A prep course for the month-long World Cup soccer tournament, a worldwide pheno

ment employees , the Supreme Court Tuesday tentatively allowed a city hospital i

n Illinois to fire a nurse who criticized a training program . As long as a publ

ic employer reasonably believes that its actions do not violate First Amendment 

rights , it can fire someone even if it later turns out that free speech was inv

olved , the court said . Justice Ruth Bader Ginsburg , described after her nomin

ation last year as a strong defender of First Amendment rights , was one of only

 four justices who signed the court 's opinion Tuesday . Three others concurred 

in the result , while Justices John Paul Stevens and Harry A . Blackmun dissente

d . The case involved an appeal by the city-owned hospital in Macomb , Ill. , of

 a decision by the U.S. appeals court in Chicago that Cheryl R. Churchill was en

titled to ask a jury to reinstate her to a job helping to deliver babies in the 

hospital 's obstetrics department . Churchill , during a dinner conversation wit

h another nurse at the hospital , criticized a policy allowing on-the-job traini

ng of nurses from other departments . She also allegedly criticized her supervis

or , which she denied . Witnesses split as to whether she had criticized the sup

ervisor , but she was fired on charges of insubordination anyway despite the obj

ections of the doctor in charge of the department who had been battling with the

 hospital administration over staffing and training . While government employees

 ( unlike private employees ) have had a right to make statements about public p

olicy , including nurses ' training , they do not have the right to make stateme

nts considered `` disruptive . '' The hospital said that because it believed Chu

rchill had criticized her supervisor speech that is not protected by the First A

mendment it had acted in good faith and its judgment should not be questioned . 

But the appeals court said that ignorance of the fact that her statements were c

onstitutionally protected was not a defense and that the facts should be determi

ned by a jury . Justice Sandra Day O' Connor , writing for four justices , said 

that a government agency 's responsibility to perform its job sometimes outweigh

s its employees ' First Amendment rights . `` When someone who is paid a salary 

so that she will contribute to an agency 's effective operation begins to do or 

say things that detract from the agency 's effective operation , the government 

employer must have some power to restrain her , '' O' Connor wrote . She ordered

 the case sent back to a lower court to decide whether the hospital 's assumptio

ns were `` reasonable , '' though she made it clear that `` reasonable '' should

 be broadly defined . ( Optional add end ) Justice Antonin Scalia , joined by Cl

arence Thomas and Anthony M. Kennedy , sharply critized the `` reasonable '' req

uirement as a new constitutional right , but agreed with other aspects of the op

inion . Stevens , joined by Blackmun in dissent , wrote , `` The First Amendment

 demands that the government respect its employees ' freedom to express their op

inions on issues of public importance . '' In other action Tuesday , the court :

 Ruled , 7-2 , that the state of Washington could impose minimum stream flows on

 a hydroelectric power plant to protect fish . Refused , over a dissent by O' Co

nnor , to hear the appeal of a an anti-abortion group banned from participating 

in a downtown festival in Frankfort , Ky. . Declined to hear a challenge to a ru

ling that officials in Cobb County , Ga. , must remove a 3-by-5-foot framed pane

l containing the Ten Commandments and teachings of Jesus from a wall in the coun

ty courthouse . Agreed to decide in an Arizona case whether arrests based on err

oneous computer records are good-faith mistakes that don't necessarily require t

hrowing out all evidence seized afterward .

 WASHINGTON Although he says he wants his day in court , Rep. Dan Rostenkowski ,

 D-Ill. , may well meet his match if Eric H . Holder Jr. , the prosecutor who ob

tained his indictment , chooses to try the case himself several months from now 

. Holder , 43 , the first black U.S. attorney for the nation 's capital , is a t

all , stately man with a polished courtroom manner and 18 years experience in pu

blic corruption cases . He also has made a study of how to appeal to juries . ``

 He understands juries here , and he certainly understands politicians , '' says

 a former colleague on the Washington , D.C. , Superior Court , where Holder ser

ved five years before President Clinton appointed him as Washington 's top prose

cutor last July . A confident , easygoing man , Holder has said he wants to deve

lop a better relationship between his office of 300 attorneys , who are dispropo

rtionately white , and the predominantly black population of the District of Col

umbia from which juries for his cases are drawn . During his years as a judge , 

he said he winced at seeing prosecutors lose trials they should have won mainly 

because they failed to relate to jurors . Holder said he plans to correct that i

n his new post . He promptly won the respect of his new colleagues when he took 

over the Rostenkowski probe after his swearing-in last October . At the time , J

ay B . Stephens , his Republican predecessor , criticized the Clinton White Hous

e for replacing him at a time when it was replacing other U.S. attorneys across 

the country in the midst of a highly sensitive investigation . Rather than duck 

the criticism , Holder met it head on . `` The idea that a Democratic U.S. attor

ney is going to do something different than a Republican U.S. attorney is pretty

 close to ridiculous , '' he said . Instead of shortening or curtailing the inqu

iry , he decided to expand it by asking for the appointment of a new federal gra

nd jury to replace the old jury , which faced a deadline of Oct. 31 , 1993 . Des

pite his short time as top prosecutor , Holder has had ample experience investig

ating public corruption . He spent a dozen years as a lawyer in the Justice Depa

rtment 's public integrity section , where he had a hand in the Abscam congressi

onal bribery prosecution of former Rep. John W. Jenrette , D-S.C. . `` In some w

ays , I came in as prepared as I could have been because of my 12 years in publi

c integrity , '' he told The Washington Post earlier this year . `` I think pote

ntially I 'm a better U.S. attorney now than I was then , from being on the benc

h for five years and presiding over hundreds of criminal trials . '' Former judi

cial colleagues said Holder 's record was `` pretty middle of the road , '' neit

her soft-hearted in his sentencing practices nor too conservative in espousing `

` law and order '' at any human cost . ( Optional add end ) The son of a secreta

ry and a real estate agent , Holder spent the summer of 1974 as a law clerk for 

the NAACP Legal Defense and Education Fund and the following summer as a law cle

rk in the Justice Department . He received his law degree in 1976 from Columbia 

University . A Democrat , he has never been active in local politics , has never

 run for public office or played a role in anyone else 's campaign , he told the

 Senate Judiciary Committee last year on the eve of his confirmation . Others sa

y they suspect the reason is that Holder is skeptical about politicians , or tha

t he espouses higher standards than many officeholders do . In describing the Ro

stenkowski charges to reporters , Holder said , `` The vast majority of members 

of Congress are decent and honorable public officials who work incredibly hard a

nd follow all the rules . '' He quickly added , `` But the criminal acts of a fe

w feed the cynicism which increasingly haunts our political landscape . ''

 With nearly 14 million Americans out of work , marooned in part-time jobs or to

o disheartened to answer a help-wanted ad , could the United States be approachi

ng `` full '' employment ? Key Federal Reserve officials , along with many on Wa

ll Street , believe that as a practical matter the answer is yes : that the econ

omy has has entered a danger zone where further jobs growth could set off an upw

ard spiral of inflation . That belief , which has helped justify four interest-r

ate hikes this year and may hasten the next one , has sparked a controversy that

 goes to the very core of the U.S. economy 's capabilities in a world of changin

g technology and global business links . `` How would an average person in Calif

ornia respond to the notion that somehow we 're growing too fast and have to slo

w the economy down ? '' asks Lawrence Mishel , research director at the Economic

 Policy Institute , a liberal think tank . Critics say the Fed is relying on an 

outdated world view that has failed to consider sweeping changes that are likely

 to keep the lid on inflation as joblessness shrinks further . Moreover , the jo

bs-versus-prices flap comes at a time when the labor market , despite significan

t gains , still has pockets of distress . While the national unemployment rate i

n April was pegged at 6.4 percent , that is just an average figure . The experie

nce of regions , racial groups and industries differs drastically . In Californi

a , almost 1.5 million people are looking for work , and the unemployment rate i

s 9.6 percent , according to state data . By contrast , the rate in North Caroli

na is 3.9 percent . Nationally , whites enjoy a unemployment rate of 5.6 percent

 , according to the Bureau of Labor Statistics . But the black unemployment rate

 is 11.8 percent , and the Latino rate is 10.8 percent . One in three Americans 

still believes that jobs are `` hard to get , '' the Conference Board reported T

uesday , a slight increase from April . Given the disparities of fortune , the q

uestion of when to slow the economy through interest-rate hikes takes on huge pe

rsonal and political ramifications . `` You 'd hate to throw away 500,000 jobs t

hat it might not be necessary to throw away , '' observes Laurence H. Meyer , an

 economic forecaster in St. Louis . Nonetheless , what Fed officials abhor most 

of all is the prospect of inflation , which could unhinge the financial markets 

and undermine the entire recovery . They have lately become concerned that the e

conomy is running out of `` slack '' unused factory capacity and available worke

rs . The jobless rate has been on a downward trend for almost two years , dippin

g to 6.4 percent in April from 6.7 percent in January . Factories , meanwhile , 

have been humming , another sign that the economy continues to pushing forward a

t high speed : Operating rates have churned up to 83 percent , closing in on the

 traditional inflation threshold of about 85 percent . As the economy runs out o

f slack , goes the view , shortages of labor and materials lead to inflation . A

nd inflation erodes the value of bonds . ( Begin optional trim ) `` What 's impo

rtant is that the country has removed an awful lot of slack in the economy , '' 

said Robert Parry , president of the Federal Reserve Bank of San Francisco , in 

an interview . Parry doubts that anyone can pinpoint the precise unemployment ra

te that triggers inflation , but he suggested it lurks somewhere between 6 perce

nt and 6.5 percent , and probably `` in the higher part of that range . '' ( End

 optional trim ) Therein lies the dispute . Critics say the Fed is counting too 

heavily on theories hatched in an entirely different era . Nowadays , they conte

nd in a theory of their own , a range of new , anti-inflationary forces have tra

nsformed basic economic behavior . `` There is no question that this ( unemploym

ent ) is what the Fed has been focusing on , and there is no question there are 

faults in their methodology , '' said Mickey D. Levy , chief financial economist

 with NationsBank in New York . ( Begin optional trim ) Corporate cost-cutting ,

 for example , has evolved from a fad to a new business culture , with major imp

lications for keeping the lid on prices . Consider hiring practices : By some es

timates , one in five jobs generated during the recovery has been temporary , sa

ving employers much of the expense of permanent staffers who qualify for full be

nefits . Global forces are also at play . More than ever , foreign workers and f

actories are ready to meet the needs of U.S. consumers when America approaches t

he limits of its own industrial capacity . ( End optional trim ) `` They 're jus

t wrong , '' Robert Pollin , an economics professor at University of California 

, Riverside , said of the Fed 's worries that America 's falling unemployment ra

te threatens an inflationary spiral . `` They haven't factored in the downward w

age pressures from global competition . '' `` If some of the world 's best physi

cists can be hired in Russia for $ 100 per month , why should anyone pay a third

-rate American physicist $ 50,000 a year ? '' MIT economist Lester C. Thurow rec

ently asked in the New York Times . ( Begin optional trim ) In the 1960s , econo

mists counseled that an unemployment rate in the 4 percent range was the flash p

oint for inflation . Then came the youthful baby boom , largely unsettled in lif

e , inexperienced in the workplace and often lacking job skills . Estimates of t

he inflationary flash point floated toward a 7 percent unemployment rate . Fast-

forward to 1994 , and the picture has changed once more . Economists believe the

 danger zone has has gotten lower , partly due to a more-experienced work force 

, and peg it in a range between 6.5 percent and 5 percent . But that range cover

s a lot of territory : The difference of 1.5 percentage points could be the diff

erence of up to 2 million jobs , said Ross DeVol , an economist with the WEFA Gr

oup in suburban Philadelphia . ( End optional trim ) The issue could become even

 touchier in the coming weeks , in light of some new signs that the economy is p

erking along faster than expected . The Commerce Department recently surprised a

nalysts by revising upward to 3 percent the nation 's growth rate for the first 

three months of the year , though reports released Tuesday indicated that the ec

onomy cooled off in April . In any case , this much is agreed upon : A recovery 

once dubbed `` jobless '' is spewing out new jobs by the hundreds of thousands ,

 and it is doing so without sparking wage inflation so far . But the Fed is on a

 course of raising interest rates anyway , a strategy that will reduce jobs grow

th in the future : `` To the average person on the street , I 'd guess this does

n't make a lot of sense , '' DeVol said .

 WASHINGTON The Supreme Court , in a case with far-reaching consequences for all

 privately owned hydroelectric dams , ruled 7-2 Tuesday that states may require 

hydroelectric projects to keep enough water in rivers to maintain fish populatio

ns , preserve aesthetic qualities and even ensure recreational uses . The case h

ad pitted the state of Washington , which is home to dozens of powerful rivers a

nd even more hydroelectric dams , against the Tacoma City Light , a utility comp

any that would own and privately operate a massive water project on the Dosewall

ops River . The state had insisted that the utility forfeit some electric genera

ting capacity by leaving the Dosewallops at levels that would allow the continue

d migration of rare salmon and trout up and down the stretch of water . But offi

cials from Tacoma City Light had argued that while states may set standards for 

water quality , only the federal government , which regulates privately owned hy

droelectric dams , may set standards for water quantity . But Associate Justice 

Sandra Day O' Connor , writing for the majority , rejected that argument , calli

ng the distinction between the quality and quantity of water in a river `` an ar

tificial distinction . '' `` In many cases , water quantity is closely related t

o water quality ; a sufficient lowering of the water quantity in a body of water

 could destroy all of its designated uses , be it for drinking water , recreatio

n , navigation or , as here , as a fishery , '' O' Connor wrote for the majority

 . Justices Clarence Thomas and Antonin Scalia dissented . The ruling could effe

ct hundreds of privately owned dams whose licenses are due for renewal in the co

ming years . Already , operating licenses of some 230 privately owned dams have 

expired and are operating pending a licensing review , and dozens more are due t

o expire in the next several years . While environmentalists cheered the ruling 

, the hydropower industry said it is likely to create uncertainty over federal l

icensing of hydropower projects and over who federal or state officials will hav

e the final say in issuing operating licenses . `` We are very dismayed by the c

ourts decision , '' said Karolyn Wolf , a spokeswoman for the American Hydropowe

r Association . `` It 's left the industry in the lurch and we feel the ramifica

tions for the industry will be severe . '' The ruling also was seen as broadenin

g states ' rights to protect and preserve their waters from degradation by hydro

power projects . ( Optional add end ) Under the federal Clean Water Act , states

 are responsible for designating uses for streams and rivers , such as drinking 

water , fish habitat or whitewater recreation . A state must then issue a plan t

o ensure that those designated uses are not degraded . While those plans normall

y set out complex chemical standards that must be met , the court ruled that sta

tes also can enforce standards expressed in more general terms . In the dispute 

that prompted Tuesday 's ruling , the state of Washington had designated the Dos

ewallops as a river capable of supporting the migration of salmon and steelhead 

trout , species of fish that are considered in danger of extinction . If the Tac

oma City Light hydroplant diverted too much water for power generation , the sta

te argued , the river no longer would be able to meet that objective . `` The ru

ling shows that water quality and water quantity are strictly intertwined , and 

have to be treated together under the Clean Water Act , '' said Katherine Ransel

 of American Rivers , a watchdog group that brought the case before the Supreme 

Court . `` They 're like love and marriage , you can't have one without the othe

r . `` It 's also sweeping : the court has ruled that water quality means much m

ore than some measure in a test tube , '' she said . `` The other side had argue

d that that 's what states are limited to . The court said uh-uh . ''

 The Federal Trade Commission has begun assessing the potential consequences of 

a possible merger between R.H. Macy & Co. and Federated Department Stores Inc. .

 According to sources , the FTC has sent letters to both retailers , asking abou

t their operations , particularly in states where the chains overlap : New York 

, New Jersey , California , Georgia , Texas and Florida . Spokeswomen for the tw

o retailers declined comment on the inquiry , which an FTC spokesman refused to 

confirm or deny . Federated 's proposed takeover of Macy 's would create the nat

ion 's largest department-store group , with $ 13.5 billion in sales . Federated

 owns Bloomingdale 's , Abraham & Straus , Stern 's and six other chains . In ad

dition to its flagship operation , R.H. Macy also runs I . Magnin , Bullock 's a

nd smaller specialty stores . Macy 's , which has vowed to remain independent , 

has argued that a combined entity would lead to fewer suppliers and higher price

s . Conversely , Federated maintains that a merger would result in a more effici

ent company that can offer consumers lower prices . Federated has circulated pro

posals on Wall Street claiming at least $ 100 million in cost savings after a me

rger . The number of A&S locations , for instance , might be scaled back . And o

verlapping chains elsewhere , such as in Atlanta , are expected to be sold . But

 a merger is far from certain , even though Federated is a big Macy 's creditor 

and plays an important role in shaping Macy 's bankruptcy reorganization , which

 is expected to be completed by January . Macy 's own proposal to emerge from ba

nkruptcy has , so far , won the backing of bondholders and suppliers . To wrest 

control of Macy 's , Federated must still win the backing of other important cre

ditors . Until Aug. 1 , Macy 's has the exclusive right to file a reorganization

 plan in bankruptcy court .

 WASHINGTON Health care , an issue already steeped in heavy political problems ,

 became a bit more difficult Tuesday with the indictment of Rep. Dan Rostenkowsk

i . Under the rules of the Democratic caucus , the Illinois Democrat must immedi

ately step aside as chairman of the Ways and Means Committee , a prestigious pan

el with the prime responsibility for drafting the sweeping health legislation at

 the top of President Clinton 's agenda . Before any measure can be voted on by 

Congress , proposals must wend their way through committees in the House and Sen

ate . Rostenkowski 's loyalty to Clinton and his dealmaking ability were best su

ited to getting a comprehensive plan out of the House where other House panels a

re either faltering or planning to report out legislation that hasn't been given

 much chance of success . Based on the seniority system , Rep. Sam Gibbons , D-F

la. , will automatically step in as acting chairman of Ways and Means . Some Cap

itol Hill watchers suggested Tuesday that with Rostenkowski out of that role , t

he administration 's emphasis may switch to the Senate , where Sen. Daniel Moyni

han , D-N.Y. , chairman of the Finance Committee , is trying to forge a bipartis

an accord . Democrats on the committee went out of their way to insist that busi

ness will go on , even if it 's not as usual . They point to the fact that Gibbo

ns has already told the Ways and Means Committee staff it will remain intact and

 it is expected to continue working on the bill Rostenkowski has been fashioning

 even in the final days before his criminal indictment . `` We 're more concerne

d with getting a bill out than with personalities , '' said Rep. Charles Rangel