May 3, 1997

US unemployment rate dropped to 4.9 percent in April, lowest level since December 1973; startling three-tenths of a point decline comes as factories record new peak in overtime hours and economy continues to advance at healthy pace; Pres Clinton hails strongest economy in generation; annual growth rate of 5.6 percent for first three months of year also cited; nation is now enjoying rare combination of low unemployment and low inflation; graphs; stock market, unfazed, ends week with strong gains; jobless ranks dwindled by 430,000, benefiting all demographic groups, but especially adult women (4.4 percent jobless) and blacks (9.8 percent) (M)

News analysis of budget-balancing agreement as substantial accomplishment for Pres Clinton and Republican Congress; Clinton accepted Republican principle of tax cuts, abandoned Democratic theme of protecting Medicare at all costs, and got some extra money for education and welfare; Republicans got tax cuts for families and investors and some savings in domestic programs, but dropped attempts to sharply cut Medicare and Medicaid, abolish Government agencies, expand military and relax environmental protections; rank-and-file still must vote on actual bills which renege on some campaign promises, and five-year plans may be hard to keep when belt-tightening begins to pinch (M)

Tony Blair becomes Prime Minister of Britain after Labor party's huge election sweep; 43-year-old leader enters 10 Downing Street to jubilant cheers of supporters, and promises 'practicable measures in pursuit of noble causes'; photos; John Major, who turned in resignation at Buckingham Palace and vacated official residence, will give up Conservative party leadership in aftermath of party's worst defeat this century; tallies show full extent of rout: Labor now has 418 seats in Commons, gain of 146, and Conservatives have 165, loss of 178; Liberal Democrats have 46, gain of 26 from 1992 and best showing for center-left party since 1920's; other 30 seats go to small parties including Scottish Nationalists, Welsh Nationalists, Sinn Fein and Ulster Unionists; voter turnout is 71.3 percent, down from 77.7 in 1992; Tories are left with no seats in Scotland or Wales and sharply fewer in prosperous 'Middle England;' casualties include seven Cabinet members including Foreign Sec Malcolm Rifkind and Defense Sec Michael Portillo; Portillo, Kenneth Clarke and Michael Heseltine and others will seek party leadership; Blair says 'enough of talking' after 18 years in opposition; Michael Prescott becomes Deputy Prime Min, Gordon Brown Chancellor of Exchequer, Robin Cook Foreign Sec and Jack Straw Home Sec (M),

Article, Waiting for China: Jitters in Taiwan, discusses possibility that China may set deadline for return of Taiwan, following return of Hong Kong this July and Macao in 1999; Wesley J D Yu, whose family built political dynasty under rule of Chiang Kai-shek's Nationalist party, discusses frankly the possibility of some sort of confederation with mainland; says Taiwan would have to have own military, foreign policy and officials, and China would have to promise not to use force to reunify; long-deferred question has suddenbly become one of Asia's major secuirty concerns; on Taiwan itself, Nationalist party supremacy is being undermined by growing independence movement; Pres Lee Teng-hui, first native Taiwanese leader, has allied himself with separatists to straddle island's politics; army of Taiwan business executives is investing on mainland despite Government efforts to curb interdependence; photo; map; tables (M)

Pres Clinton reaches agreement with Republican leadership on plan to balance Federal budget in five years; pact, following years of bitter partisan wrangling and months of intense negotiations, is completed with help of last-minute news that deficits in next five years are likely to be $225 billion lower than Republicans had projected; Clinton gets money for education, health insurance for children and Medicare; Republicans get long-sought cuts in capital gains and other taxes, cuts in overall domestic spending and start on curbing Medicare and other entitlements; Clinton and Sen leader Trent Lott praise deal; photos of Lott and Repr Bill Archer; Republicans can now take home austerity package that insulates them from Democratic attack; highlights; Clinton also wins restoration of welfare benefits for legal immigrants and expansion of student loan and Head Start programs; deal is made possible after Congressional Budget Office slashes deficit projections, enabling negotiators to take out sensitive elements such as Social Security cost-of-living increases (M)

Summary of major news stories on inside pages

Diplomatic efforts to bring together Zaire Pres Mobutuo Sese Seko and rebel leader Laurent Kabila for talks fall through after day of relentless confusion, after Kabila refuses to fly to offshore vessel for security reasons; Mobutu, who has advanced cancer and cannot walk unassisted, is driven up cargo plank in armored Cadillac to join US envoy Bill Richardson and Pres Nelson Mandela aboard South African ship; photo; map; tensions are high in Kinshasha, as wealthy Zairians flock to hotels in case of panic at rebel assault; rebel units are said to be within 100 miles (M)

An article yesterday about luxury decontrol rules for rent-regulated apartments referred incorrectly in some editions to the percentage of tenants with rent protections in New York City who have incomes over $250,000. According to an analysis by the Census Bureau, there are 3,840 such tenants, or 0.35 percent of the roughly 1.1 million regulated apartments -- not 0.003 percent.

INTERNATIONAL 3-7 Blair Takes Over At 10 Downing Street Tony Blair, the leader of Britain's Labor Party, entered 10 Downing Street to the jubilant cheers of flag-waving supporters, and in keeping with his campaign of restrained expectations, promised them ''a Government of practicable measures in pursuit of noble causes.'' 1 Former Prime Minister John Major asked the Conservative Party to pick a new leader soon and spent a sunny afternoon watching cricket. 7 Gerry Adams, the leader of Sinn Fein, the political wing of the Irish Republican Army, won a parliamentary seat from Northern Ireland in the British elections, as did the party's second-ranking official, Martin McGuinness. Neither man will take up his seat, however, because Sinn Fein policy precludes them from taking the required loyalty oath to the British Crown. 7 No Meeting of Zairians Diplomatic efforts to bring President Mobutu Sese Seko and the rebel leader, Laurent Kabila, together for shipboard talks fell through when Mr. Kabila stood up his rival, refusing to fly to the vessel for security reasons. Mr. Kabila's decision came after the meeting, which was expected to transfer power between the two men, had already been delayed for several hours by Mr. Mobutu. 1 Russia Cedes Point on NATO Russia dropped a major demand on limiting NATO's military forces, improving the prospects that the two sides will meet a May 27 target date for completing an agreement between the alliance and its former adversary. 3 River Crests in Manitoba Residents of Winnipeg, Manitoba, watched the flooding Red River reach its crest without overwhelming the city's main lines of defense. Around 24,000 Canadians in small towns south of the city have been forced to leave their homes since the floodwaters crossed the border with North Dakota. 4 Mexico Rejects U.S. Proposals President Ernesto Zedillo of Mexico rejected a proposal that would allow United States drug agents to carry arms in Mexico, and another that would let American officials administer lie-detector tests to Mexicans applying for sensitive posts in Mexico's anti-drug agencies. 4 Talks On North Korea Set American, Japanese and South Korean officials are to meet in Tokyo next week to try to find a way to get North Korea to attend peace talks. Japan's Foreign Ministry said the meeting would also address severe food shortages in the North. President Clinton has said the West would provide large-scale food aid and help North Korea rebuild its economy after it entered peace talks. Red Cross officials from the two Koreas will meet in Beijing today to discuss relief aid for the North. While withholding major government assistance, South Korea has lifted a ban on civilian food aid to the North. (AP) NATIONAL 8-13 Budget Deal Is Reached, With Help of Windfall The Clinton Administration reached agreement with the Republican leadership on a plan to balance the Federal budget in five years, using a last-minute financial windfall from a strong economy to help forge a deal that could alter the nation's economic and political landscape. 1 Less than 24 hours after the liberal wing of his party was once again accusing him of treason, President Clinton was able to lance the Democratic anger, with the help of the fiscal bonus that allowed some last-minute additional spending. 13 Assuaging Budget Concerns Lobbyists for the elderly applauded some of the last-minute revisions in the budget plan. Among them were the scaling back of an increase in monthly Medicare premiums to $1 from $8, the removal of a cap on Medicaid spending for the poor and the moderation of a proposed change in the Consumer Price Index that would have lowered Social Security and other Government benefit payments. 12 Member Leaves Texas Group Four days after a member of the Republic of Texas secessionist group was returned from jail to the group's mountain compound in return for two hostages, he walked out of the cramped trailer there and surrendered to state law-enforcement officers. ''I had to get out of there,'' the authorities quoted him as saying. ''I couldn't take it anymore.'' 8 White House to Appeal Ruling The White House said that it would appeal a ruling by a Federal court ordering it to turn over to Whitewater investigators notes taken by Government lawyers of conversations they had with the President's wife, Hillary Rodham Clinton. 10 2d Soldier Guilty in Killings A jury convicted a second white former Army paratrooper on murder and conspiracy charges in the killings of a black couple in North Carolina in 1995. The former soldier, Malcolm Wright Jr. of Lexington, Ky., was found guilty of two counts of first-degree murder and one count of conspiracy to commit first-degree murder in the deaths, near Fort Bragg. 10 Roosevelt Memorial Opens Franklin Delano Roosevelt was placed alongside Washington, Jefferson and Lincoln in the nation's political pantheon with the opening of a sprawling outdoor memorial honoring his leadership during World War II and the Great Depression. President Clinton hailed him as ''the greatest President of this great American century. 8 Arguments in Tobacco Case A jury heard closing arguments in the trial of a wrongful-death suit against R. J. Reynolds Tobacco. The case is being watched closely by Wall Street for its potential effect on tobacco stocks. 8 NEW YORK/REGION 25-29 Interim Brookhaven Chief Calls Water There Safe After one day on the job, the interim manager of the Brookhaven National Laboratory said he was confident that the public drinking water around the laboratory was safe, even though the lab has leaked radioactive water for years, and he praised the lab as ''one of the premier research facilities in the country.'' 26 Officers Cleared in Killing A Brooklyn grand jury has cleared two police officers in the killing of an unarmed man whom they shot after he entered a stolen car they had under surveillance in East Flatbush, prosecutors said. The officers said they had opened fire because they thought that the man, Aswan Watson, 23, was reaching for a gun. When the car was searched, all that was found was an anti-theft device called the Club. The killing, in June 1996, caused two days of street demonstrations. 25 Painting's Ownership Disputed A judge ruled that a painting that a Cornell University professor had sought to sell through Sotheby's could not be sold until its rightful owner was established. A Polish prince contends that the painting, possibly 400 years old and listed by Sotheby's as ''Portrait of a Lady, Presumably Anne of Bretagne,'' had been in his family's art collection until it was stolen by the Nazis during World War II. 27 D'Amato Criticizes F.A.A. Senator Alfonse M. D'Amato called on the Federal Aviation Administration to address a growing shortage of air traffic controllers, saying it was ''playing Russian roulette with people's lives.'' 28 Suffolk Health Official Ousted Dr. Mary E. Hibberd, who gained a reputation for standing up to powerful figures as Suffolk County's Health Commissioner for the last six years, is being forced from office, and she is citing politics for her departure. 28 Now They're Just Friends Donald J. Trump and Marla Maples confirmed their decision to separate. But in their statement, no mention was made of an impending divorce, the possibility of a reconciliation, a prenuptial agreement or the couple's 4-year-old daughter, Tiffany. But the two said that they would remain friends. 27 ARTS 15-21 BUSINESS DAY 36-49 Jobless Rate Drops Sharply America's unemployment rate dropped below 5 percent in April, a level not seen since 1973, when Richard M. Nixon was President, the Government reported. A startling three-tenths of a point decline in the jobless rate pushed it down to 4.9 percent, as factories recorded a new peak in overtime hours and the economy continued to advance at a healthy pace. 1 When it comes to economic news, it does not get much better than this. And yet good economic news always has a way of making people nervous, and this time is no exception. 37 Dow Stocks Back Near Record The Dow Jones industrial average soared 94.72 points, bringing it within a few points of its record. That capped a week in which the Dow rose 4.9 percent, its best weekly gain in more than five years. 37 Business Digest 37 SPORTS 30-35 OBITUARIES 14 EDITORIAL 22-23 Editorials: An uneven budget agreement, new power to redesign cigarettes, the fight for ''gifted'' education. Columns: Russell Baker, Maureen Dowd. Chronicle 24 Bridge 21 Crossword 16 Weather 20

An article yesterday about Central Park misstated the telephone number for skating classes at the Wollman Rink. It is (212) 396-1010, extension 15.

A chart of British election results in some copies yesterday reversed the totals for two parties in the old Parliament. The Conservative Party had 323 seats and the Labor Party 274. An updated chart appears today on page 7.

An article yesterday about French politics misidentified one of four city governments controlled by the right-wing National Front. Along with Marignane, Orange and Vitrolles, the National Front controls Toulon, not Toulouse.