In chapter 4 of Peskin & Schroeder, \begin{align} T\{\phi(x)\phi(y)\} &= N\{ \phi(x)\phi(y)+ \text{Contraction}({\phi(x),\phi(y)}) \}, \tag{4.37}\\ & = N\{ \phi(x)\phi(y)\}+ N\{\text{Contraction}({\phi(x),\phi(y)}) \}. \tag{linearity of $N$} \end{align}
If for instance $x_0>y_0$, using the definition of $T$ and Contraction we have that $$\phi(x)\phi(y)=N\{ \phi(x)\phi(y)\}+ N\{ [\phi^+(x),\phi^-(y) ] \}.$$
This makes no sense, as
\begin{align} N\{ [\phi^+(x),\phi^-(y) ] \} &= N\{ \phi^+(x)\phi^-(y) -\phi^-(y)\phi^+(x) \}, \\ &=\phi^+(x)\phi^-(y)-\phi^+(x)\phi^-(y), \\ &=0. \end{align} where it should really of course not be affected by the normal ordering.
Clearly the problem is it seems like the Contraction in (4.37) should not be normal ordered. Why is it? I know this has been asked before but the answers are not direct. Please answer the question directly.