Yesterday we learned that non-farm productivity rose 2.2% in the first quarter of this year. Anyone who was working in an office or factory when the last recession hit in 2001 knows what that means—a lot of people have been laid off or had their hours cut back, and the lucky ones who haven’t are filling in the gap left by their colleagues’ absence. Here’s how the Bureau of Labor Statistics explained the current numbers:

Productivity gains were due primarily to declines in hours worked. . . The decrease in hours was the largest since the second quarter of 2003, when they fell 2.1 percent.

A look back to the 2001 – 2003 period reminds us that productivity continued to grow at a healthy pace throughout the recession.

Wages, on a per-hour basis, rose, but not enough to keep up with inflation:

Hourly compensation increased 4.2 percent during the first quarter of 2008 following a 3.7 percent rise in the previous quarter. . . Real hourly compensation, which takes into account changes in consumer prices, decreased 0.1 percent in the first quarter of 2008 after falling 1.3 percent in the fourth quarter of 2007.

On the brighter side, the economy isn’t in recession, according to the latest official GDP calculations. Unemployment insurance claims data released this morning also suggest that, even though hours worked have fallen, businesses aren’t cutting loose their employees in the numbers one would expect in a recession.

So people are working less and earning less than they need to keep up with inflation, but the economy continues to grind on. What gives? Could it be that, just maybe, we’re spending money we don’t have?

The answer is—drum roll, please. . . Yes. Yesterday we also saw the release of the Federal Reserve’s consumer credit statistics for the first quarter of 2008, which show that borrowing continued to grow at an annualized rate of 5.4%. The monthly figures reveal that in March (the last month for which data are available), total consumer credit rose at an annual rate of 7.2%, and revolving credit (credit cards) increased at a yearly rate of 7.9%. It seems that instead of economizing to make ends meet, we just keep on borrowing.

Are we just postponing the inevitable recession, making it worse by loading up on debt that eventually will force people to stop spending? Or are we idling along with just enough (borrowed) fuel to avoid stalling until we get over the hill of damage done by the subprime crisis? If we knew, we’d sink all our money into puts or calls, get our 1000% return, and retire to a villa in Costa Rica. But since we don’t know, the best thing to do is focus on strategies that, when well managed, bring in steady income regardless of market direction.