EMPLOYMENT: Which Way Is Up?

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When the Labor Department announced the U.S. unemployment figures for April, the news was so good it might be bad. The jobless rate fell to 5.4%, down from 5.6% in March, and the lowest level since June 1974. That was encouraging to those who found work, but the news raised fears of renewed inflation. Reason: pressure on the job market could lead to a widespread rise in wages that, in turn, could boost prices.

Restraining consumer prices, which rose at a 6.4% annual rate in March, will be no easy task for Federal Reserve Chairman Alan Greenspan. To cool the economy, he may have to nudge interest rates upward. But doing so could drop a political bombshell on the presidential campaign of Vice President George Bush. For a loyal Republican like Greenspan, it is a dilemma with the sharpest of horns.