Greenspan Gets Ready to Fight His Labor Pains

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The next Federal Reserve meeting on interest rates isn't until May 16, but the numbers Alan Greenspan was waiting on are already out. April's unemployment (3.9 percent, down from 4.1 in March) and average hourly earnings figures (up 6 cents last month to $13.64) hit the Street on Friday, and the way the markets see it, Father Greenback just raised interest rates again. Twice. "It seems almost certain that the Fed will raise rates by a half-point, or 50 BASYS points — twice the increment he's hiked it by lately," says TIME senior economics reporter Bernard Baumohl. "It shows what really concerns Greenspan as he watches for inflation: the tightness of the labor markets."

In Greenspan's eyes, the tech-productivity bounties of the New Economy do serve to neutralize some portion of the overheating worries associated with economic growth. But if the same workers are doing so much more work, why do companies keep hiring more people? "There's still a simple supply-and-demand issue here," says Baumohl. "That extra growth not absorbed by productivity is eating into unemployment, and that's driving up wages. And it's wage pressures that are historically the single biggest key to inflation."

Not to worry, though, stock-watchers. In this season of wild swings, Dow and NASDAQ marketeers had already factored the whole thing in and swallowed the whole 50 basis points, emotionally speaking, buying steadily all morning. But out in the real world, Greenspan faces a still-blazing economy that 11 months of persistent quarter-point cuts has hardly cooled. And his job, ghoulish though it may sometimes seem, involves keeping about 5 percent of America from getting one of their own.