The Federal Aviation Administration’s shutdown of ValuJet Airlines — less than six weeks after FAA officials had insisted that the airline was safe — has raised questions about the agency’s ability to ensure the safety of the U.S. airline industry. Those concerns led Tuesday to a major personnel shakeup at the agency, a tightening of inspection rules and a plea by Transportation Secretary Federico Pena for Congress to rewrite the agency’s historic mandate that requires it to promote as well as police the aviation industry.

"There should never be another question about the top priority of the FAA," Mr. Pena said at a news conference called to deflect criticism of the agency. His comments made it seem likely that the fallout from the crash of ValuJet Flight 592 into the Florida Everglades on May 11, killing all 110 people on board, could lead to a radical change in the way the FAA regulates the airline industry.

Mr. Pena and FAA Administrator David Hinson conceded that the agency failed to heed earlier indications of potential safety problems at the upstart, low-fare airline. Mr. Hinson acknowledged that the FAA didn’t adequately gauge ValuJet’s airworthiness, saying, "We bear some responsibilities in this case."

For one thing, Mr. Pena said that the agency didn’t adequately monitor the growing industry trend of having maintenance work done by independent contractors, known as outsourcing. FAA investigations concluded that the practice led to a litany of safety concerns at ValuJet. As a result, Mr. Hinson said the agency would boost its inspections of airlines that use outside contractors to conduct their maintenance operations.

The turmoil at the FAA also led to a high-level personnel shakeup. The agency’s top inspection official, Anthony J. Broderick, long-time FAA associate administrator for regulation and certification, submitted a letter to Mr. Hinson taking early retirement. In his letter, Mr. Broderick said the agency needed to repair its public image and he believed his departure could help accomplish that.

"The events of the past weeks mandate that you make major visible changes to improve the public confidence in the safety of our air transportation system and the quality of FAA oversight of the airlines. My leaving will provide you with the maximum amount of flexibility to make those changes," he wrote.

Mr. Pena’s call to rewrite the FAA’s basic mandate could bring even more changes. Since it was chartered in 1958, the agency, which is part of the Department of Transportation, has had the sometimes contradictory mission of ensuring safety as well as promoting air travel. Over the years, that dual mandate has prompted the FAA to oppose numerous safety recommendations from the National Transportation Safety Board, concluding that the changes would be too costly for airlines and aircraft makers.

Critics say that conflict was illustrated vividly the day after the ValuJet crash when Messrs. Pena and Hinson stood before television cameras and attested to the airline’s safety. Mr. Pena said Tuesday he is urging Congress to change the FAA charter so that it has only one mission: regulating safety.

ValuJet said there was no evidence that maintenance was to blame for the crash. The National Transportation Safety Board suspects that oxygen canisters being carried illegally in the plane’s cargo hold may have caught fire minutes after takeoff from Miami International Airport. But its official report on the cause of the crash won’t be ready for months.

Meanwhile, the FAA appears to have been deeply divided over how tough to be on ValuJet. As late as last Thursday, FAA officials in Atlanta and three key investigators were negotiating with ValuJet chief executive Lewis Jordan to trim the airline’s fleet of aging aircraft so that the carrier could have better control over maintenance. At that point, there was no discussion of a shutdown, according to people involved with the talks.

Over the weekend, however, two officials from the FAA headquarters in Washington flew to Atlanta to review the inspection records. After a series of weekend meetings, the regulatory officials recommended that Mr. Hinson give ValuJet an ultimatum: Shut down voluntarily or be shut down.

At about 1:30 p.m. Monday, Messrs. Hinson and Pena met at the White House with Clinton administration officials, including chief of staff Leon Panetta and senior presidential adviser George Stephanopoulos, who had been sharply critical of their earlier public assurances that ValuJet was safe. A White House official said Clinton political advisers didn’t press the transportation officials to shut down the airline.

But about an hour after that meeting began, FAA officials in Atlanta presented the ultimatum to a stunned Mr. Jordan, according to people familiar with that meeting. ValuJet announced it would temporarily suspend flights but called the FAA’s action "grossly unfair" because it said it had been denied the opportunity to respond to the agency’s concerns.

The chain of events prompted a round of criticism of the FAA on Capitol Hill. Republican Sen. Larry Pressler of South Dakota, chairman of the Senate Commerce Committee, blasted the FAA for its oversight of ValuJet safety, particularly because a string of internal agency documents chronicled problems at the carrier long before the crash.

Jeff Nelligan, a spokesman for the House Transportation and Infrastructure Committee, which oversees the FAA, said it was "absolutely brazen" for Mr. Pena to blame the agency’s problems on its dual mandate. "This is passing the buck," Mr. Nelligan said. "They are scrambling over there and it’s apparent to all."

The FAA admits that its oversight capabilities haven’t kept pace with the explosive growth of new airlines in recent years. Mr. Pena has trumpeted the rise of low-cost carriers, including ValuJet, as a major victory for the Clinton administration and a boon for the flying public. Asked at a briefing about President Clinton’s expressed concern about the quality of the FAA’s safety oversight, White House spokesman Mike McCurry said, "The President wants to make sure we do everything, redouble and recheck everything, that it is absolutely the safest system on Earth."

Republican Sen. Fred Thompson of Tennessee, Democratic Rep. John LaFalce of New York and the husband of Democratic Rep. Nancy Pelosi of California each made at least $5,000 on hot IPOs since last year, sometimes by buying and selling the same day. The wives of two other Democratic congressmen — Lloyd Doggett of Texas and Peter Deutsch of Florida — invested in IPO stocks but still hold them.

All deny receiving special treatment from their brokers, who usually reserve IPO stocks for their best customers or other favored clients. The lawmakers reported the trades on annual financial disclosure statements released last week.

Initial public offerings are as close to a sure thing as the stock market offers for those who get in early on the right deals and sell on the same day because the price often rises sharply as soon as the stock begins trading. Several lawmakers in the past few years have sworn off such trades after news reports disclosed lawmakers" profits, including former Democratic House Speaker Thomas Foley and GOP Sen. Alfonse D’Amato of New York. They ceased trading in IPOs after critics suggested that their stock profits appeared to be, in effect, gifts from people with stakes in pending governmental matters who might want to curry their favor.

A recently released Securities and Exchange Commission report on Sen. D’Amato’s one-day $37,125 profit questioned the motives of his brokerage firm, Stratton Oakmont Inc. of Lake Success, N.Y. Stratton at the time was the subject of a major SEC enforcement action.

Sen. Thompson had just opened his account with his Nashville broker at J.C. Bradford Co., when he took home a one-day profit of $7,700 on an investment of about $15,000 in IPO shares of Cybex Corp., a Huntsville, Ala., electronics maker.

Sen. Thompson’s press secretary, Alexandra Pratt, pointed out that the senator "had his share of gains and losses," including one trade in which he lost $3,000. The Tennessee Republican also authorized his broker, Paul "Buddy" Enoch, to discuss the matter on his behalf.

It was through Mr. Enoch that Sen. Thompson obtained the hot investment. The stock was "way oversubscribed," according to Cybex spokesman Stephen Thornton, meaning that most investors couldn’t buy shares before it went to market. Sen. Thompson didn’t report the profit on his financial disclosure form. When The Wall Street Journal questioned the apparent oversight last Friday, Mr. Thompson filed an amendment.

Mr. Enoch says he invested Mr. Thompson in another successful IPO this spring, Premier Technology. Sen. Thompson flipped 500 shares of that stock for a profit of about $3,300. Mr. Enoch says he gives many of his other clients access to initial public offerings. Sen. Thompson, he adds, happened to have a large sum of ready cash in his account when the two stocks went public.

Typically, hot IPOs go to wealthy investors. And despite his long and successful careers in law and acting, Sen. Thompson has relatively modest means. His federal financial disclosure form indicates that his net worth, excluding his home, is less than $615,000 and could be as low as $200,000. His brokerage account, which Mr. Enoch calls "medium size," appears to be worth considerably less than $100,000.

Mr. Enoch, however, said he spreads his IPO shares around to all of his clients. The senator "wasn’t treated differently than anyone else," he says. Mr. Enoch says Sen. Thompson came to him on someone else’s recommendation, but he doesn’t know whose.

Sen. Thompson has received campaign contributions from J.C. Bradford executives, including Mr. Enoch. In his 1994 campaign, 11 officials of the firm contributed a total of $6,100. Over the last two years, another $15,750 was given by Bradford officials. A Nashville-based lobbyist who counts the firm among his clients, Thomas Ingram, was a consultant to Sen. Thompson’s 1994 campaign.

The financial disclosures of the other members who traded in IPOs suggest fairly active and sophisticated trading. For example, Rep. Pelosi, one of Congress’s wealthier members, reported more trades in new stocks than any other member. All seven were listed in the name of her husband, San Francisco businessman Paul Pelosi. The trades included some of last year’s hottest IPOs, such as the Internet-related companies Netscape Communications Inc. and UUNet Technologies Inc.; both doubled in value within a day. Mr. Pelosi bought and sold between $1,000 and $15,000 worth of each within a day of the offering. He bought like amounts of stock in four other companies — Remedy Corp., Opal Inc., Legato Systems Inc. and Act Networks Inc. — right around the time of their initial offering and then sold within a month or two. He reported buying Vanguard Airlines stock around the time of its initial offering and still owned it at the end of the year.

Most if not all of Mr. Pelosi’s trades appear to have been profitable. Rep. Pelosi couldn’t be reached to comment.

Rep. LaFalce, the top Democrat on the House Small Business Committee, bought $15,000 worth of IPO stock in Healthplan Services Corp., which specializes in providing health-care administrative services to small companies. The company says there were five times as many orders for the stock as there were shares for sale. Rep. LaFalce reported making between $5,000 and $15,000 when he sold it three months later. Through a spokesman, the congressman says he is an active trader who was given access to the IPO through his broker, whom he declined to name.

The wives of Reps. Deutsch and Doggett invested at least $1,000 in Food Court Entertainment Networks Inc., and Schlotzksy’s Inc., respectively. Both say their brokers gave them access to the deals but treated them just as they do other clients.

"We’re hot as fire down here," he drawls. "It’s not the best it’s ever been, but it’s pretty dang close."

Defying predictions, American consumers continue to open their wallets — and fuel economic growth. Economists say businesses let their inventories dwindle early this year and then were surprised by consumers’ resilience. But now, as they rush to restock their shelves, economic growth could pick up in the current quarter — with much of the spending coming from affluent Americans enjoying the dual benefits of rising incomes and gains in mutual-fund investments.

You can see evidence of economic growth in the cars streaming into Mr. Helfman’s dealership from Chrysler Corp.’s Sterling Heights plant, near Detroit. The plant recently added Saturdays to its production schedule "to keep up with demand," says Dick Entenmann, its manager. Even hotter is Chrysler’s minivan plant in nearby Windsor, Ontario, now up to three shifts and turning out 1,450 units a day. "The lights never go out around here," says manager Adrian Vido, though he has to allow half an hour between shifts for workers to get in and out of parking lots.

Chrysler’s growth is leading the industry at the moment; its May sales were up 17% from a year earlier. For the industry as a whole, auto sales by domestic producers rose 7% from May 1995. Chrysler economist Van Bussmann says the industry, long prone to boom-and-bust cycles, will rack up its third year of strong sales this year. "We haven’t had three years of back-to-back steady sales for at least 50 years," he says.

All this activity on Main Street, of course, is making Wall Street nervous. Bond-market experts fear that when the economy gets hot, inflation heats up, too. So, they are watching closely for any hints of excessive strength in the government’s employment report coming out Friday. Strong job growth, they fear, could lead the Federal Reserve to raise interest rates in an effort to head off inflation, and fixed-income securities would suffer.

Right now, there is little evidence of strong growth fueling inflation. Materials costs are stable, and businesses say they have little pricing power. "It is becoming increasingly difficult to pass on higher prices," says Nolan Archibald, chief executive of Black & Decker Corp., the Towson, Md., toolmaker. With foreign competition intense, "you just have to absorb any price increases on the raw-material side."

Wage increases remain modest as well. In 26 states, unemployment is below 5% — a level that in the past has pushed wages higher. Yet even in those states, employers seem to find creative ways of hiring enough workers without raising wages. In Minnesota, with a 3.1% unemployment rate, for example, the Minneapolis bus authority cut its drivers’ minimum age to 19 from 21 to fill jobs. The first to be hired, 19-year-old Kari Kuntz, seems a little out of place among the burly men in the drivers’ lounge of the bus garage. She says most passengers don’t ask about her age, though some inquire about her long, purple-tinted hair.

William J. Hudson, chief executive of AMP Inc., a $5.5 billion maker of electronic components with 40 factories in the U.S., says he isn’t having any trouble filling jobs. He is raising wages by a moderate 3.5% this year, "but we are more than making up for that in higher productivity." Meanwhile, his prices are falling an average of 4% a year, largely because of foreign competition.

The Fed isn’t at all likely to raise interest rates at its July 3 meeting despite the bond market’s fears. In interviews, some Fed officials express concern about a first-quarter uptick in wages, but they note that that rise was offset by lower employee benefits. And they see scant other signs of strain in the economy; they note, for instance, few worrisome shortages of materials. One of Chairman Alan Greenspan’s favorite indicators, lead times for parts and materials deliveries, has been little changed for a few months, giving no hint of the bottlenecks that could force up inflation.

"We are in a strong quarter," a fact that will require the central bank to be especially vigilant for inflationary signs, says Fed Governor Janet Yellen. But she adds, "The underlying trend is for balanced growth" and expects the second half to slow a bit from the current pace.

For President Clinton, the economy could hardly be better; in some ways, it is in its best shape in a generation. Although a flare-up in inflation or surge in interest rates could change things quickly, the economy’s current resilience is helping fuel Mr. Clinton’s popularity in the opinion polls. The so-called misery index — the combination of inflation and unemployment that helped sink President Carter’s bid for re-election — is at its lowest level in decades. Inflation has stayed below 3% for more than three years, and unemployment below 6% for nearly two years. However, wage stagnation remains a serious and confounding problem for people who lack a college education.

What could go wrong? For one thing, the economy’s moderate strength isn’t uniform. California is finally emerging from a long slump, which lingered on well after the national recession lifted in 1991. But unemployment there remains at a painful 7.5%, second only to West Virginia’s. New York and New Jersey, too, are lagging behind in economic growth.

There’s also the possibility that inflation will pop up, forcing the Fed to act later this summer. A single strong quarter isn’t likely to cause policy makers to slam on the brakes; nor is it likely that a small rise in rates would sharply slow the economy. But if there are signs of an inflationary spike, the outlook could change.

And the stock market might drop. Economists think one explanation for the strength of housing and auto sales might be the "wealth effect": Households flush with gains on stocks or mutual funds are more likely to buy big-ticket items. But if those gains in wealth evaporate in a sudden slump in the market, it could affect consumer spending in a way that it never has before, says economist Henry Kaufman. A bigger slice of household assets is in the stock market now than before the 1987 crash; so, a plunge could hit consumer sentiment far harder. "There’s no precedent for this," Mr. Kaufman says.

But for now, it’s steady as she goes. "It’s not too hot, and it’s not too cold," Chrysler’s Mr. Bussmann says.

Mr. Bussmann’s favorite consumer-spending barometer is a measure of real disposable income per household — income after taxes and inflation, divided by the number of households. In March, disposable household income was 1.8% above a year earlier. "It’s been running in that range for a couple of years," he says. "Steady, sustained growth — nothing that would lead to a buying binge," but enough to keep people buying plenty of Chryslers.

The consumer’s strength is evident in government statistics that show overall consumer spending soared in the first quarter to a two-year high. Retailing, after suffering during the winter, is picking up, with high-end merchants doing especially well. At Neiman-Marcus Group Inc., for example, $1,000 suits are flying off the racks, says Kelly Patrick, a spokeswoman. Among even bigger-ticket items, luxury-yacht sales are booming: Kadey Krogen Yachts Inc., a Miami maker of boats that start at $350,000, says business is so good that its production is sold out for a year.

Even the limousine business is rolling along. "Compared to last year, our business is booming," says Ari Kazmi, manager of All City Limousine in Burlingame, Calif. But he says competition is fierce, keeping prices down. The wedding season is just getting under way, he says, and he has been booking more bachelor and bachelorette parties this year.

Consumers are snapping up outdoor products, despite bad weather in much of the country. Black & Decker’s Mr. Archibald reports strong sales for every product category in his outdoor division, led by the Hedge Hog, a cordless hedge trimmer. Cordless lawn mowers, which, at $350 or more, cost far more than conventional models, are roaring, he adds.

In manufacturing, a slow first quarter is giving way to hopes of a stronger year ahead. AMP’s Mr. Hudson says the economy "isn’t exactly ebullient, but it’s not sick." His company, which makes parts for scores of industries ranging from computers to cars, is budgeting for a stronger second half now that inventories, which were too big last year, are down and demand has steadied.

The rise in interest rates over the past three months may slow parts of the economy later this year, of course. But right now, housing sales are still showing unexpected strength. In the latest report, for April, new-home sales shot up 28% from the slow pace a year earlier. But many in the business say the second half will slow, reflecting higher mortgage rates, which now stand at 8.3%.

The slowing trend is clear in northern Montgomery County, Md., outside Washington. Its rolling hills are full of new homes for sale, mostly priced above $250,000. Rob Bolton, a salesman for Virginia-based Ryan Homes Inc., recalls that in some weeks earlier this year he would have one customer in the office and three more waiting to talk to him in the model home nearby. Now, things are starting to slow.

"Sales are pretty steady, but they are way down from February, March and April," he says. "It’s been a pretty successful year so far, but the amount of traffic I see up here is really directly affected by higher interest rates." Indeed, some large builders are beginning to talk about slippage in building contracts and even some outright cancellations.

Moreover, many Americans, in spite of the favorable macroeconomic trends, still feel discouraged by the stagnation of wages that affects many less-educated workers, and by continued corporate layoffs. "In the face of all this seemingly good news, a sense persists that something is fundamentally wrong," Mr. Greenspan said Wednesday at an economic conference on Cape Cod, Mass. "I refer to the pervasiveness of job insecurity in the context of an economic recovery that has been running for more than five years, inflation that has been contained, and a layoff rate that is historically quite low."

The Fed chairman also suggested Wednesday that this insecurity is rooted in a "rare, perhaps once-in-a-century event — a structural technological advance." The rapid changes in technology, he said, have created a world in which ideas and education are now the dominant element in creating economic value. This, in turn, can be threatening to people unready or unwilling to embrace it. "A new world is emerging," he said.

Factory orders fell slightly because reduced demand for aircraft and defense goods offset moderate gains in other sectors, the Commerce Department reported. The April decline followed a revised 1.7% increase in March, previously reported as a 1.5% gain.

Analysts had predicted a greater decline in April after the Commerce Department announced last week that durable-goods orders, such as for major appliances and automobiles, fell 1.9% in April. But orders for nondurable goods rose 2% for the month, offsetting that result.

The downturn in durable-goods orders mostly reflects erratic month-to-month demand for civilian aircraft. Although auto sales rebounded in April following the General Motors Corp. auto-parts strike, overall orders for transportation goods dropped 12.8% after a 14.6% increase in March.

Excluding that sector, new orders for other items rose 1.9% in April. Those gains indicate a slowly rebounding manufacturing sector, said Robert Dederick, chief economist at Northern Trust Co. "The manufacturing sector has been the drag on the economy," he said. "That stage is really behind us."

Factory inventories were unchanged, and unfilled orders fell 0.2%. The completion of several months of inventory correction indicates continued short-term growth, analysts said.

"This picture is very, very consistent with an economy that was depressed by an inventory adjustment and is working its way out of it," said James Annable, the chief economist at First National Bank of Chicago. "But it will continue to be hampered into the second half of the year."

The industrial sector will continue to produce erratic results but is experiencing a general pickup in activity, said Richard D. Rippe, senior vice president and chief economist at Prudential Securities.

"Business is gradually improving," he said. "It’s not a picture of sharp or robust growth."