By Tyler Cowen / Bloomberg Opinion

The paradox that currently defines the U.S. and global economies goes something like this: If business is mediocre, why do firms keep hiring more workers? And if U.S. workers are doing less, why do bosses want more of them?

There seems to be some serious tension in the data. Measured growth is poor, yet the labor market continues to boom. There is also productivity crisis, at least according to the usual measurements, with year-to-year productivity growth negative for five consecutive quarters.

There is a way of making sense of these conflicting signals: Workers have been undergoing a serious crisis of morale since the pandemic; and they really are doing less. So businesses, in turn, have to hire more of them just to keep pace.

Does this hypothesis fit with these economic signals? With inflation still in the range of 5 percent, slow economic growth cannot be due to insufficient aggregate demand. More likely, it is due to supply-side and productivity considerations. The biggest natural disaster of the last half decade has been covid, which damages not capital but labor; whether workers’ health or their morale.

Some workers still suffer from long covid, of course. But the productivity slowdown is more widespread. Could part of the explanation be the broader adoption of the work-from-home option? I know there are studies that say WFH increases productivity, but even the author of one of the more widely cited papers says that more research is necessary and that a lot depends on how well the arrangement is organized. Meanwhile, America is experiencing a mental health crisis, arguably made worse by both covid stress and the accompanying lockdowns.

The productivity question is even more puzzling. If worker productivity is low, why keep on hiring? The key may be to look not at total productivity, but at productivity per hour; and not per reported hour, but per hour actually worked.

I concede that there exists no measure of productivity per hour actually worked. (The official number, which is not doing great either, measures productivity per reported hour.) But if the average office worker only puts in say two to three hours a day — and it is not implausible — then there is a lot of slack in the worker’s day, especially if they are working from home.

So consider this thought experiment as a possible explanation: You are a manager and have noticed that new hires tend to be more enthusiastic and hard-working than current employees. Under this theory — and that’s all it is — you decide to hire more contract workers for well-defined, short-run tasks. Meanwhile, you redouble your efforts to bring workers back into the office.

There are some signs this is happening. Facebook parent Meta, for instance, is now requiring its (non-remote) workers to come into the office three days a week, starting in September. Eventually, as these and other adjustments take root, there should be a return to more normal patterns in the labor market and economic growth figures.

Viewed through an economic lens, it is puzzling why there aren’t more gains from trade. That is, workers agree to put in more effort, and employers agree to pay them more. That is a trend which should be expected; but WFH makes monitoring difficult. Artificial intelligence also will kick in at some point, and the workers who are not pulling their weight may be in for a comeuppance. In the meantime, the economy is stuck with the current productivity slowdown.

To the extent productivity performance remains poor, it is harder for the Fed to fight inflation. To the extent that the labor market remains strong, on the other hand, and somewhat insulated from the Fed’s tightening, it helps explain why the U.S. economy has not yet entered a recession.

This is not just an issue for the United States. Germany reports significant labor shortages, in both skilled and less skilled sectors. Yet at the same time Germany has entered a “technical recession,” with low or zero economic growth. Again, if GDP is flat, how can these labor shortages be real? In Czechia, the combination of poor growth and strong labor markets is more extreme yet.

Little in macroeconomics is certain. But it is worth considering the possibility that — at least for a while — we have entered a new, topsy-turvy world in which the old correlations no longer apply.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. He is co-author of “Talent: How to Identify Energizers, Creatives, and Winners Around the World.”