Bypassed State, Executives Say : Economy: California’s diversification will help it weather problems in home building and defense, participants at a Business Council meeting predict.

While the Northeast shivers in the chills of a serious economic slowdown, California has not yet caught cold.

The West has thus far happily escaped the business turmoil engulfing some areas of the country, according to corporate leaders gathered for the Business Council meeting here.

“Basically, the California economy is slowing, but because of widespread diversification, we are a long way from recession,” said Howard P. Allen, chairman of the executive committee of Southern California Edison. He retired earlier this year as chairman of the big utility firm.

California can weather the current downturn in home building and defense spending, Allen said confidently.

The massive service economy required to meet the needs of 29 million people provides a buffer against a sharp recession, he said in remarks during a news conference and in a later interview at last weekend’s semiannual meeting of the Business Council, an aggregation of current and past chairmen of the nation’s giant corporations.

“Growth will drop, but we do not see any significant recession in California as in the Northeast,” Allen said.

Although the national outlook for business and residential construction has deteriorated, “things are picking up for us a little bit,” said S. D. Bechtel Jr., chairman emeritus of the Bechtel Group Inc. of San Francisco. U.S. and foreign markets for the company should improve, but margins will be “very tight,” said Bechtel, whose firm is one of the biggest designers and builders of large industrial plants and factories.

Other executives from outside the state echoed the theme of western strength.

“The Northeast is quite hard hit now,” said James D. Robinson III, chairman and chief executive of American Express. “In the central and western parts of the country, spending is more robust.”

The economy performs quite differently across the country, noted John S. Reed, chairman and chief executive of Citicorp.

In areas of weakness, jittery consumers prepay their credit cards and put them away in a drawer, he said jokingly. Elsewhere, cardholders keep shopping with enthusiasm.

Reed and Willard C. Butcher, chairman and chief executive of Chase Manhattan Bank, said banks are being hurt by troubled real estate loans, reflecting the fall in property values.