NEW ORLEANS - The merriment of Mardi Gras is like the exaggerated greasepaint smile of a sad clown in a celebratory city still mired in miseries.

For the sake of the Big Easy's psyche and pocketbook, the Carnival goes on this week, as big and brassy as before Hurricane Katrina devastated this storied place 18 months ago.

Bill Haber/AP (ENLARGE)

People line up to enter Blaine Kern's Mardi Gras World in New Orleans.

Bill Haber/AP (ENLARGE)

Pelicans and seagulls sit on the seawall with the historic Pontchartrain Lighthouse crumpled in the background in New Orleans. A compromised quality of life and uncertainty about New Orleans' future after Hurricane Katrina have the city on edge, threatening to push younger, more educated residents away and exclude poor people from the recovery.

There are as many parades and balls as ever as the extended celebration moves toward its climax next week on Fat Tuesday. Hotels are booked nearly solid, although boosters stress that some rooms are still available.

City is forever changed

But Mardi Gras could be the institution most back to normal in a New Orleans where violent crime and a lagging recovery have already changed the commerce and culture forever.

"This one event is very healthy," said Arthur Hardy, a historian and publisher of an authoritative Mardi Gras guide. He said that other than the Saints, who were "abnormally good" in making the National Football League playoffs, Mardi Gras is probably closer to pre-Katrina standards than any other aspect of life here.

Before Katrina flooded New Orleans in early September 2005, the city's population was about 444,000. The Louisiana Recovery Authority found the population is now about 191,000, not even half of what it was.

Instead of continuing to grow as former residents return, the population has hit a "plateau" and could even tilt the other way, said Elliott Stonecipher, a Louisiana demographic and political analyst. A recent study of moving van companies "quite frankly showed an out-migration," he said.

Because "the city lost 108,000 housing units" in Katrina, said Greg Rigamer, a demographer with CCR & Associates in New Orleans, it will remain a much smaller city for many years. A population of 300,000 in five years "might be realistic," he said.

Devastation still obvious

Riding down streets in the Ninth Ward and Lakeview, lined with ruined houses and deserted except for National Guard patrols, it's hard to believe that a year and a half have passed since Katrina.

On Lamanche Street, clothes and a Spiderman sleeping bag are still in tree limbs where floodwaters deposited them. Power wires are still down in front of the Holy Family Spiritualist Church, where someone left Mardi Gras beads on a statue of the Virgin Mary.

In a drying scrapbook on the driveway of a demolished house in the Ninth Ward are pictures of a family's vacation to Atlanta and student IDs from a daughter's years at Dillard University.

One resident who did return home to New Orleans only a few months after Katrina was Stacy Brundrick, an accountant. But she moved to Birmingham, Ala. after city services were slow to resume, and crime spiked.

'I will always love New Orleans'

"When people call and ask me when I'm moving back, I jokingly tell them 'When I don't need a bulletproof vest any more,' " she said.

She has come back for Mardi Gras, though, and will ride in a parade Saturday as a member of the all-female Iris Krewe.

"I will always love New Orleans," she said. "But a lot of young professionals are like me. I have a friend who says he wavers every day on whether to stay or to leave."

There were 162 killings in New Orleans in 2006, "and one conviction. That's ugly," said Peter Scharf, director of the Center for Society, Law and Justice at the University of New Orleans. There were 21 more murders in the first 42 days of 2007.

The murders of Helen Hill, a well-known local film maker, and brass band musician Dinerral Shavers destroyed the illusion that killings were concentrated in certain neighborhoods, Scharf said. "The truth is now there are really not that many safe places in the city."

Celebrating her first Mardi Gras, 1-year-old Sophia Funderburk was safe - at least from beads thrown from floats - inside a plastic box enclosing her seat atop a ladder beside St. Charles Avenue. The protective bubble was modeled after the Popemobile, her parents said.

Hope Funderburk was pregnant with Sophia when Katrina hit, and the family lived with friends for a year while their flooded house was being rebuilt. They're back at home now - but most of their neighbors aren't.

"In our neighborhood, maybe a third are back. A third are not coming back. The other third hasn't returned and is still deciding whether to come back," said Funderburk, watching the parade with her daughter and husband, Tim. With fewer residents and deserted houses, what was an "up-and-coming neighborhood" has become much more dangerous, she said.

Crime a big problem

"New Orleans has always had crime, but it's come closer to our home now," she said. "We've had robberies and shootings on our block."

Most of the shootings are still "bad guys killing bad guys," said Jimmy Keen, a retired homicide squad commander with the New Orleans Police Department. "But you get one innocent victim and everyone says, 'Whoa, this could happen to me.' "

A study by the University of New Orleans titled "Keeping Our People" found that 32 percent of the populace was considering leaving within two years.

But crime has not kept away the Mardi Gras crowds.

The French Quarter seemed as jam-packed and bawdy ever as Carnival kicked off last weekend. Bourbon Street was alive with music - R&B from Funky 544, Dixieland from Papa Joe's, Cajun accordion and fiddle from Fat Catz, and "Play That Funky Music, White Boy" blaring from seemingly every other bar doorway. Raucous folks on balconies tossed beads down to breast-baring young women below.

A mobile police tower called a Sky Watch, equipped with cameras and searchlights, loomed over the celebrating crowd in the French Quarter, however, and cops are pulling 12-hour shifts.

"Jesus loves you. God wishes that no one will go to hell," evangelist Walter Williams told passersby. He and Paul Gros of the Assembly of God Church in the French Quarter set up a high-tech Christian cross in the middle of Bourbon Street, and Bible verses scrolled across in lighted letters.

Nearby, Bill Young sold beads from a street cart. His big seller is a string of blue-pill beads with a faux bottle of Super Viagra at the bottom.

This is Young's twelfth season of selling Mardi Gras trinkets. "Now it's a tad slow, but it looks good for next week," he said. "It'll be good for the city and for the vendors and the other people who pay the taxes around here."

Indeed, a profitable Mardi Gras is sorely needed by small businesses, said Sandy Shilstone, president of the New Orleans Tourism Marketing Corp. Increasing property insurance rates are the latest financial woe to beset the "mom and pop" store owners that are the foundation of the tourism industry, she said.

"Mardi Gras was a homecoming for New Orleaneans last year," said Shilstone. "This year, we hope it's a homecoming for tourists."

Georgia friends make the trip

Three friends from Georgia said they did not let the much-publicized crime keep them away from Mardi Gras. However, they stressed that while they dance on Bourbon Street, "we don't get drunk."

"We will be back here again next year for Mardi Gras," vowed Fay Alexander of Thomaston, Ga. She had come with Carolyn Copeland of Woodbury and Brenda Beckham of Griffin.