in Washington-Shock from the 9/11 terrorist attacks is still working its way through the economy. Wall Street may have settled down, but Main Street has not. Six weeks later, government statisticians are reporting, millions of workers are among the economic casualties of America's new war. In New York City alone, some 75,000 workers lost their jobs after the destruction of the World Trade Center. New York hotels, for instance, laid off more than 5,000 employees; restaurants let go some 15,000 workers. Those numbers will only rise in coming weeks as many of the 14,000 struggling businesses in lower Manhattan give up and close their doors. Experts say the final jobless toll in the city eventually will reach 100,000. And that's only at the epicenter of the terrorist earthquake. Nearly two months later, the aftershocks continue to jolt every U.S. state. On Oct. 20, in far-off Hawaii, organizers of a public job fair wrestled with attendance levels 40 percent higher than anticipated. Maybe they shouldn't have been surprised: With one-third of the civilian workforce involved in the travel industry, tourist-starved businesses in the Aloha State have laid off some 11,000 workers since Sept. 11. After years of unprecedented job growth and low unemployment, the American worker is suddenly looking like an endangered species-and a key political ally. If Democrats can woo disaffected voters stuck in unemployment lines, they may be able to widen their Senate majority and take back the House of Representatives in next year's mid-term elections. Small wonder, then, that when President Bush looked for the proper venue to tout his economic stimulus plan, he settled on the sprawling Department of Labor complex overlooking Constitution Avenue-a soulless, bureaucratic-looking monolith that often gets lost among Washington's more imposing centers of power. Indeed, prior to the Bush speech, the Labor Department hadn't hosted a presidential visit in more than a decade. "It's clear, as a result of today's new unemployment claims, that the attack of Sept. 11 sent a shockwave throughout our economy," Mr. Bush said in his Oct. 4 speech. "We need to do something about it.... We can stimulate growth and at the same time take care of the workers whose lives have been impacted by the Sept. 11 attack." Some economists may quibble with that claim, but for the Labor Department employees in the audience that day, it represented a promise that their oft-overlooked department would be, for once, at the center of the political action. As if to underscore that promise, the president announced he was requesting an additional $3 billion in funding for emergency grants to displaced workers-monies to be administered by the agency. With an unemployment crisis brewing, Elaine Chao, the diminutive Labor secretary, is standing tall within the president's cabinet. The normally combative relationship between Republican administrations and organized labor has, for the moment, been replaced by a kind of uneasy mutual admiration. Unionized workers in New York, from police and firemen to electricians and steamfitters, have become local folk heroes after toiling round-the-clock to help the city recover. "I am grateful to stand with the unions that represent America's heroes," Ms. Chao said in a Sept. 26 speech to New York's labor leaders-surely words not often used by a GOP official. "[Their] courageous acts have inspired the courage of millions-both here and around the world. The quiet men and women who do their jobs and do them in the face of danger deserve our thanks, and our respect. These union members built America and they do whatever it takes to keep her strong. In times of need, they're the first ones to arrive and the last ones to leave." For Ms. Chao, whose resumé includes stints at some of Washington's favorite "good guy" organizations, including the United Way and the Peace Corps, this is familiar territory. She's well liked and well regarded within the Beltway. Her nomination to the Bush cabinet sailed through the Senate without a single "no" vote after the original nominee, Linda Chavez, withdrew under pressure. (It didn't hurt that Ms. Chao is married to Mitch McConnell, the powerful Republican senator from Kentucky.) Secretary Chao's relationship with her new labor constituency wasn't always so cozy, however. When she spoke to WORLD prior to the terrorist attacks, she admitted to feeling under siege herself. "I'm under tremendous pressure all the time, from all different kinds of groups," she acknowledged. "We will do the right thing, but we will get criticized, and I understand that. My mind is not ruled by that. "If you're philosophically true to yourself and clear about the purpose of political leadership, I think that's very energizing. If you get a bad editorial from a liberal paper, that's a badge of honor. In fact, I've made a couple of decisions here and I've been praised by The Washington Post, and it ruined my day," she said with a laugh. "The Department of Labor does not represent business interests. We do not represent union interests. We represent the American workforce." It's a good line that she uses often, but threading that theoretical needle requires an unusually steady hand. Both big business and big labor are well organized and well funded, making them perennial power players in Washington. But the vast majority of American workers belong to neither a labor union nor a country club, leaving them in a kind of political netherworld where competing groups claim to have their best interests at heart. Although Ms. Chao sometimes has trouble with the facts and figures of her new post-when was that law passed? how often do Americans change jobs?-one number rolls easily off her tongue: Labor unions represent only 13 percent of working Americans. Despite that small percentage, the Department of Labor during Democratic administrations has been practically a wholly owned subsidiary of groups like the AFL-CIO and the Teamsters. That won't be the case under her watch, she vows. "Washington is filled with organized groups representing one special interest after another," she said. But the 87 percent of working families who are not represented by a union "are among the most under-represented groups in Washington.... The father or mother or both are going to work, coming home, taking care of their kids, trying to keep food on the table, take their kids to church or to softball practice. Basically they're trying to raise a family, and they are not spending their time organizing as a political force." Ms. Chao also believes that small businesses have been largely ignored by previous occupants of her post. "A mom-and-pop shoe store in Middle America somewhere, they provide jobs, they have workplace concerns, and the government has to be sensitive to them," she said. Entrepreneurs are the largest creators of jobs in the American economy, but Ms. Chao said the concerns of small businesses were mostly overlooked by Clinton officials eager to curry favor with union voters. Representing the needs of millions of mom-and-pop businesses may sound like a noble goal, but it puts Ms. Chao squarely at odds with labor leaders, who often view small business as a mortal enemy. Organized labor thrives in big, smokestack industries such as mining and auto manufacturing, while small businesses are largely non-unionized. Indeed, small-business owners usually oppose new workplace regulations because, with fewer employees, they cannot afford to spread around the cost of compliance. With the American economy struggling to recover from the double whammy of a cyclical recession and terrorist-related layoffs, the tension between big labor and small business may become still more pronounced in coming months. Before the attacks, in fact, the biggest issue on Ms. Chao's agenda was an especially divisive one. She hadn't finished unpacking in her new office before she was assigned to rewrite-within weeks-the ergonomic rules that the Clinton administration had worked on for years. Union leaders immediately began denouncing her as a pawn of big business and the enemy of hardworking Americans, while business leaders large and small warned darkly of economic recession if the engine of commerce were idled by unprecedented new regulation. The controversy centered on so-called repetitive stress injuries, or RSIs, which occur when a worker repeats the same task over and over again. An autoworker, for instance, who tightens bolts thousands of times a day might develop soreness in his wrist or elbow. The unions say that's a debilitating injury and that companies should redesign jobs to prevent such aches and pains. The Clinton administration agreed, pushing through a sweeping set of regulations during its final days in power. Business leaders pegged the cost of compliance at close to $100 billion a year, however, and Congress quickly scuttled the regulations at the behest of President Bush. With new, scaled-back regulations due in September, union bosses turned up the heat. The AFL-CIO posted thousands of handbills throughout Washington: "Bushwhacked," they screamed in stark, black-and-white type. Or, "One worker hurt every 18 seconds." Or, ominously, "Stop the pain." The greatest concentration of posters was at a construction site next door to Department of Labor headquarters, where dozens of them were plastered on a plywood safety wall. Chao loyalists tried to strip them away, but the shredded sheets still teased: "Whacked," "Worker hurt," "Pain." Ms. Chao tried to get beyond the bumper-sticker mentality with a national "listening tour" on the ergonomics issue. But the unions, which had once praised her for her commitment to listening, suddenly had nothing to say. "It is clear that these forums are a sham and a fraud backed by industry and Republicans in Congress," the AFL-CIO charged on its website. "The questions being asked by [the Labor Department] are one-sided, reflecting only concerns and issues raised by industry opponents.... You will also be pleased to know," the union added sarcastically, quoting from a Labor Department press release, "that 'the Secretary encourages all interested parties, particularly small business owners and employees of small businesses, to participate.'" At all three forums, union members picketed outside and tried to disrupt the proceedings inside the halls. Police were called in. Picketers were ejected. Tempers flared. The showdown with the unions has been delayed for now. After weeks of promising a September release of the new ergonomics regulations, Ms. Chao announced on Sept. 21 that the regulations would be introduced at some vague point later this fall. That may buy her time to mend fences with the heroes of the New York labor unions, but only for a matter of weeks. Eventually, the issue will once again come to a boil, and Ms. Chao insists she's ready for the confrontation. At first glance, the petite, Taiwan-born labor secretary may not seem much of a match for the thick-necked union organizers who protested outside the meeting halls. But Ms. Chao's stylish coif and tailored, Fifth Avenue suits belie a steely determination to advance a surprisingly broad philosophical agenda-an agenda, ironically, that was left largely unexamined by the liberal senators who fawned over her nomination. "It's helpful to have a philosophical compass," she said, not only of the ergonomics battle but also of her job in general. "We're not in government just to make the machinery of government grind smoother. Certainly we can do that, make government more efficient. That's a worthwhile goal. But we are not just competent managers; we are leaders. We are in office because we believe that government that governs least is the government that governs best. We believe that regulations should not be overpowering, but should truly protect those they are meant to protect. We believe that the law of unintended consequences runs rampant through the regulatory process." Ms. Chao wants to change the very language used to debate workplace issues. She heads a department whose name harks back to a 1930s Marxian view of a world divided between "labor" and "capital." "That's old paradigm," Ms. Chao said dismissively. "The Department of Labor should really be called the Department of the Workforce." Still, old habits die hard, even for the philosophically inclined. Moments after laying out her agenda, Ms. Chao tripped over the L-word several times. "We have to reach out to those with lesser skills if we hope to avoid a labor shortage-uh, worker shortage," she said. Clearly, the fabled paradigm shift can be difficult, even for the person whose foot is on the clutch. But Ms. Chao seems to know the direction she wants to steer her department-a task complicated by potholes in the road ahead.